Over 20 years after the OECD issued the 1998 Report by the Committee on Fiscal Affairs (Tax Sparing: A Reconsideration), it is appropriate to revisit the reasons that the OECD used for discouraging the use of such clauses, re-evaluating the soundness of such reasons under the current circumstances. Although tax treaties signed in the 21st century show a reduction in the use of such clauses, they are still part of international treaty practice. However, the most recent model clauses incorporate some remedies that prevent their abuse, taking into account some of the OECD's recommendations included in the 1998 Report. Tax sparing clauses are vital international instruments used to retain the effectiveness of tax incentives in respect of multinational entities by avoiding a situation in which a reduction in taxation in the host country increases taxation in the residence country. Therefore, tax sparing clauses can only be analysed considering the fundamentals of tax incentives, understanding that the former support the latter. While the OECD has advised the limited and exceptional use of tax incentives and the mechanisms for their incorporation through the use of tax sparing clauses, respect for sovereignty has been used as a strong argument against these recommendations. However, there are valid reasons justifying the full but cautious use of tax incentives and in combination with tax sparing clauses. The assessment of the adequacy of specific-purpose tax incentives will depend on a number of complex social, economic and political factors that start by analysing the financial and government systems of the state that provides the tax incentive. Tax incentives can prove to be efficient or inefficient depending on the purpose that the state pursues and the means to achieve these objectives, so it is not possible to universally sustain the inconvenience of developing countries using tax incentives as part of their tax policy. This will clearly influence the negotiation of the use of tax sparing clauses in bilateral treaties. In addition, the drafting of modern tax sparing clauses should aim to tackle their use beyond their main purpose and in line with controlled foreign corporation rules and other minimum taxation provisions as envisaged in the framework of the Pillar 2 debate.