A report released by the International Chamber of Commerce (ICC) on 3 February 2026 assesses the potential economic impact of the new UN Model Article 12AA on taxation of cross-border services. The new services article was designed to strengthen source-country taxing rights by allowing them greater rights to tax a range of professional and technical services provided from developed countries. However, the Article has been approved at a time when developing economies are increasingly active exporters of professional and technical services, so increasingly a developing country may be the resident country of the service provider and not the source country.
The analysis, which was prepared for the ICC by Oxford Economics, looks at the potential impact of Article 12AA for the countries of the global south, defined as non-OECD members that are lower and middle-income countries based on the World Bank classification. The analysis proceeded by comparing a “status quo” baseline with a scenario that assumed widespread adoption of Article 12AA. The values of the parameters used for the analysis were selected on the basis of prevailing tax practices in the global south, based on a review of existing domestic tax regimes and tax treaty frameworks.
The analysis assumes that countries in the global south would levy withholding taxes (WHT) with a statutory rate of at least 15% and that they would renegotiate their double tax treaties to include a WHT cap of 3% for deals with the Global North and a cap of 10% in deals with other Global South partners. This assumption was based on a survey of double tax treaties concluded since 2018. To account for uncertainty around future policy design, the analysis also includes an alternative scenario where there are lower withholding tax rates.
The results of the analysis indicate that the widespread adoption of Article 12AA would lead to a contraction in services trade in the global south, due to the higher effective cost of cross-border service provision. Total exports of technical and professional services by developing economies would be projected to decline by around 4 .2% relative to the baseline. Imports of services would also fall by 4 .1%. Switching to domestic service provision would be limited, owing to the highly specialised nature of many imported services. The results appear to indicate that Article 12AA may reduce the South–South services trade disproportionately. There could be wider negative economic consequences affecting overall trade and investment flows.
These results highlight that Article 12AA could have important economic implications, and policy discussions should therefore move wider than technical tax considerations to include specific country contexts and address the broader effects on the economy.
