Research On The Identification Of "beneficial Owner" In Tax Treaties

With the advancement of economic globalization,tax treaties have become an important way for countries to promote the cross-border flow of capital and balance tax benefits.In tax treaties,the contracting states usually levy withholding taxes on each other’s resident companies’ dividends,interest and royalties from their own territory at preferential tax rates.Non-contracting resident enterprises generally cannot obtain such preferential treatment as provided in the tax treaties,but some multinational corporations try their best to obtain tax treaty treatment that they should not enjoy by setting up agency companies and conduit companies in the contracting party.Treaty abuse(Treaty-shopping)not only infringes the tax sovereignty of the contracting states,but also causes competition imbalance between enterprises,so that companies that abuse the tax treaties get an unfair competitive advantage.In order to regulate the behavior,the Organization of Economic Co-operation and Development(OECD)introduced the "beneficial owner" system in its model tax treaty issued in 1977.In subsequent bilateral and multilateral tax treaties,the "beneficial owner" system has become a special anti-avoidance system,if the enterprise of a Contracting State that received dividends,interest and royalties does not meet the conditions identified by "beneficial owner".Then the enterprise cannot become the beneficial owner of dividends,interest,and royalties,and thus cannot enjoy preferential withholding tax rates between contracting states.However,the 1977 OECD model does not give a definition of "beneficial owner",but simply adopts the exclusion method to exclude agents and conduit companies from the beneficial owner.This has led to the application of "benefit owner" in international tax practice has a majority of difficulties in many countries.In the tax treaties signed by my country,the "beneficial owner" system is also used as the standard for determining whether the residents of other contracting parties that receive dividends,interest and royalties should enjoy preferential withholding tax rates.In 2009,the State Administration of Taxation issued the "Notice on How to Understand and Identify the" Beneficial Owner "in the Tax Agreement"(hereinafter referred to as "Circular 601"),which clarifies the concept of beneficial owner in China and introduces substantive in the determination Business activity standards.The introduction of this standard has increased the discretion of tax authorities at all levels in determining whether an applicant has beneficial owner status,and has safeguarded my country’s tax interests.However,because different countries have different standards for identifying the beneficial owner system,and the tax authorities have difficulty in determining whether the applicant has substantive business activities,there have been different judgments in the same case during the application of the system.This brings great uncertainty to investors’ investment income,but also damages our tax authority.Therefore,clearly defining the connotation and identification standards of the "beneficial owner" system and regulating the abuse of tax treaties are of great significance for safeguarding my country’s tax interests and promoting my country’s economic development.This article explores the origin and development of the "beneficial owner" system from the theoretical and practical aspects,and explores the emergence and evolution of the "beneficial owner" system concept and the divergence of international recognition standards.In the process of identifying the system,the Organization for Economic Cooperation and Development has played a vital role.Since the "beneficiary owner" was introduced into the model of the Organization for Economic Cooperation and Development,the organization will summarize the "beneficiary" at intervals.The development experience of the “owner” system also updates the content of the model.The OECD model has a positive impact on the application of the “beneficiary owner” system in all countries.Countries draw on the model content and include “beneficiary owner” in the tax treaties signed "The system makes it an important system for regulating cross-border dividends,interest,and royalties in tax treaties.The second part of this article studies the criteria for identifying "beneficial owners" in tax treaties,including legal nature standards,economic substantive standards,and mixed standards.Through the analysis of the Prevost,Vico,Indian Finance Corporation and Real Madrid cases,the determination criteria adopted by the courts of various countries in handling disputes involving "beneficial owners" are discussed.The comparison shows the advantages and disadvantages of the identified standards.The third part of this article sorts out the normative documents issued by the State Administration of Taxation concerning the identification of "beneficiary owners",clarifies the standards and development process adopted by China in identifying "beneficiary owners",and concludes that China’s "beneficial owners" The status quo identified by people.The fourth part summarizes the identification dilemma of China’s "beneficial owner" system,combined with the international anti-avoidance system and China’s tax practice,proposes measures to improve China’s "beneficial owner" system with a view to making for our tax practice a little contribution.