Beneficial ownership concept: Number of negative court cases grows

Dec 15, 2016

Tax audits become more efficient day by day. It is true that when the tax authorities file claims related to deoffshorisation aspects, these claims are usually successful, well thought-out and backed by information obtained from abroad.

In the beginning of November, we published a digest of recent court practice on situations, when the tax authorities challenged application of DTT benefits based on the concept of beneficial ownership. Now one more taxpayer has lost its case.

Just like in case of PAO Severstal that we analysed in detail in our previous Tax Flash, the tax authorities examined the cash flow Russia-Cyprus-BVI and collected facts confirming limited functions and powers of Cypriot income recipients. The court accepted references to Comments to the OECD Model Tax Convention, which provide a definition of beneficial ownership of income (to recap, Russian new deoffshorisation provisions were not applicable to periods reviewed in all court cases).

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