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Clarification of the Meaning of the Term "Beneficial Owner"

Clarification of the Meaning of the Term "Beneficial Owner"
18 Jul 2011
The term “beneficial owner”, as used in the OECDs draft changes to the Commentary on Articles 10,11 and 12 of the OECD Model Tax Convention, has given rise to different interpretations by courts and tax administrations.

Given the risks of double taxation and non-taxation arising from these different interpretations, the CFA has developed proposals aimed at clarifying the interpretation that should be given to that concept in the context of the Model Tax Convention.

We welcome the introduction of a treaty based approach as a significant step towards decreasing the confusion in the meaning of the beneficial ownership concept. Currently the wording in the proposals, though, is too broad and may allow for a more aggressive and arbitrary approach by tax authorities towards structures which are not aimed at the abuse of treaties.

Taxanders from around the world provide their comments and illustrate, using examples and "real life" cases, what can be done to achieve a better understanding of the beneficial ownership concept, including Taxand Cyprus, Taxand India, Taxand Luxembourg, Taxand Netherlands, Taxand Pakistan, Taxand Spain, Taxand Thailand and our Taxand Global Transaction Tax Service Line.


Taxand's Take

Overall the draft discussion proposed clarification is a step forward in an international consensus on the interpretation of the concept of a beneficial owner. The proposed new wording will however not remove all disputes on the interpretation of the concept. The broad wording will offer arguments for tax authorities to take a more aggressive and arbitrary approach towards conduit companies but also to structures which are not aimed at treaty abuse. The biggest risk is with complex financial transactions, as these will be targeted by tax authorities even though there is no abuse of a treaty. We therefore feel that the OECD should further refine and elaborate the discussion draft so as to bring about more clarity on the interpretation the concept of beneficial ownership.

Access Taxand's full response to the OECD's revised discussion draft on the clarification of the meaning of "beneficial owner"

Your Taxand contact for further queries is:
Marc Sanders
T. + 31 207 570 905

Taxand's Take Author

Marc Sanders
Taxand Board member