The UN Committee of Experts on International Cooperation in Tax Matters has released draft changes to the UN model tax treaty and other documents in advance of its annual meeting to be held October 27–31 in Geneva.
Included is a new draft article and commentary on payments for technical services; a proposal for a new article on taxation of fees for cyber-based services; a proposal to clarify the meaning of “the same or a connected project” for purposes of determining a permanent establishment for service providers under Article 5; amendments to treaty rules to address hybrid entities; and the work plan of the Committee of Expert’s Subcommittee on Extractive Industry Taxation for Developing Countries.
The Committee also released proposed amendments to the commentary to Article 9, dealing with transfer pricing. A previous version of the commentary stated that the UN would follow OECD principles set forth in the OECD transfer pricing guidelines.
Under the revised language, the OECD transfer pricing guidelines are referred to only as “valuable guidance relevant for the application of the arm’s length principle.” The amendment goes on to state that it is “highly important” that the two models be consistent to avoid double tax.
The following papers were released:
- Article 4 (Resident):
- Article 5 (Permanent Establishment):
- Article 8 (Shipping, inland waterways transport and air transport:
- Taxation of services:
- Capacity-building:
- Article 23 (Methods for the elimination of double taxation):
- Base erosion and profit-shifting:
- Article 9 (Associated enterprises):
- Taxation of the extractive industries:
- “Subcommittee on Extractive Industries Taxation Issues for Developing Countries – note by the Secretariat,”(E/C.18/2014/2)
- “Subcommittee on extractive industries taxation for developing countries – report of the Coordinator,” ( E/C.18/2014/CRP)
- Attachment A: draft outline of overview note on extractive industries taxation issues
- Attachment B – capital gains taxation and indirect sales
- Attachment C – VAT in the extractives industry (outline of guidance note)
- Attachment D – taxation guidelines for worldwide decommissioning
- Attachment E – note on selected treaty issues in relation to the extractive industries
- Article 26 (Exchange of information):
- “Revised proposal to update Article 26 (Exchange of Information) of the United Nations Model Double Taxation Convention Between Developed and Developing Countries and its Commentary – note by the Subcommittee on Exchange of Information,” (E/C.18/2014/CRP.4)
- “Secretariat note: proposed United Nations code of conduct on cooperation in combating international tax evasion,” E/C.18/2014/CRP.5)
- Article 13 (Capital gains):
- Manual for the Negotiation of Bilateral Tax Treaties between Developed and Developing Countries
Researcher previews UN debate. Martin Hearson, a doctoral researcher at the London School of Economics and Political Science, has previewed UN debate on changes to the UN Model, including draft amendments to the Article 9 commentary; a proposal to tax indirect transfers of capital assets; and the new draft services article, in an October 27 blog post. See, Martin Hearson
_____________
USCIB contests proposed change to UN Model’s transfer pricing commentary: In an October 24 letter, William J. Sample of the United States Council for International Business states that if adopted, the proposed modification to the commentary to Article 9 of the UN Model will lead to increased disputes and double taxation. Sample condemned the lack of input by stakeholders in the UN process and argues that is inappropriate for non-OECD countries that participated in OECD transfer pricing guideline negotiations and obtained concessions to “undercut” those negotiations by arguing elsewhere for positions that were rejected. USCIB
