Limits to Tax Planning

S. 309 1. Introduction

The appropriate attribution of income and taxing rights between states has gained a lot of attention recently. As a consequence of the financial crisis of 2007 – 2008 states have become increasingly determined to execute their taxing rights as efficiently as possible. Politicians, even conservatives usually believing in lower taxes, press multinational enterprises and wealthy individuals to pay their taxes “fairly”: a good example of this would be Prime Minister Cameron saying at the 2013 World Economic Forum in Davos that: “individuals and businesses must pay their fair share” of taxes.

This book concerns limits to tax planning and explains to what extent taxpayers may legitimately shape their tax liabilities. The purpose of this paper is to provide an overview of one of the most important and controversial concepts currently in international tax law – “beneficial ownership.” The reason why this topic is included in the book is that the “beneficial owner” concept very often has to be considered in tax structuring (it limits unintended use of tax treaties such as treaty shopping). The concept is especially important for a contracting state in which interest and royal...