The following discussion is for academic purposes only and does not constitute tax advice or legal opinion. Enterprises should comply with the relevant laws and regulations of the place where they are located in any cross-border tax arrangement, and consult professional tax and legal advisors before implementation. The phenomenon of "taking advantage of tax treaty loopholes" (sometimes called "treaty shopping") currently being discussed internationally refers to some enterprises "traveling" between different countries through carefully designed cross-border structures, thereby enjoying the preferential low-tax treatment in tax treaties in order to achieve the purpose of reducing the overall tax burden. When discussing such phenomena in academia and practice, it is generally believed that the following situations or conditions may occur: 1. There is an unclear definition of "residence" in the structural design. The tax treaties of various countries generally require the determination of resident status (or "tax residency") as a prerequisite for enjoying treaty treatment. If an enterprise or holding company obtains tax residency status in certain treaty countries with the help of an intermediary entity, it may obtain preferential treatment by taking advantage of the provisions on resident status in the treaty even though its actual business activities do not occur in that country. 2. Using intermediary companies or "shell companies" to arrange. Companies set up intermediary holding companies in certain countries with low tax rates or a loose tax treaty network, and then the intermediary companies will apply lower withholding tax rates to the treaties signed with other countries. This arrangement often relies on the definition of the nature of payments (such as dividends, interest or royalties) in the treaties of various countries. If the "beneficiary" identification standards in the treaty clauses are loose, it may be exploited. 3. Loopholes or ambiguities in the text of tax treaties. When countries negotiate and sign tax treaties, due to different tax systems and policy objectives, their clauses sometimes appear ambiguous or fail to cover all cross-border arrangements. Companies may use these uncertainties in legal texts to set up structures at the junction of different treaties, making the tax rate of actual transactions lower than expected. 4. The principle of "substance over form" and the lack of anti-abuse rules. In recent years, many countries have added anti-abuse clauses to their treaties, such as the "Principal Purpose Test" (PPT) or the "Beneficiary Test", but there are differences in specific implementation among countries. If the anti-abuse provisions in a country's treaty are not strict enough or are weakly enforced, companies have the opportunity to "pass on" income through virtual arrangements and thus obtain low tax rates. It should be noted that with the improvement of international tax governance (such as the BEPS Action Plan promoted by the OECD), countries are gradually revising tax treaties to plug the above loopholes. In recent years, tax authorities have strengthened their efforts to investigate and punish "treaty shopping", and companies that use similar arrangements face greater challenges in terms of compliance risk and reputation risk. In short, companies may use one or more of the above situations to build a tax structure that formally meets the requirements of low-tax treaties but actually transfers profits to low-tax areas. However, this practice is often under the close scrutiny of tax authorities in various countries. Once it is determined to be an abuse of tax treaties, it may not only face back taxes, fines or even criminal liability, but may also affect future international business arrangements. Therefore, in any cross-border tax planning, it is necessary and important to ensure that the arrangement complies with the principles of economic substance, transparency and compliance requirements.