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The beneficial ownership of income concept: How to validate reduced rate of corporate withholding tax

Vol. 18, Iss. 11, NOVEMBER 2019

Received: 27 March 2019

Received in revised form: 10 September 2019

Accepted: 28 October 2019

Available online: 29 November 2019

Subject Heading: FISCAL SYSTEM

JEL Classification: E6, H2

Pages: 25212533

Lapin D.A. Financial University under Government of Russian Federation, Moscow, Russian Federation

ORCID id: not available

Subject The article analyzes the law enforcement practice in the context of resolution of tax disputes arising from the application of double tax treaties' (DTT) benefits by taxpayers of corporate income tax. It confirms the justified use of DTT benefits by taxpayers and tax agents.
Objectives I determine trends in the law enforcement activities of tax and judicial authorities in the Russian Federation related to the application of the concept of beneficial ownership of income, and formulate criteria for assigning a person to the beneficial owner category.
Methods The study employs classical methods of economic analysis, induction and deduction, as well as the comparative method.
Results I analyzed certain indicators and criteria of eligibility for beneficial owner of income status; defined a strategy for validating the use of reduced rates of withholding tax. The findings may be helpful for corporate income tax administration.
Conclusions Despite the emerging court practice, which in most cases is against taxpayers, I conclude that to have a successful mechanism for confirming the beneficial ownership of income, it is important to create a detailed defense file containing the necessary information on disposal and use of received income. The key point here is substance over form.

Keywords: beneficial owner of income, actual right to income, law enforcement practice, double tax treaty, withholding tax


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