OECD Model Research Articles

The Role of 'Commercial Reasons' and 'Economic Reality' in the 'Principle Purpose Test' under Art.29(9) OECD Model Tax Convention 2017

The Role of 'Commercial Reasons' and 'Economic Reality' in the 'Principle Purpose Test' under Art.29(9) OECD Model Tax Convention 2017

Have the OECD Model and the UN Model Served Their Purpose? Are They Still Fit for Purpose?

In this contribution to the 75th anniversary issue of the Bulletin for International Taxation, Stef van Weeghel considers whether the OECD Model and the UN Model are still fit for purpose. He also suggests ways in which the international tax system could be improved.

Have the OECD and UN Models Served Their Purpose?

In this article, the author maintains that the OECD Model and the UN Model, which is greatly influenced by the OECD Model and whose differences are primarily due to the imbalanced income stream between developing and developed countries, have perfectly served their purpose of being a treaty harmonizing force and will continue to do that in the future.

From the Avoidance of Double Taxation to the Avoidance of Double Non-Taxation: The Changing Objectives of Tax Treaties

The OECD/G20 Base Erosion and Profit Shifting Project has clarified that relief from double taxation under tax treaties does not extend to double non-taxation. This (new) objective of tax treaties is analysed from the perspective of the preamble and the amendments to the OECD Model (2017) and the related case law.

Twenty Years of Change to the Treatment of Services in the OECD Model and the UN Model

In this article for the 75th anniversary issue of the Bulletin for International Taxation, Carmel Peters provides her views on the various changes that have been made to the treatment of services in the OECD Model and the UN Model since the turn of the century.

What Can We Learn from the History of Article 21 of the OECD Model?

John F. Avery Jones, in this contribution to the 75th anniversary issue of the Bulletin for International Taxation, provides his thoughts on what can be learned from the history of article 21 of the OECD Model, particularly that of article 21(2) which was added to the OECD Model (1977).

Proposal for a Reform of Article 21 of the OECD Model

In this article, Kees van Raad presents a proposal for changes to article 21 of the OECD Model (with consequent changes to article 7) and provides draft texts for the updated treaty provisions and the pertinent Commentaries.

What Is a “Tax Paid in That Other State” under Article 23 of the OECD Model?

Professor Michael Lang provides us, in this 75th anniversary issue of the Bulletin for International Taxation, his view on the meaning and implications of the phrase “tax paid in that other state” in article 23 of the OECD Model.

Development of Soft Skills from Out-of-School Experiences in Peru. Learnings from Non-Profit Organizations’ Activities in Public Schools in Lima

This research aimed to examine the enhancement of soft skills in public education in Peru through analysing non-profit organisations’ techniques at the school level. The objectives were (a)To understand how the quality of education in Peruvian public schools assures the development of soft skills, (b)To explore the potential of non-profit organisations in supporting the development of soft skills in public schools. Interviews with three non-profit organisations and a government official, alongside reports, were analysed based on an OECD model. The findings include government initiatives that indirectly develop soft skills, but management issues might lead to teacher-centred rather than student-centred methodologies, deterring skills development. Unfriendly environments characterise vulnerable areas for skills development; non-profits become supportive disruptive spaces to cultivate values, ethics, and skills. The discourse analysis concludes that, despite their small scope, they mainly develop collaboration and task performance skills, impacting career decisions, families and communities. Non-profits employ a playful and concrete methodology that fosters the development of soft skills, but which is difficult to implement in public schools due to a lack of resources and school management. Further research should explore non-profits’ impact on skills development. This study is a pioneer in this field in LATAM.

A Blueprint for Restructuring the OECD Model’s Distributive Rules

While frequent readers of tax treaty texts are used to them, the OECD Model’s distributive rules (Articles 6-22) give rise to misinterpretation and misapplication by employing a combination of confusing approaches to accomplish single taxation. The author analyzes the existing rules and presents a blueprint for more transparent rules.

