Thursday, September 08, 2005

2005 OECD Model Tax Convention made available


The OECD has made available yesterday (07/09/2005) the 2005 updated version of its Model Tax Convention. As you may know, the OECD Model is periodically updated to take account of new developments and to reflect the experience in the application of tax conventions. The 2005 edition incorporates the latest changes to the Model which were approved by the OECD Council on 15 July 2005 (these changes were released in draft form on 15 March 2004)

These changes result from work done by the Committee on Fiscal Affairs (CFA) on a number of issues (you find below a link to the background reports)
- Tax treatment of activities related to international shipping and air transport (see also http://www.oecd.org/dataoecd/20/53/34083450.doc);
- Cross-border income tax issues arising from employee stock-option plans (see also http://www.oecd.org/dataoecd/35/53/33700277.pdf);
- Tax issues arising from cross-border pensions (see also http://www.oecd.org/dataoecd/12/21/34562290.pdf);
- Issue of multiple permanent establishments (see also http://www.oecd.org/dataoecd/34/9/31483903.pdf);
- Revision of Article 26 and its Commentary concerning the exchange of information (see also http://www.oecd.org/dataoecd/28/4/33614065.pdf);


The update also includes the following technical changes to the Model Tax Convention:
- 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.
- Changes to the Commentary on Article 20 to clarify the relationship between Articles 15 and 20.
- 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.
- 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.

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