The U.S. Treasury Department today announced the release of a newly revised “U.S. Model Income Tax Convention” that will serve as the baseline text that Treasury will use as it negotiates tax treaties. Today’s release is the first update to the U.S. model income tax treaty since 2006.
Treasury reports that the 2016 model income tax treaty reflects changes made in response to comments received to the proposed model treaty provisions released in May 2015.
The 2016 model income tax treaty also incorporates certain OECD base erosion and profit shifting (BEPS) recommendations including:
Notably, the U.S. 2016 model income tax treaty does not adopt the other BEPS recommendations relating to the permanent establishment article including the revised rules related to dependent and independent agents and the exemption for preparatory and auxiliary activities.
The Treasury release states that Treasury is preparing a detailed technical explanation of the 2016 model income tax treaty to be release this spring. The preamble to the model income tax treaty invites comments regarding certain situations that need to be addressed in the technical explanation for the so-called “active trade or business” test of Article 22 (Limitation on Benefits). The deadline for public comments on this subject is April 18, 2016.
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