Beneficial ownership for tax purposes is the test used to decide whether the person receiving a cross-border payment of dividends, interest or royalties is the one who is truly entitled to that income. Under most double taxation treaties based on the OECD model, the reduced rate of withholding tax is available only if the recipient is the beneficial owner and is resident in the treaty partner country. An agent, a nominee or a conduit company that is obliged to pass the payment on to someone else does not qualify.
The concept is narrower than, and separate from, the anti-money laundering idea of a beneficial owner as the individual who ultimately controls an entity. In securities operations, custodians rely on documents from the beneficial owner to apply tax treaty relief at source or to support tax reclaim processing, including for dividend withholding tax.