Strategizing International Tax Best Practices – by Keith Brockman

The 2014 Update, as adopted by the OECD Council on 15 July 2014, includes changes that were previously released for comments, including the meaning of “beneficial owner.”  Numerous additions and deletions to Commentaries on various Articles, including positions of non-member countries, are also included.  A link to the Update is provided for reference:

http://www.oecd.org/tax/treaties/2014-update-model-tax-concention.pdf

Interesting changes:

  • Article 5 Commentary: new views by Germany, Estonia, and Israel.
  • Article 9 Commentary: Hungary (newly added) and Slovenia reserve the right to specify that a correlative (i.e., offsetting) adjustment will be made only if they consider that the primary adjustment is satisfied.
  • The term “beneficial owner” does not have reference to any technical meaning under domestic law, thus it should not be used in a narrow technical sense, rather, it should be understood in its context and in light of the object and purposes of the Convention including avoiding double taxation and the prevention of fiscal evasion and avoidance.
  • The term “beneficial owner” does not deal with other cases of treaty shopping, which can be addressed in specific anti-abuse treaty provisions, general anti-abuse rules (GAAR), substance-over-form or economic substance approaches.
  • Article 13 Commentary: With respect to paragraph 3.1, Austria and Germany hold the view that when a new tax treaty enters into force, these countries cannot be deprived of the right to tax the capital appreciation which was generated in these countries before the date when the new treaty became applicable.
  • Article 26 Commentary: The Commentary was expanded to develop the interpretation of the standard of “foreseeable relevance” and the term “fishing expeditions,” i.e. speculative requests that have no apparent nexus to an open inquiry or investigation.  The Commentary further provides for an optional default standard of time limits within which the information is required to be provided unless a different agreement has been made by the competent authorities.  The examples provided are to demonstrate the overarching purpose of Article 26 not to restrict the scope of exchange of information but to allow information exchange “to the widest possible extent.”

The Update requires a comprehensive review to determine potential implications, including beneficial ownership restrictions and ways of working by competent authorities.  Such review should distinguish changes to the Articles versus additions or deletions to the Commentary interpreting such Articles.  Note that the OECD BEPS changes will be an addition to this Update.

Comments on: "2014 Update to the OECD Model Tax Convention" (2)

  1. Gary Brown said:

    Hello Keith,

    I wanted to make sure that you knew about our Africa Tax, Law & Finance Hub, http://www.africatlf.com. Recent tax articles include:

    – How are African and Middle East nations responding to the US FATCA banking regulations? – Now that Tanzania has finally released new transfer pricing regulations, what are the requirements for specific documentation and penalties for lack of compliance? – Will The South African Revenue Service Adopt A Taxpayer Bill Of Rights?

    I would be delighted to cooperate in any way and would be happy to publish an article by you. Regards.

    • Hello Gary,
      Thank you for your informative note, and offer to publish an original article. I will certainly keep it in mind.
      I also intend to spend more time on your site to view your valuable articles.

      Thanks again.

      Best regards,
      Keith

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: