Ultimate income beneficiary

The Organisation for Economic Cooperation and Development (“OECD”) has published discussion material intending to clarify the definition of an ultimate income beneficiary[1].

Fulfillment of conditions for an ultimate income beneficiary is fundamental for recognition of benefits (lower tax rates) arising from a relevant double taxation treaty, in particular in case of income from dividends or interests and license fees.

In the discussion material, the OECD proposed new comments on Article 10 – Dividends, 11 – Interests and 12 – License fees for the OECD Model Tax Convention. According to this proposal, a person who is fully entitled to dispose with the relevant income and receive the benefits arising from such income (and such entitlements are not restricted by the obligation to transfer the relevant income to a third party) can be considered as the actual owner of the income. 

Fulfillment of all conditions can be proven by a confirmation of tax residency, an affidavit that the relevant person is the ultimate income beneficiary or by other possible evidence pursuant to a double taxation treaty or applicable tax laws.

[1] The OECD uses the term “beneficial owner”: http://www.oecd.org/dataoecd/49/35/47643872.pdf