Становления концепции бенефициарного собственника в международных актах: от правового дуализма к унификации

In international tax law, the concept of beneficial owner remains controversial. The lack of a single unified official definition creates serious difficulties both for the formation of national tax legislation. So is judicial practice. The concept of beneficial owner first appeared in trust law and, having evolved significantly, manifested itself in international tax law. The legal nature of the concept has been modified through its use within the framework of the DTT. The judicial and tax authorities of most countries give the concept an anti-evasive character and actively use it along with other norms of counteracting tax abuse. It is the judicial interpretation of this term that gives a certain degree of unification of its application both for the purposes of the OECD Model Convention and the UN Model Convention. It seems that the experience of judicial interpretation should be generalized and, on its basis, a universal concept of the beneficial owner with a list of essential elements should be developed. Based on the analysis of historical experience, theoretical studies and judicial practice, the article attempts to study the transformation of the term “beneficial owner”. The author's proposals for the unification of the beneficial owner concept in international acts are formulated in this article.

Transfer Pricing of Trademark: The Legal Restrictions Regarding the Application and Interpretation of the Arm’s Length Principle – The Finnish Approach – Part I

This article discusses the legal restrictions regarding the application of the arm’s length principle contained in the Finland’s national tax law and how the national arm’s length principle can be interpreted, taking into account the principle of legality and the doctrine of sources of law. In addition, this article includes a brief analysis of the reasons why the national arm’s length principle contained in Finland’s national tax legislation differs from the arm’s length principle contained in article 9 of the OECD Model Tax Convention.

How Often Do OECD Member Countries Update Their Tax Treaties?

In this article, the authors report on the findings and the implications of their study on the time taken by the (founding) OECD member countries to update their treaty networks and align such networks with the (most recent version of the) OECD Model.

From Evasion to Avoidance: The Historical Evolution of the OECD Model in Addressing Tax Abuse

In this article, the author examines the historical evolution and significance of the anti-avoidance provisions in the various OECD Models and the Commentaries on the OECD Model as these measures affect the abuse of tax treaties. The author also discusses the time before the OECD Model.

US Tax Policy and Attribution of Profits to Permanent Establishments

Article 7 of the OECD Model concerns the attribution of profits to permanent establishments. The OECD Commentary on Article 7 has long observed that article 7 incorporates the arm’s length standard, yet how the arm’s length standard is taken into account for purposes of article 7 has historically generated a great deal of debate. To some extent, the adoption of the Authorised OECD Approach (AOA) in 2010 went a long way towards providing an analytic framework and settling that debate – but not all the way, and certainly not with respect to US treaties. This article examines in detail how the US Treasury, through the technical explanations of US treaties and in litigated cases, has articulated its understanding of how to attribute profits to permanent establishments in non-AOA treaties, and how those explanations can be reconciled with the view also expressed by the US Treasury in those same technical explanations that article 7 embodies the arm’s length standard.

The Ability to Pay and Economic Allegiance: Justifying Additional Allocation of Taxing Rights to Market States

The OECD/G20 Inclusive Framework and the UN are working intensively on how to change the allocation of taxing rights to cross border income and to adapt the international tax regime to the digitalization of the economy. A stated aim is that more taxing rights should be allocated to the market states. However, during the process it has become clear that it remains uncertain why the allocation of taxing rights should be changed. In this article, it is argued that the allocation should continue to be justified by the principle of economic allegiance in accordance with the ability of the MNEs to pay taxes. On this basis, it is analysed whether the following three measures are justifiable: the new nexus under the Pillar One Blueprint, the inclusion of software in the definition of royalties in the UN Model Tax Convention and the implementation of a shared taxing right for automated digital services in the UN Model Tax Convention. Allocation of taxing rights, ability to pay principle, economic allegiance, single tax principle, Inclusive Framework, Pillar One Blueprint, OECD Model Tax Convention, UN proposals on shared taxing rights, UN Model Tax Convention, automated digital services.

