Access to Treaty Benefits

S. 3341. Introduction

The concept of beneficial ownership intends to identify the person who is behind certain legal entities or arrangements; usually, businesses are carried out through numerous and diverse kinds of legal entities or arrangements settled in different tax jurisdictions. Its goal is to grant transparency in cross-border operations and mainly to attribute treaty benefits to those persons who are really entitled. Beneficial ownership is a binding provision under most international tax treaties that serves as a requisite for payments of royalties, dividends, and interests to be entitled to a reduction or exemption of the source jurisdiction withholding tax (Articles 10, 11, and 12 of the OECD Model Tax Convention (OECD Model)). Such a provision excludes intermediaries such as agents, nominees, and conduit companies resulting in the conservation of taxation and preventing tax evasion on international grounds.

The explicit purpose of international treaties is to resolve issues concerning taxation between two countries; these problems often include double taxation, double non-taxation, and tax evasion. Treaties grant benefits often consisting of a tax exemption or tax reduction t...