UN Releases 2017 Edition Of Tax Model Convention

After the 16th Session of UN Committee of Experts on International Cooperation in Tax Matters in New York during May 14 to 17, the United Nations updates the 2017 UN Model Double Taxation Convention between Developed and Developing Countries (UN MC).

2017 Update

The United Nations Model Convention gives more weight to the source principle than the residence principle, compared with the OECD Model Convention. The Committee has undertaken work on BEPS issues and commenced the refurbishing process of the UN MC in 2014 by incorporating the outcome of the work to address BEPS issues. Particularly, following the work by the OECD and G20 on Action 6 (Preventing the Granting of Treaty Benefits in Inappropriate Circumstances), the Committee took note of the considerations identified by the OECD and suggests countries to consider them additionally beside the UN MC.

Amendments Compared with the 2012 Edition

The main differences between the Articles of this version and the previous version published in 2012 include:

  • A modified title of the Convention and a new preamble of the Convention emphasizing that treaties should not create opportunities for tax avoidance or evasion, including through treaty shopping;
  • A new version of Article 1 that includes a fiscally transparent entity clause, and a saving clause which claries that residence taxation is generally preserved under tax treaties;
  • A modified version of Article 4 that includes a new “tie breaker” rule for determining the treaty residence of dual-resident persons other than individuals;
  • A modified version of Article 5 to prevent the avoidance of permanent establishment status;
  • A modified Article 10 to change the circumstances in which a lower rate applies for dividends on direct ownership of shares above a 25% threshold;
  • A new Article 12A to provide for source taxation of fees for technical services;
  • A new version of Article 13, paragraph 4 to modify the scope of the land-rich company rule;
  • A modified version of Article 13, paragraph 5 for consistency with Article 13, paragraph 4;
  • Changes to Articles 23A and 23B to clarify that there is no obligation to provide relief for tax imposed on a solely residence basis;
  • A new Article 29 that contains provisions relating to entitlement to treaty benefits. These include a limitation on benefits rule, a third state permanent establishment rule and a general anti-abuse rule.

Commentaries of the amended articles have been changed accordingly.

Source: United Nations

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