Institute for Austrian and International Tax Law Beneficial Ownership, Treaty Entitlement including Transparent Entities Prof. Dr. Michael Lang Vienna University of Economics and Business Administration

Institute for Austrian and International Tax Law 2 Treaty Entitlement n Art 1 and Art 4 par 1 OECD Model Convention n Residence n Unlimited Tax Liability (Worldwide Taxation)

Institute for Austrian and International Tax Law 3 Concept of Residence according to Art 4 par 1 OECD Model Convention n „liable to tax […] by reason of his domicile, residence, place of management or any other criterion of a similar nature“ n „does not include any person who is liable to tax in that State in respect only of income from sources in that State“

Institute for Austrian and International Tax Law 4 „Liable to Tax“ n Certain level of taxation n Objective exemptions n Subjective exemptions n Entities not treated as taxpayers

Institute for Austrian and International Tax Law 5 Partnerships n Conflict of Allocation of Income n Example: l Source State: Allocating income to partnership l Other State: Allocating income to partners n Which State‘s tax law is relevant? n OECD: State of the beneficiary (why?) n OECD: Transparent partnerships are not residents

Institute for Austrian and International Tax Law 6 Beneficial Ownership (1) n OECD-Model Convention 1977 n Art 10, 11, 12 OECD.Model Convention n Not general requirement for treaty entitlement n Criterion for limitation of source taxation (e.g. Art 10 par 2, 11 par 2 OECD Model Convention) n Need to distinguish between OECD Model Convention 1963 and 1977?

Institute for Austrian and International Tax Law 7 Beneficial Ownership (2) n Need to distinguish between Art 10, 11 and 12 on the one hand and other provisions of the OECD Model Convention on the other hand? n Beneficial ownership of legal relevance? n Entity is „bound to pass on the income“ (Indofood): No beneficial ownership?

Institute for Austrian and International Tax Law 8 Conclusion n Legal basis for treaty entitlement: Art 4 par 1 OECD Model Convention n Broad interpretation of Art 4 par 1 OECD Model is convincing n Relevance of term „beneficial ownership“ should not be overemphasised