The OECD released the contents of the final 2017 update to its OECD Model Tax Convention.
This update may be of particular interest to the 71 jurisdictions (including Canada) that signed on to the Multilateral Instrument (MLI) earlier this year in an agreement to modify existing bilateral treaties in an effort to combat base erosion and profit shifting (BEPS). The final update, released November 23, 2017, includes changes and additions to the convention as well as observations and recommendations made by OECD and non-OECD economies alike. This may provide more insight into how some jurisdictions could interpret various MLI provisions.
According to the OECD, this 2017 update will be incorporated into a revised version of the OECD Model Tax Convention, which will be published in the next few months. The OECD previously released the draft contents of the 2017 OECD Model update on July 11, 2017.
The 2017 update mainly comprises changes developed through the OECD/G20 BEPS project, including revisions to the articles and commentary on permanent establishment, changes to the title and preamble of the Model Convention, and changes to the commentary for persons covered and "improper use of the convention" as well as residency, among other changes. It also revises articles and commentary regarding the Mutual Agreement Procedure (MAP)-some of the changes are intended to reflect the MAP arbitration provision, an enhanced version of the conflict resolution procedure for cross border tax disputes that was developed earlier this year by the OECD while negotiating the Multilateral Instrument.
Other changes that were not developed as part of the BEPS project include revisions to the articles and commentary for international shipping and air transport.
The 2017 update also adds new Article 29 (Entitlement to Benefits), which includes a limitation-on-benefits rule, an anti-abuse rule for permanent establishments situated in third States and a principal purposes test rule. Finally, the 2017 update includes the changes and additions made to the observations and reservations of OECD member countries and to the positions of non-OECD economies.
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Information is current to December 05, 2017. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500