Comparative Study on Anti-Treaty Shopping – Focused on Beneficial Ownership Theory

Abstract

Abstract This article provides an overview of the concept of the traditional qusai-definitions of treaty shopping in an attempt to delineate the outline of such practices. This article also consider the current trends in treaty shopping and the anti-treaty shopping policies in the context of tax treaties, OECD Model Convention, US tax policy and domestic legislation, and its interaction with other domestic anti-abuse rules and judicial doctrines, focusing on recent cases on beneficial ownership. Lastly, this article examines the possible implications of Korean Law on the treaty shopping debate. From a global perspective, specific guidance is needed to harmonize how jurisdictions apply the concept of “beneficial owner” to holding companies. Since the tax authorities throughout the world often refer to OECD Commentary when interpreting Double Tax Conventions, it is critical that the concept of “beneficial owner” be clear and concise so as to avoid confusion and misinterpretation. It should be also noted that the verification of beneficial ownership requirement should be made on a factual basis, to avoid treaty shopping and treaty abuse as it is difficult to establish a general rule.