Beneficial Ownership - a concept in identity crisis

Abstract: The aim of this thesis is to analyze and determine the meaning of the term “Beneficial Owner”, in the model treaty of the OECD and therefore its meaning in bilateral negotiated treaties based on the model treaty. The term’s legacy and application is presented. While the meaning and application of the term is being presented, its application as, as well as border to, anti-abuse rules are examined. The concept establishes that certain tax treaty benefits are only available to a direct recipient of the incomes dividend/interest/royalty, if the direct recipient is also the beneficial owner of the income, that is if he beneficially owns the income. The legal and factual circumstances relevant for assessing who the beneficial owner is, are scrutinized. Traditionally, there has not been much case law on the term’s meaning, but lately increasingly more cases have dawned around the world. While several of these cases claim to apply an internationally coherent and autonomous concept, they are surprisingly diverse in their outcome. At the same time, the concept of Beneficial Ownership is getting its own meaning and impact in the EU-legal sphere. EU law is however something that is largely left out of this thesis. The commentaries to the OECD model treaty form an important aid of interpretation when studying the model treaty, additionally, case law from around the globe has been utilized in an effort to shed light on the concept and its application. The author can conclude that the concept, despite being an internationally coherent concept, is unclear and diverse in its application and the sources for interpreting it, such as the commentaries from the OECD fiscal committee, are vague and ambiguous. While the concept of “Beneficial Ownership” shares some traits with anti- abuse rules, the concept is fundamentally different. The author can determine that different approaches are apparent in jurisprudence. What seems to be most supported in the sources is that that the direct recipient’s power over a received income is the only consideration relevant when assessing whether he is the beneficial owner. In some cases, a wider approach, assessing the situation from a helicopter view has been utilized, effectively doing other largely unsupported considerations in the assessment. The author criticizes the blurred line to anti- abuse rules and carefully tries to explain the tendencies from the authorities as a mean for them to circumvent strict legality requirement and tax payer protection in an increasingly challenging globalized world.