The French Supreme Tax Court Secures Its Hold on the Tax Bases of Digital Enterprises by Reshaping the Dependent Agent PE Concept

In this article, the author comments on the French Supreme Court’s Decision in Conversant, which addresses the test for determining whether a dependent agent permanent establishment (DAPE) exists. The author, after providing background details on the facts of the case and an historical overview of the DAPE provision, shows how the decision is consistent with previous decisions of the Court and the economic principles that underlie the international tax system originally established by the OECD Model.

Reservations and declarations to tax treaties

The subject of the article.The article represents a research of conceptual properties and issues of applying reservations and declarations to the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting, developed in frames of implementing the OECD/G20 Action Plan on Base Erosion and Profit Shifting (BEPS). The Multilateral Tax Convention modifies the application of agreements for avoiding double taxation, that are covered by its action. Since January 1, 2021 it has been applied to 34 agreements for avoiding double taxation between the Russian Federation and such countries as the UK, Canada, Latvia, Malta, the Netherlands and France. The Multilateral Tax Convention provides for updating bilateral tax treaties – whether they were developed upon the OECD Model Tax Convention or the UN Model Tax convention. The Convention retains a great degree of flexibility in relation to the implementation of its provisions – especially by the means of reservations, made by the countries.The purpose of the articleis to identify the main characteristics of applying reservations and declarations in international tax law.The methodology.The study is based on empirical methods of comparison and description, theoretical methods of formal and dialectical logic.The main results.Reservations have played a minor role in international taxation until now – usually they reflected disagreement, expressed by an OECD member country with the provisions of the OECD Model Tax Convention or its Official commentary. Reservations were formulated in relation to a non-binding (model) document and their importance was limited. Such reservations cannot be associated with declarations, made in relation to legally binding documents like the Multilateral Tax Convention. Analyzing the general points of scientific dispute upon the mentioned range of issues, the author argues with researchers who deem that the structure of reservations to the Multilateral Tax Convention doesn’t correspond with the provisions over reservations in the Vienna Convention on the Law of Treaties, 1969 and thus recognize those reservations as “legal hybrids”.Conclusions.The structure of reservations to the International Tax Convention is deter-mined by the nature of double taxation agreements. The model lawmaking principle (the use of the OECD Model Tax Convention) allowed developing “umbrella” architecture of relationships between the provisions of the Multilateral Tax Convention and the norms of double taxation agreements. The article categorizes types of reservations as reservations of general nature and treaty-specific reservations. The article also considers the specific properties of reservations made in relation to the provisions of the Convention, which com-pose a minimal standard.

The OECD Model Tax Convention and its commentaries as a source of interpretation of double taxation treaties in Ukraine

Interpretation of double taxation treaties is of utmost importance for application of their norms according to the criteria of good faith in compliance with the provisions of the Vienna Convention on the Law of Treaties. At the same time, there is no consensus in understanding the role of the OECD MC and its Commentaries as means of interpretation of double taxation treaties. As it is demonstrated on the basis of the development of court practice in Ukraine, the present situation does not add certainty to implementation of double taxation treaties and might even have the negative effect on investment climate in a state of source of income. The article does also contain the ways of improvement of application of the OECD MC and its Commentaries during the implementation of double taxation treaties of Ukraine including (1)preparation of the letter on issue of application of the OECD MC and its Commentaries as a source of interpretation of double taxation treaties by the Supreme Court of Ukraine, (2) granting of the technical assistance to tax authorities of Ukrainein the area of application of double taxation treaties in accordance with the international standards such as the OECD MC and its Commentaries and (3) translation of the OECD MC and its Commentaries into Ukrainian language.

Tax Treaties and Abuse: The Effectiveness of the Principal Purpose Test and Some of Its Shortcomings

In this article, Hans van den Hurk sets out his views on the abuse of tax treaties and the effectiveness of the provisions contained in article 29(9) of the OECD Model regarding the principal purpose test (PPT), together with a consideration of some of the drawbacks of the PPT.