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of <h1>Limitation of Benefit Clause in Tax Treaties Prevents Treaty Shopping with Specific Anti-Avoidance Measures</h1> The Limitation of Benefit (LoB) clause in tax treaties is a measure to prevent treaty shopping, ensuring that only eligible residents of contracting states benefit from tax treaties. This clause, considered a Specific Anti-Avoidance Rule, restricts third-country residents from exploiting bilateral agreements. It includes various tests like ownership, base erosion, active business connection, and recognized stock exchange tests to determine eligibility. The clause is not inherently defined in international treaties but is essential for providing certainty in treaty application. India has incorporated LoB clauses in treaties with countries like Singapore and UAE, influenced by economic and political considerations.
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