The United Nations Committee of Experts on International Cooperation in Tax Matters is to hold its twentieth session in the form of a virtual meeting in June and July 2020, including informal virtual meetings taking place between 22 and 26 June. Matters to be discussed include changes to the UN Model Treaty, the Practical Manual on Transfer Pricing and other publications.
UN Model Tax Treaty
The UN Tax Committee is to consider changes to the commentary on Article 5 (permanent establishment) of the UN Model. Other updates under consideration include clarification of the concept of beneficial owner; application of Art 12 to software payments; application of Art 13 (5) to transparent entities; changes to the model in relation to collective investment vehicles (CIVs), pension funds and real estate investment trusts (REITs); and updates relating to capital gains on indirect transfers.
Practical Manual on Transfer Pricing
Revisions to the Manual to be presented to the Committee for consideration and approval include changes relating to comparability; updates on group synergies and central procurement functions; and a chapter on financial transactions.
Other revisions to be presented to the Committee for first consideration and guidance include revisions to the Manual’s Introduction; and revisions to Part A on Transfer Pricing in a Global Environment to update the content for the impact of new business models emerging as a result of the digital economy. Further guidance is being drafted on centralised sales functions; and some examples of financial transactions aim to clarify the guidance given in the chapter on financial transactions.
The Committee has requested updates to Part D on Country Practices, and is intending to add a section on practices in Kenya. The Committee is considering the possibility of removing Part D and placing it on their website, where the text could be updated more readily.
Taxation of the Digital Economy
A subcommittee is considering guidance on the digital economy in relation to tax treaty issues; domestic law issues; and VAT issues. The UN approach would be independent of similar work done in other international and regional organisations and would look at approaches that avoid both double taxation and double non-taxation; tax the income on a net basis (instead of turnover) where practicable; and are simple to administer.
The UN aims to gain more attention for the position and the needs of developing countries in taxing the digital economy. It considers that the proposed approach should increase the rights of market and user jurisdictions to impose tax on the relevant amount of profits of multinational entities obtaining value from these jurisdictions.
Other
The twentieth session will discuss the development of the new UN handbook on tax dispute avoidance and resolution, considering new chapters on arbitration under the mutual agreement procedure (MAP) and on possible improvements to the MAP. New material will also be considered in relation to the Handbook on Extractive Industries Taxation and the Carbon Taxation Handbook.
Other items included on the agenda are the tax treatment of official development assistance projects; tax and the sustainable development goals; and related capacity support offered by UNDESA through which practical guidance is provided to governments, tax administrators and taxpayers, focusing on the least developed countries.
