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Beneficial Ownership: Recent Trends – Review 1

Beneficial Ownership: Recent Trends, by Michael Lang, Pasquale Pistone et al., IBFD 2013

Reviewed by Glen Loutzenhiser, British Tax Review B.T.R. 2014, 5, 676-678.


Beneficial Ownership: Recent Trends*B.T.R. 676 The title of this book is somewhat misleading.1 On picking it up for the first time this reviewer expected to find a number of useful if fairly descriptive chapters highlighting recent case law across a range of jurisdictions on the interpretation of the relatively narrow though important concept of "beneficial ownership" in bilateral tax treaties. Some analysis of the recent OECD *B.T.R. 677 work on the subject was also expected.2 It turns out, however, that the editors of this book had greater ambitions. The result is an exceptionally deep and rich treatment of the topic, exploring the historical development of beneficial ownership, its interrelationship with anti-avoidance rules, its role as an allocation of income rule, its treaty and domestic aspects—along with, of course, those "recent trends."
The genesis of the book was a conference held in May 2012 at the Institute for Austrian and International Tax Law of the Vienna University of Economics and Business. The book is comprised of 21 chapters written by leading tax academics and practitioners including John Avery Jones, Philip Baker, Richard Vann, Pasquale Pistone, Brian Arnold and David Duff. Some of the chapters are highly conceptual or in-depth historical analyses; others are fairly short comments on one or two particular cases. The principle jurisdictions covered are the UK, US, Canada, Switzerland, the Netherlands, Denmark, Spain, Italy and India. There are also two chapters examining beneficial ownership in EU law, focusing in particular on entitlement to benefits under the Interest and Royalties Directive.3
The book begins with an extensive introductory chapter by David Duff. Rather than merely setting the scene (which he does well) or briefly outlining the chapters that will follow, Duff introduces the key points in, and then engages critically with, the contributions of the other contributors. The result is an interesting 26-page guided tour bringing together the best bits of the entire collection. In Chapter 2, Philip Baker launches the first of 16 jurisdiction-based chapters, providing his views on what he describes as the "atypical" English Court of Appeal decision in Indofood International Finance Ltd v JP Morgan Chase Bank NA London Branch4. That case famously gave us the novel idea that beneficial ownership had an international fiscal meaning, which had the effect of kick-starting serious OECD work on the topic and also led to extensive new HMRC guidance.5 In Chapter 3, Brian Arnold reviews the influential cases on beneficial ownership in Canadian tax treaties. Arnold is quite critical of the taxpayer-friendly decision of the Canadian Tax Court in Velcro Canada Inc. v Canada.6 He also questions why the Canadian tax authorities did not invoke that country’s GAAR in either Velcro Canada or the earlier case of Prévost Car.7 This is followed by 14 more chapters covering important developments (recent *B.T.R. 678 or not) in other countries and the EU. These chapters are more variable in length and depth of analysis, but the overall geographical coverage is quite extensive.
Chapter 18 by Ekkehart Reimer entitled "Conceptualising Beneficial Ownership" is the first of four concluding chapters that depart from the jurisdiction-based format to focus on bigger-picture questions. In Chapter 19, Richard Vann delves into the history of beneficial ownership in tax treaties in some detail. Vann’s main conclusion is that the concept originally was aimed at payments to nominees and agents to ensure treaty benefits were available to the persons on whose behalf the Page1 payments were received; any anti-avoidance considerations were incidental at best.8 Consequently, Vann is critical of the use by tax authorities of beneficial ownership to deny treaty benefits, which he argues has confused the case law and created unnecessary uncertainty. Vann urges the OECD not to develop the concept beyond this relatively narrow original purpose.9 Vann’s chapter is followed by a shorter historical chapter by John Avery Jones with the controversial-sounding title "The Beneficial Ownership Concept was Never Necessary in the Model". Avery Jones argues that the UK’s support for the ultimate inclusion of beneficial ownership in the OECD Model Double Taxation Convention on
Income and on Capital 197710 related to a narrow issue of UK domestic tax law that became a
non-issue once the second sentence was added to the meaning of resident in Article 4(1) in that same 1977 Model to exclude from residency for treaty purposes UK nominees or trustees receiving foreign income for a non-resident.11 Daniel Guttman concludes the collection in a short piece responding briefly to Vann and Avery Jones and speculating on what the OECD’s next steps should be. Like Vann, Guttmann urges caution. He points out that many recently concluded treaties already contain both beneficial ownership provisions and general anti-avoidance rules.12 Should this prove to be the long-term trend, Guttmann concludes the beneficial ownership concept "will move from useless to obsolete. This may be good news after all".13
In summary, this book combines broad jurisdictional coverage of its fairly narrow topic with some impressive historical and policy material. It also mixes in a healthy dose of academic debate amongst its contributors. It is certainly a must-read for anyone interested in this fascinating subject.



Glen Loutzenhiser

1 M. Lang, et al., (eds), Beneficial Ownership: Recent Trends (The Netherlands: IBFD, 2013).
2 OECD, Clarification of the Meaning of ‘Beneficial Owner’ in the OECD Model Tax Convention, Discussion Draft (April 29, 2011 to July 15, 2011), available at: [Accessed November 17, 2014]
and OECD, OECD Model Tax Convention: Revised Proposals Concerning the Meaning of ‘Beneficial Owner’ in Articles 10, 11 and 12 (Discussion Draft) (October 19, 2012 to December 15, 2012), available at: [Accessed November 17, 2014].
3 Council Directive 2003/49/EC of 3 June 2003 on a common system of taxation applicable to interest and royalty payments made between associated companies of different Member States [2003] OJ L157/49.
4 P. Baker, "United Kingdom: Indofood International Finance Ltd v JP Morgan Chase Bank" in Lang, et al., (eds), above fn.1, 27–38, discussing Indofood International Finance Ltd v JP Morgan Chase Bank NA London Branch [2005] EWHC 2103 (Ch); [2006] STC 192 (HC) and [2006] EWCA Civ 158; [2006] STC 1195 (CA).
5 HMRC, International Tax Manual INTM332000, Double taxation claims and applications—Beneficial ownership: contents, available at: [Accessed November 17, 2014].
6 B. Arnold, "The Concept of Beneficial Ownership under Canadian Tax Treaties" in Lang et al., (eds), above fn.1, 39–49, discussing Velcro Canada Inc. v Canada 2012 TCC57. Arnold describes the decision as, in his opinion, "clearly wrong" (at 48).
7 Prévost Car Inc. v Canada 2009 FCA 57; [2010] 2 F.C.R. 65, upholding the decision of the Tax Court in Prévost Car Inc. v Canada 2008 T.C.C. 231.
8 R. Vann, "Beneficial Ownership: What does History (and Maybe Policy) Tell Us" in Lang, et al., above fn.1, 275.
9 Vann, above fn.8, 301.
10 OECD, Model Double Taxation Convention on Income and on Capital (OECD: Paris, 1977).
11 J.F. Avery Jones, "The Beneficial Ownership Concept was Never Necessary in the Model" in Lang, et al., above fn.1, 333–339.
12 D. Guttmann, "The 2011 Discussion Draft on Beneficial Ownership: What Next for the OECD?" in Lang, et al., above fn.1, 341–344.
13 Guttmann, above fn.12, 344.