The Organisation of Economic Cooperation and Development (OECD) Council has
approved the contents of the 2008 Update to the OECD Model Tax Convention.
This followed the earlier approval of the update by the Committee on Fiscal
Affairs at its meeting of 24-25 June 2008, the OECD announced on 18th July.
Whilst most of the changes included in the update had previously been released
for public comments, the update itself was released as a discussion draft in
April 2008.
After an examination and review of these comments, the OECD has decided that
no major additional changes should be made to the update, although a number
of useful clarifying changes were proposed.
The contents of the 2008 update result primarily from the following reports:
- Improving the Resolution of Tax Treaty Disputes: That report was adopted
by the Committee on Fiscal Affairs on 30 January 2007 following extensive consultations
that included the release of a discussion draft on 1 February 2006 and a public
consultation meeting in Tokyo on 13 March 2006.
- Revised Commentary on Article 7: The revised Commentary on Article 7 was
first released as a public discussion draft on 10 April 2007. In accordance
with earlier decisions by the Committee concerning the implementation of the
conclusions from its work on Attribution of Profits to Permanent Establishments,
the revised Commentary incorporates those aspects of the conclusions from that
work that do not conflict with the existing interpretation of Article 7 reflected
in the current version of the Commentary. The Committee has also approved, on
25 June 2008, the public release of the second part of the implementation package,
i.e. a new Article 7 and related Commentary changes that will fully incorporate
the conclusions of the Report on Attribution of Profits to Permanent Establishments.
- Application and Interpretation of Article 24 (Non-Discrimination): That
report was released as a public discussion draft on 3 May 2007.
- Tax Treaty Issues related to REITs: That report, which was released as a
public discussion draft on 31 October 2007, was prepared in close co-operation
with representatives of the real estate industry.
- The Tax Treaty Treatment of Services: Proposed Commentary Changes. That
report was released as a public discussion draft on 8 December 2006.
The update also includes a number of technical changes to the Commentary on
the Model Tax Convention that deal with the following topics:
- The concept of “place of effective management”.
- The situation of dual-resident persons who are treaty non-residents under
the tie-breaker rule.
- Certain aspects of the definition of royalties.
- An interpretation issue related to the distribution of software.
- Whether days of residence should be taken into account for the purposes
of the computation of the 183-day rule of subparagraph 2a) of Article 15.
- A minor drafting change to paragraph 32.6 of the Commentary on Articles
23 A and 23 B.
- A minor updating of paragraph 12 of the Commentary on Article 21.
The update also includes a number of changes and additions that have been made
to the observations, reservations and positions of member and non-member countries.
In addition, the positions on the Model Tax Convention of Armenia, Chile, the
Democratic Republic of the Congo, Kazakhstan and India are included for the
first time through this update.
It is expected that a revised version of the OECD Model Tax Convention that
will incorporate the contents of the update will be released at the beginning
of September, in time for the OECD Conference on the 50th Anniversary on the
OECD Model Tax Convention.
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