OECD Releases Draft Proposal on Cross-Border Tax Claims

February 12, 2010 International Tax CooperationTaxation in EU

Comparison of Primary class sizes in state-funded schools within OECD countries (2007) v2The Informal Consultative Group (ICG), an OECD pilot group, has released a draft proposal and started consultations on implementation of procedures for international businesses to claim reductions in withholding rates as a result of tax treaties.

The discussion paper Possible Improvements to Procedures for Tax Relief for Cross-Border Investors, released on February 8th, analyses the current problems faced by international portfolio investors when attempting to claim any fiscal benefits resultant from cross-border tax-treaties and laws. The document recommends that intermediate structures be created in order to facilitate the claiming, administration, and granting of any related tax reliefs. The proposed intermediaries would operate on a “pooled claim” system, to lower administration requirements and protect claimant privacy. The paper outlines a set of “best practices” for the intermediaries and a collection of standardized documents that could be used by any jurisdiction wishing to utilize the suggestions.

Commenting on the document and the feasibility of its implementation, Jeffrey Owens, Director of the OECD Center of Tax Policy and Administration said: “Some countries have indicated that they would implement the system by incorporating the procedures into their domestic law or regulations. It appears that the documents in the Implementation Package could be adapted relatively readily by a country pursuing such an administrative approach.”

The discussion paper is a continuation of works published earlier by the ICG, and a development of ideas presented in two OECD papers published on January 12th 2000 on the effect of tax treaties on collective investment vehicles. The ICG was formed by the OECD Committee on Fiscal Affairs in 2006 to asses the legal issues and barriers surrounding portfolio investments and tax treaties.

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