United nations of tax incentives

4 . 
Eligible persons
When drafting a tax incentive, persons that are eligible to qualify 
should be clearly identified. There are various aspects regarding types 
of persons and their characteristics that should be considered.

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Design and Assessment of Tax Incentives
4 .1 
Types (company, individual, trust, partnership, etc .)
Different types of persons and entities are treated differently under 
tax laws. There is a fundamental distinction between individuals and 
entities such as companies, trusts and partnerships. In developing the 
policy underlying a tax incentive, there should be consideration as to 
the types of persons/entities that can qualify, and qualification should 
be no broader than it needs to be.
For example, if a tax incentive is targeted at a particular 
commercial activity, perhaps only commercial entities that typically 
conduct such activities should qualify and no other entities such as 
trusts and foundations. If the incentive is targeted at large investment 
projects, it may be appropriate to exclude individuals from qualification.
In drafting a tax incentive applicable to a particular industry, 
it must be remembered that the types of entities that can qualify to 
conduct activities in the industry (such as who can be a licence holder) 
may not be consistent with the tax categorisation of those entities. 
For example, in many countries partnerships are transparent for tax 
purposes, that is to say it is the partners that are the taxpayers for tax 
purposes not the partnership.
However, a partnership may qualify as a licence holder for a 
particular industry. Care must be taken in drafting a tax incentive to 
ensure policy objectives are met. Extending the example, if the policy 
is that partnerships (that are transparent for tax purposes) can qualify 
for the tax incentive, but the incentive requires the holding of a licence, 
then partners (the relevant taxpayers) will not qualify. In such a case 
the tax incentive may have to treat partners as if they held the relevant 
licence or provide some other special rules for partnerships.