An official report describing the outcome of the fourteenth session of the UN’s Committee of Experts on International Cooperation in Tax Matters (Committee of Experts) was released on the UN website this week.
The fourteenth session, held April 3–6 in New York, featured discussion of the revised and updated 2017 United Nations Practical Manual on Transfer Pricing for Developing Countries, which was released publicly that week.
The UN Committee also agreed to key changes to the United Nations Model Double Taxation Convention between Developed and Developing Countries for a 2017 update, including the final wording for an important new article providing for withholding tax on payments for technical services.
According to the report, it was decided that the launch of 2017 update to the UN Model would be postponed until October, during the week of the fifteenth session of the Committee of Experts but that the update would not be an item for substantive discussion at that session.
An option for a “robust” limitation on benefits (LOB) clause based on the US version of the LOB clause was approved for the 2017 model treaty with modification, after debate.
Also, it was also decided at the meeting that discussion on Article 12 on royalties as related to to software payments would be deferred until the fifteenth session of the Committee. The Royalties Subcommittee was unable to reach a final decision with respect to the characterization of software-related payments.
New paragraphs for the commentary on Article 12 that deal with the characterization of “industrial, commercial and scientific equipment” were approved.
Also, following discussion, it was decided that Article 5(6) and the treaty commentary relating to reinsurancce will remain unchanged for the 2017 update but issues regarding reinsurance will be taken up again at the next session of the Committee.
UN practical manual on transfer pricing
According to the meeting report, Stig Sollund,Coordinator of the Subcommittee on Article 9 (Associated Enterprises): Transfer Pricing, recommended that the UN transfer pricing manual continue to be updated and made more practical.
He also suggested including in future updates more developing country practices, in particular focusing on least developed country legislative and other experiences.
The Committee also approved the contents of a guidance note which identifies transfer pricing issues that arise in the extractive industries by reference to the various major stages in the extractive industries value chain. It will be added to the Handbook on Selected Extractive Industries Taxation issues for developing Country, after necessary editing.
The Committee will change its membership this summer.