Purposes of double taxation treaties and interpretation of beneficial owner concept in Ukraine

• Author: Pavlo Selezen
• Pages: 26-36

Purposes of double taxation treaties and interpretation

of beneficial owner concept in Ukraine

Research fellow Pavlo SELEZEN1

Abstract

TСe term ‟benefТcТal oаner” Сas bee n Тnterpreted bв UkraТnТan courts concernТng

the application of double taxation treaties’ provisions since the adoption of the Tax Code of

Ukraine in 2010. Changing nature of the beneficial owner concept, its importance as an

instrument for treaty shopping counteraction and the necessity of its proper interpretation

in the Ukrainian reality are the main factors that have a strong impact on the development

of court practice concerning beneficial ownership. The article focuses on the prevention of

tax avoidance as one of th e purposes of double taxation treaties and its role in the

interpretation of the term ‟benefТcТal oаner”. The analysis is based on the practice of the

Supreme Administrative Court of Ukraine on interpretation of the relevant provisions of the

Convention between the Government of Ukraine and the Government of Switzerland on

Avoidance of Double Taxation with respec t to Taxes on Income and Capital as of 30

October 2000.

Keywords: interpretation, purposes of international treaties, double taxation treaties,

beneficial ownership.

JEL Classification: K33, K34

1. Introduction

In one of its decisions the Supreme Administrative Court of Ukraine

admits that the term ‟beneficial owner” could not be interpreted in a narrow

technical sense. Its meaning ‟should be defined taking into account purposes, tasks

of international double taxation treaties” such as the prevention of tax avoidance

and such main principles as ‟the prevention of treaty provisions abuse.”2 This

approach is shared by the State Fiscal Service of Ukraine.3

The proposed approach provides that the prevention of tax avoidance is

one of the purposes of double taxation treaties. Is it true for all double taxation

treaties of Ukraine? Is the prevention of tax avoidance the purpose in all cases? The

1 Pavlo Selezen - Research Institute of Fiscal Policy, University of State Fiscal S ervice of Ukraine,

pselezen@i.ua .

2 Decision of the Supreme Administrative Court of Ukraine in case К/800/52155/13 of March 24,

2014, available online at: http://reyestr.court.gov.ua/Review/38106136 (accessed on September 29,

2017).

3 Letter of the State Fiscal Service of Ukraine No. 9033/7/99-99-10-02-02-17 of October 31, 2014,

available online at: http://www.profiwins.com.ua/uk/letters-and-orders/gna/5296-9033.html

(accessed on September 29, 2017).