Taxsutra Pro Issue 3 : Beneficial Ownership – As an International Tax Treaty Concept

The Third edition of Taxsutra Pro is a 136 page report on the hot button topic of ‘Beneficial Ownership’ in an International Tax Treaty Context.

While the term ‘beneficial ownership’ appears fairly straightforward, it brings with it the possibility of a wide and varied interpretation. The concept is prevalent in international as well as Indian domestic jurisprudence. However, its application has differed with the context in which it is used. Even in international tax jurisprudence, the lack of a uniform definition and understanding of the concept, has left its meaning fraught with uncertainty.

The aim of this report is to shed light upon the meaning of beneficial ownership only in an international tax treaty context, both from a policy and case law viewpoint. The report is divided into four Parts. Part I discusses the evolution of beneficial ownership in the OECD Model Tax Convention, which depicts how its scope has been gradually widened. It also discusses the principal ways in which the term has been interpreted and applied, i.e. as an anti-abuse rule, or with a forwarding of income approach; with a legal interpretation or a practical economic one. Part II then deals with the evolution of beneficial ownership and its interpretation in Indian case law. Part III comprises a similar discussion in noteworthy foreign case law. Part IV embodies a conclusion on the earlier parts and specifically questions the role, relevance and need of the beneficial ownership test in light of emerging general anti-avoidance rules.