OECD Reports on Portfolio Investments

The OECD has released two reports for consideration dealing with (i) the availability of Treaty benefits to collective investment vehicles (CIVs) and their investors and (ii) portfolio holdings more generally.

The first report, on the “Granting of Treaty Benefits with respect to the Income of Collective Investment Vehicles”, includes a comprehensive set of recommendations with respect to the legal and policy issues relating specifically to CIVs (i.e. the extent to which either the vehicles or their investors are entitled to treaty benefits). The Report analyses the technical questions of whether a CIV should be considered a “person”, a “resident of a Contracting State” and the “beneficial owner” of the income it receives under treaties that, like the OECD Model Convention, do not include a specific provision dealing with CIVs (i.e. the vast majority of existing treaties). Further, the Report includes proposed changes to the Commentary on the Model Convention to reflect the conclusions of the Report.

The second report, on “Possible Improvements to Procedures for Tax Relief for Cross-Border Investors”, discusses the procedural problems in claiming treaty benefits faced by portfolio investors more generally and makes a number of recommendations on “best practices” regarding procedures for making and granting claims for treaty benefits for intermediated structures. The objective of the work on best practices is two-fold: (i) to develop systems that are as efficient as possible, in order to minimise administrative costs and allocate the costs to the appropriate parties; and (ii) to identify solutions that might address the need for tax administrations to ensure proper compliance with tax obligations, from the perspective of both source and residence countries.