Conventions fiscales

Improving tax treaty benefits for collective investment funds


OECD explores ways to improve how tax treaty benefits are effectively granted with respect to investment through collective investment funds

Over 115 participants representing the tax authorities from 29 countries and tax specialists of the financial sector (including collective investment funds, security custodians and real estate investment trusts) met in Paris on 1-2 February 2006 to discuss a number of issues related to the application of tax treaties to collective investment. The meeting was organized by the OECD Centre for Tax Policy and Administration with the assistance of BIAC (the Business and Industry Advisory Committee) and was chaired by Mr. Robert Waldburger, Head of the Division for International Fiscal Law and Double Taxation Matters (Federal Tax Administration of Switzerland).

The value of assets that are currently managed by collective investment funds is in excess of US$16 trillion.  A substantial part of these assets represent cross-border portfolio investment the income from which is entitled to the benefits of tax treaties.  Unfortunately, there are both legal and practical issues that may prevent these benefits from being effectively granted and may sometimes cause them to be granted inappropriately.

The legal issues relate primarily to the treaty entitlement of the funds themselves and of their investors. Collective investment funds take different legal forms (e.g. companies, limited partnerships, trusts, contractual arrangements) and their tax treatment varies from country to country; it is therefore often unclear whether the benefits of tax treaties are available to the funds themselves. Where these benefits are not available at the level of the fund, they would normally be available to the investors themselves to the extent that these are residents of countries which have a concluded a tax treaty with the country from which the fund derives income.

There are, however, very important compliance and administrative difficulties involved in ensuring that the benefits of tax treaties are effectively granted to a very large number of investors in a fund, taking into account that the number of investors in a given fund may change on a daily basis and that there are a number of different intermediaries involved.  These difficulties may result in the benefits of tax treaties not being granted or being inappropriately granted, with risks of double taxation or double non taxation that are of concern for both the country of source of the income and the country of residence of the investor.

There was general agreement among the participants that, taking into account the magnitude of the amounts involved, work should be done to explore concrete ways to address these important practical issues.  The participants noted that recommendation 8 of the G30 report “Global Clearing and Settlement – A Plan of Action” invited “market participants and public authorities [to] work together to minimize the administrative costs to each party involved in tax relief arrangements…” The participants agreed that a good way forward would be to set up an OECD joint group of industry specialists, government representatives dealing with tax policy and representatives of tax administrations (from OECD and non-OECD countries) to further examine the various issues discussed at the meeting with a view to make concrete and detailed proposals for improving the application of tax treaties to income from collective investment.  Business participants indicated a willingness to provide support for the work of such a joint group.

The participants also discussed issues arising in some countries from special vehicles (e.g. Real Estate Investment Trusts- REITs) under which collective investment in immovable property is structured. It was agreed that the application of tax treaties to such vehicles and their investors also raised legal issues that warranted further examination by both tax administrations and industry specialists.

Participants all endorsed the Chair’s proposal to report to invite the Committee on Fiscal Affairs and its Bureau to articulate and implement the proposals for follow-up work described above.

For further information, please contact Mary Bennett ( or Jacques Sasseville (


Documents connexes