Feedback sought on UN model tax treaty provision clarifying taxation of software payments

A subcommittee of the UN Committee of Experts on International Cooperation in Tax Matters has released a February 16 discussion draft and has requested public feedback on a proposal to revise the UN model tax treaty to include software payments within the definition of royalties. 

The change would make it clear that source jurisdictions can levy a withholding tax on software payments.

An earlier discussion draft on this topic was released on September 1, 2020, and debated at the 21st session of the Committee of Experts on International Cooperation in Tax Matters.

A subcommittee addressing UN model tax treaty amendments has now requested additional technical advice from the public. Specifically, the subcommittee would like feedback on the following questions:

• Is the description of “software” in paragraph 12.1 of the Commentary on Article 12 of the OECD
  Model (extracted in paragraph 12 of the proposed UN Commentary) (a) consistent with current
  business practice and (b) appropriate for use as a definition in this context, perhaps by adding
  the definition to Article 3?
•  Do paragraphs 16 and 17 of the proposed UN Commentary adequately distinguish between
  goods that constitute “computers” and those that are not “computers” notwithstanding that
  they incorporate software to execute their functions or provide some degree of connectivity?
  What additional language or examples would help to clarify the distinction?
• The proposed Commentary continues to adopt paragraph 14.4 of the Commentary on Article
  12 of the 2017 OECD Model on distribution intermediaries. Some participants in the
  Subcommittee do not agree with the analysis in that paragraph for the reasons set out in the
  Annex to this Discussion Draft. Do you agree with the position set out in paragraph 19 of the
  proposed Commentary or with the analysis in the annex? If the latter, do you agree that the
  appropriate approach is to delete the words ‘for the purposes of using it’ at the end of
  subparagraph (c)?

Comments should be sent by March 16, to [email protected].