An overview to beneficial owner concept

Tuğcan Özbey
Aslıcan Süzen

The definition the term " beneficial owner" differs among OECD and Turkish tax legislation.

The beneficial owner is a vital concept in international taxation in order to ensure security.

The concept of beneficial owner, which has no exact equivalent in Turkish legislation is realized by considering the criteria in OECD Model Tax Convention, OECD Model Tax Convention Commentary (“OECD Commentary”) and international judicial decisions.

The ultimate beneficial owner notification requirement included in the Turkish legislation is a regulation aimed at pointing out the beneficiaries of the income and wealth and thus preventing tax evasion.

A Quick overview to beneficial owner concept

The OECD Commentary defines beneficial owner as the person who has the full right to use and enjoy that income.

Although the concept of beneficial owner does not have a full equivalent in Turkish legislation, it is possible to evaluate the concept of beneficial owner by practicing the substance over form rule in the Tax Procedural Law. Furthermore, there are tax inspections concluded on the basis of various OECD and European Parliament reports, together with the substance over form rule.

Beneficial owner concepts in Turkish tax legislation

Turkey has published the General Communiqué on Tax Procedural Law no. 529 (“the Communiqué”) on 13 July 2021. According to the Communiqué, Turkish tax legislation identifies the beneficial owner as the real persons who exercise ultimate control over the entities or assets.

The beneficial owner was defined by different international organizations before entering the Turkish legislation.

The beneficial owner definition was included in the Regulation on Measures Regarding Prevention of Laundering Proceeds of Crime and Financing of Terrorism with a regulation in 2014 following the definition of the Financial Action Task Force (“FATF”). Therefore, the Communiqué considers the FATF definition regarding the prevention of crimes such as money-laundering and terrorist financing in the determination the beneficial owner.

According to the Communiqué, it is compulsory to declare the individual/s who ultimately control or have ultimate influence over the legal entities or the entities without legal status.

Concrete differences between the OECD and Turkey’s definitions

The beneficial owner concept in Turkish tax legislation is a regulation on the identification of persons (typically real persons) who exercise ultimate control over entities or assets and should not be confused with the term beneficial owner concept in the Double Tax Treaties, which refers to the persons having the full right to use or enjoy the income obtained.

Therefore, although as these two concepts are separate and should not be confused, both issues have their own importance separately. Considering the purpose of the beneficial owner regulation in Turkey, the notifications requirements to be fulfilled to the Revenue Administration should be compliant.

On the other hand, by considering the importance given to the beneficial owner concept in both Turkish tax legislation and the international taxation regulations, in the case of benefitting from the Double Tax Treaties, it would be important to emphasize that the conditions are met, and the relevant information is provided.



Explanations in this article reflect the writer's personal view on the matter. EY and/or Kuzey YMM ve Bağımsız Denetim A.Ş. disclaim any responsibility in respect of the information and explanations in the article. Please be advised to first receive professional assistance from the related experts before initiating an application regarding a specific matter, since the legislation is changed frequently and is open to different interpretations.