Taxpayers are entitled to optimise their obligations; however, the boundary between permissible optimisation and impermissible abuse is not always clear. In order to establish tax avoidance, both the subjective element – tax-driven intent – and the objective element – the failure to achieve the purpose of the relevant provision – must be present, and the transaction must form part of an artificial (non-genuine) scheme serving tax avoidance as a whole.
The definition of an artificial scheme is not provided explicitly but has been developed through case law, in particular by the Court of Justice of the European Union. In Slovenian jurisprudence, the concept is currently relevant in the tax treatment of acquisitions of own shares and contractual arrangements relating to the provision of services, where the prevailing position has emerged that a single, legally correct transaction does not in itself constitute tax avoidance, unless it forms part of a broader, substantively empty scheme.
The existence of an artificial scheme is established by way of indicia. Indicators include, inter alia, unusual or overly complex transactions, short-term structures, rapid transfers of funds between entities, and the use of conduit companies lacking genuine economic function. The assessment must always be based on the circumstances of the individual case, with decisive weight given to the actual legal and economic effects of the transactions.
The full article is published in Pravna praksa.
