Conduit Companies, Beneficial Ownership, and the Test of Substantive Business Activity in Claims for Relief Under Double Tax Treaties

Saurabh Jain, John Prebble and Kristina Bunting "Conduit companies, beneficial ownership, and the test of substantive business activity in claims for relief under double tax treaties" (2013) 11 eJournal of Tax Research 386.

WU International Taxation Research Paper Series No. 2014 - 11

50 Pages Posted: 6 Aug 2014 Last revised: 7 Mar 2015

See all articles by Saurabh Jain

Saurabh Jain

National Law Institute University (NLIU), Bhopal

John Prebble QC

Victoria University of Wellington - Faculty of Law; Institut für Österreichisches und Internationales Steuerrecht, Wirtschaftsuniversität Wien; University of Notre Dame Australia - School of Law

Kristina Bunting

Victoria University of Wellington

Date Written: December 1, 2013

Abstract

If interpreted in a strict legal sense, beneficial ownership rules in tax treaties would have no effect on conduit companies because companies at law own their property and income beneficially. Conversely, a company can never own anything in a substantive sense because economically a company is no more than a congeries of arrangements that represents the people behind it. Faced with these contradictory considerations, people have adopted surrogate tests that they attempt to employ in place of the treaty test of beneficial ownership. An example is that treaty benefits should be limited to companies that are both resident in the states that are parties to the treaty and that carry on substantive business activity. The test is inherently illogical. The origins of the substantive business activity test appear to lie in analogies drawn with straw company and base company cases. Because there is no necessary relationship between ownership and activity, the test of substantive business activity can never provide a coherent surrogate for the test of beneficial ownership. The article finishes with a Coda that summarises suggestions for reform to be made in work that is to follow.

Keywords: Tax law, beneficial ownership, tax treaties, company law

JEL Classification: K30, K33, K34

Suggested Citation

Jain, Saurabh and Prebble QC, John and Bunting, Kristina, Conduit Companies, Beneficial Ownership, and the Test of Substantive Business Activity in Claims for Relief Under Double Tax Treaties (December 1, 2013). Saurabh Jain, John Prebble and Kristina Bunting "Conduit companies, beneficial ownership, and the test of substantive business activity in claims for relief under double tax treaties" (2013) 11 eJournal of Tax Research 386. , WU International Taxation Research Paper Series No. 2014 - 11, Available at SSRN: https://ssrn.com/abstract=2476243

Saurabh Jain

National Law Institute University (NLIU), Bhopal

Kerwa Dam Road
BHOPAL
Bangalore, 560001, MD Madhya Pradesh 462044
India

John Prebble QC (Contact Author)

Victoria University of Wellington - Faculty of Law ( email )

PO Box 600
Wellington, 6140
New Zealand
+64 4 463 6311 (Phone)
Papers Indexed at HOME PAGE (Fax)

HOME PAGE: http://www.victoria.ac.nz/law/staff/prebble-scholarly.aspx

Institut für Österreichisches und Internationales Steuerrecht, Wirtschaftsuniversität Wien ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

University of Notre Dame Australia - School of Law

Sydney Campus, New South Wales
Australia

Kristina Bunting

Victoria University of Wellington

P.O. Box 600
Wellington, 6140
New Zealand

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
285
Abstract Views
2,020
rank
123,389
PlumX Metrics