ALFI has taken note of the OECD Public Discussion Draft “Follow-up Work on BEPS Action 6: Preventing Treaty Abuse” dated 21 November 2014.
This Follow-up Discussion Draft was issued further to the release of the report “BEPS Action 6: Preventing the Granting of Treaty Benefits in Inappropriate Circumstances” in September 2014.
ALFI’s response addresses the situation of collective investment vehicles (“CIV”) being widely-held, diversified, and subject to investor-protection regulation in the country of establishment of the CIV, as previously defined by the 2010 OECD report on treaty eligibility for investors in CIVs and section A of the Follow-up Discussion Draft relating to the LOB provision and treaty entitlement.
ALFI takes the view that CIVs are principally set up for genuine commercial reasons and given their economic characteristics it is reasonable to conclude that CIVs cannot, in principle, be effectively used for treaty shopping. This is the reason why the main focus of the BEPS action plan is – and should remain – multinationals and not CIVs. ALFI further believes that there are good grounds to consider that all CIVs set up as UCITS should always be considered as residents for treaty purposes.
Consequently, ALFI believes that the final report on Action 6 should foresee that all CIVs set up as UCITS as well as all other widely-distributed non-CIVs whose characteristics are similar to those of UCITS will automatically qualify as resident for the purpose of article 1 of the OECD Model Convention and that they will also be considered as qualified residents for the purpose of the LOB clause. Finally, ALFI also suggests to include a statement that Contracting States are encouraged to consider that UCITS and comparable non-CIVs will not be considered as creating opportunities for treaty shopping.
You may access ALFI’s response here.