Withholding tax demystified

The explanatory notes are of particular relevance to the real estate sector, where holding structures, cross-border arrangements and foreign financing are frequently employed. For companies in this sector, the explanatory notes represent an important tool for mitigating tax risk. Beneficial owner and economic control over the payment The explanations focus on the definition of a beneficial owner and address a range of uncertainties linked to this concept. According to the new guidelines, beneficial owner status is not determined solely by the formal right to receive the payment. What matters is the economic control over the funds received. This means that an entity seeking to qualify as a beneficial owner must have effective control over the funds, the ability to dispose of them freely, and bear the economic risk associated with the payment. The defining features of beneficial owner status include reinvestment of revenue, earning an adequate margin on such revenue, and being subje