The concept of beneficial ownership in the double tax treatie

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The concept of beneficial ownership in the double tax treatie

Journal Title: Економіка. Фінанси. Право - Year 2019, Vol 7, Issue

Abstract

Introduction. The article considers the features of the concept of beneficial owner, which is widely used in the international double tax treaties. For a long time, different intergovernmental organizations try to define this concept in their regulatory documents, commentaries to conventions and directives. Analyzing the resources, it is possible to come to the conclusion that such documents do not include the definition of the “beneficial owner” itself. This makes an application of the international legislation more complicated, as there is no unified approach and the countries may either not to have the definition of the concept in their internal legislation or this definition may differ. The article states that, in general, the meaning of the term “beneficial owner” may be defined as follows: “the beneficial owner is a person (both individual and a legal entity), who ultimately has a right to use and enjoy the benefits from the transaction”. Another sphere of development of the concept of “beneficial owner” in the double tax treaties is anti-money laundering. In it worth mentioned that the main issue herein is using by the parties so-called “agents” / “nominees” / “conduit companies”, who are acting as a fiduciary (-ies) on behalf of the interested parties and, being tax resident(s) of certain contracting state(s) do not settle the tax liabilities under the double tax treaties existing between the countries. On their turn the fiduciaries have an obligation to pass the income to another person, who will be considered as its beneficial owner. Purpose. The purpose of the article is to analyze the peculiarities of the concept of beneficiary owner in the double tax treaties, as well as to determine its influence on the legislation of different countries and international judicial practice. Results. A double tax treaty is not only the instrument of business’ encouraging and liberalization, but is also called to protect national economic and financial system from the unlawful activities of economic agents. Therefore, a lot of countries are trying to develop the concept of beneficial owner that would take into account both international experience and bilateral and multilateral relations in elimination of double taxation and national interests against money laundering. Thus, national judicial system can create the preconditions for transforming the concept of beneficial owner considering the interests of national tax system and economic needs, in particular, when it comes to finding potential attempts at tax evasion using the tax treaties Ukraine has signed with offshore tax countries. Conclusion. The concept of beneficiary ownership is mainly determined in the double tax treaties, international multilateral memorandums, as well as in the judicial practice of different countries. What is important is to accept by the court instances the notion of beneficial owner and the possibility to differentiate the legal and economic meaning of ownership and possession. Thus, the expertise of well-developed countries is important and necessary for further implementation of the concept to the Ukrainian tax legislation.

Authors and Affiliations

Anastasiia Hennadiivna Kosenkova

Keywords

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EP ID EP674891
DOI -
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