This release is the work of the Informal Consultative Group on the Taxation of Collective Investment Vehicles and Procedures for Tax Relief for Cross-Border Investors (ICG) which was established in 2006 by the OECD’s Committee on Fiscal Affairs (CFA) to consider legal questions and administrative barriers that affect the ability of collective investment vehicles (CIVs) and other portfolio investors to effectively claim the benefits of tax treaties.

On January 12, 2009, the OECD released two reports prepared by the ICG in fulfilment of this mandate. The ICG’s first report, on the “Granting of Treaty Benefits with respect to the Income of Collective Investment Vehicles,” addresses the legal and policy issues relating specifically to CIVs. A modified version of that report was released by the OECD for public comment on December 9, 2009.

The report by the ICG on “Possible Improvements to Procedures for Tax Relief for Cross-Border Investors” discusses the procedural problems in claiming treaty benefits faced by portfolio investors generally and makes a number of recommendations on “best practices” regarding procedures for making and granting claims for treaty benefits for intermediate structures.

The Implementation Package was developed by the Pilot Group on Improving Procedures for Tax Relief for Cross-Border Investors (Pilot Group) to provide standardized documentation that could be used by countries that wish to adopt the “best practices” described in the ICG's report. The Pilot Group includes representatives of the tax administrations of some OECD member countries as well as representatives from the financial services industry.

The Implementation Package provides a system for claiming treaty benefits that allows authorized intermediaries to make claims on behalf of portfolio investors on a “pooled” basis.

One of the major benefits of such a system is that information regarding the beneficial owner of the income is maintained by the authorized intermediary that is nearest to the investor, rather than being passed up the chain of intermediaries.

Although a source country may be willing to provide benefits on the basis of pooled information, it may want to maintain the ability to confirm that benefits that have been provided were in fact appropriate. In addition, when a residence country’s investor obtains income from abroad, the residence country has a compliance interest in knowing the details of that.

For those reasons, the Implementation Package also recommends that those financial institutions that wish to make use of the “pooled” treaty claim system be required to report on an annual basis directly to source countries (i.e. not through the chain of intermediaries) investor-specific information regarding the beneficial owners of the income.

The Implementation Package is the work of the Pilot Group and does not necessarily reflect the views of the OECD or any of its member states.

The CFA will be deciding whether and how the work on improving procedures should be carried forward. Because the development of standardized documentation is useful only if the documentation is widely accepted by business and governments, the CFA has decided to invite comments from all interested parties before further consideration of the Implementation Package.

Interested parties are therefore invited to send their comments on the Implementation Package before August 31, 2010.