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OECD Seeking Comments on Beneficial Owner and PE Definitions - by Raphael Barchichat and Rob Davis 

Global Tax Adviser


November 06, 2012


Raphael Barchichat
Montreal, International Corporate Tax


Rob Davis
Toronto, Transfer Pricing


The Organisation for Economic Cooperation and Development's (OECD) Committee on Fiscal Affairs has released revised discussion drafts on proposals concerning the meaning of "beneficial owner" in Articles 10 (Dividends), 11 (Interest) and 12 (Royalties) of the OECD Model Tax Convention, and the interpretation and application of permanent establishment (PE) in Article 5 of the Convention.

Beneficial owner
In light of comments received on its first discussion draft on the meaning of "beneficial owner" in Articles 10, 11 and 12 of the Convention, the OECD made changes to the proposals in April 2011. The OECD's revised discussion draft includes these revised proposals. Since the changes originally proposed were almost identical for Articles 10 (Dividends), 11 (Interest) and 12 (Royalties), the revised discussion draft focuses on the proposals made in Article 10 and includes a summary of the comments received and an explanation of the changes made to each relevant paragraph of the Commentary on that Article. The Annex includes a consolidated version of the revised proposals for Articles 10, 11 and 12 where changes made to the proposals included in the first discussion draft are underlined.


Permanent establishment
Article 5 of the Model Tax Convention includes the definition of the treaty concept of PE, which is primarily used for the purpose of the allocation of taxing rights when an enterprise of one State derives business profit from another State. The Model Tax Convention is important because many countries rely on it when drafting bilateral tax conventions (e.g., treaties). The OECD first released a discussion draft on the interpretation and application of PE in Article 5 of the Convention on October 12, 2011. The revised draft takes into account comments that the OECD received on this discussion draft, including the discussion at a public consultation meeting held on September 2012.


The OECD will accept comments on the "beneficial owner" draft until December 15, 2012 and on PE until January 31, 2013.


For more information, contact your KPMG adviser.







Information is current to November 6, 2012. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG’s National Tax Centre at 416.777.8500.

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