OECD Readies Changes To Model Double Tax Agreement
by Jason Gorringe, Tax-News.com, London
29 March 2005
The OECD is about to revise its Model Tax Convention, and has issued a consultation
document. The consultation period will close on 27th April 2005.
The OECD says the contents of the 2005 update result primarily from the following
previously released documents:
- "Proposed changes to the Commentary on Article 8": that report
was first released for public comments in April 2004. A few changes were made
on the basis of the comments received and the final version of the report
was
made public on 15 December 2004.
- "Cross-border income tax issues arising from employee stock-option
plans": the final version of that report, which was approved by the Committee
on Fiscal Affairs on 16 June 2004, was made public on 3 September 2004. The final version took into
account comments received on two previous drafts of the report which had been
made public in March 2002 and July 2003.
- "Proposed changes to the Commentary on Article 5 concerning multiple
permanent establishments": a draft version of that report was released
for public comments on 12 April 2004.
A number of changes were made on the basis of the comments received, which
were supportive of the amendments to the Commentary proposed in the draft.
- "Changes to Articles 25 and 26 of the Model Tax Convention": the
document that includes these changes was approved by the Committee on Fiscal
Affairs on 1 June 2004 and made public on 23 July 2004.
- "Technical issues related to cross-border pensions": a draft version
of that report was released for public comments on 14 November 2003.
A number of changes were
made on the basis of the comments received.
The update also includes the following technical changes to the Model Tax
Convention:
- A change to paragraph 31 of the Introduction to clarify that no reservation
is required to indicate that a country merely wishes to modify the wording
of a provision of the Model to confirm or incorporate an interpretation of
that provision put forward in the Commentary.
- The addition of commas to the French version of subparagraph 2 b) of Article
15 to conform to the English version.
- Changes to the Commentary on Article 11 to include alternative provisions
that provide for the exclusive residence taxation of all interest or of some
categories thereof and to explain the reasons underlying these provisions.
- Changes to paragraphs 29 and 30 of the Commentary on Article 11 to address
more accurately the triangular problem arising in the case of interest borne
by a permanent establishment located in a third state.
- Changes to the Commentary on Article 12 to clarify when payments for forbearance
to grant rights to use property constitute royalties.
- Changes to the Commentary on Articles 10, 11 and 13 to include a cross-reference
to the suggested provision dealing with the investment income of pension funds
found in the Commentary on Article 18.
- A change to paragraph 4 of the Commentary on Article 15 to clarify how
to take account of overlapping periods when applying the moving 12-month limit
of subparagraph 2 b) of Article 15.
- A minor change to paragraph 10 of the Commentary on Article 15 to indicate
that States may wish to deal bilaterally with the situation of employees working
on trucks and trains travelling between countries.
- Changes to the Commentary on Article 20 to clarify the relationship between
Articles 15 and 20.
The full text of the OECD Public Discussion Draft on Updating the Model Tax
Convention can be found in the
Tax
News Resources section.
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