Beneficial ownership : the proposed changes to the OECD commentaries

Abstract

The term 'beneficial ownership' was introduced into the OECD Model Convention in order to ensure that treaty benefits available under articles 10, 11 and 12 on dividends, royalties and interest are not taken advantage of by third parties who are in reality not entitled to such benefits. The aim of this thesis is to determine an adequate definition for 'beneficial ownership'. It is clear that mere agents, nominees and conduits having very narrow powers which thereby render them mere fiduciaries or administrators on account of another, are clearly not beneficial owners. However, determining whether other entities can be considered beneficial owners is not an easy exercise due to the fact that the term 'beneficial ownership' has never been clearly defined and neither have the criteria that one must follow. Possible criteria to look into are considered in this thesis, as well as the possibility of certain entities, such as collective investment vehicles, being seen to be beneficial owners. In Chapters One and Two of this thesis, a number of divergent views on the matter emerge, put forward by various authors and courts. Landmark cases, including those of Indofood and Prévost, contribute towards the understanding of the concept. The OECD Commentaries are used as a guide by many, in an attempt to define 'beneficial ownership'. The OECD has recently put forward amendments to such Commentaries, to try to define the concept of beneficial ownership, and how it should be interpreted in the Discussion Draft entitled "Clarification of the Meaning of 'Beneficial Ownership' in the OECD Model Tax Convention". Following this discussion draft, the OECD issued a revised discussion draft on the 19th of October, 2012. The meaning behind, and the implications of these amendments, are essentially the focus of this study.