However, my recent experience in two quite separate matters has suggested that much more needs to be done – primarily on the international stage – if these objectives are to be achieved.
Both matters have a number of similarities:
- the source country is one of the world’s superpowers
- the other country is a well recognised 'aggregation' jurisdiction
- both require a determination of the ‘beneficial owner’.
Even though ultimately identical (negative) conclusions might be reached, the similarities seem to end there. It was not possible to identify a common understanding and application of the relevant underlying principles. Further, at this stage, the knock-on consequences (if any) of a negative conclusion remain unclear.
It is generally understood that the concept of ‘beneficial owner’ is fundamental to the reduced withholding tax rates available under tax treaties based on the Organisation for Economic Co-operation and Development (OECD) Model.
Without those reduced withholding tax rates, and despite almost universal foreign tax credit systems, alternative (domestic) withholding tax rates often make investment into the source country from the non-resident’s perspective unattractive.
For a variety of reasons, only in recent times has the term ‘beneficial owner’ attracted more serious focus and attention (e.g. from the OECD).
The above two examples clearly show that much more needs to be done in this area.
How comfortable are you with your position on this issue? You may wish to contribute to the current debate.