The virtual meetings of the UN Committee of Experts on Tax Matters taking place from 19 to 28 October 2021 are considering issues arising from the UN Model Tax Convention that should be the subject of future discussion within the UN Committee.
Computer software
There is an issue as to whether the definition of royalties in Article 12 of the UN Model should be revised to refer explicitly to payments for computer software. This addition would extend the scope of Article 12 beyond payments relating to the use of a copyright in the computer software. The issue has been considered during previous sessions of the Committee and work could be completed by 2023.
Self-initiated adjustments
The UN Committee may need to look at the treatment of self-initiated adjustments in the commentary on Articles 7 (business profits), 9 (associated enterprises) and 25 (mutual agreement procedure). In 2017 the OECD amended its commentaries on Articles 7, 9 and 25 of the OECD Model to clarify that the mutual agreement procedure may be used to relieve double taxation where a taxpayer amends a return (that has already been filed) to adjust reported profits that did not conform to the arm’s length principle. Relief from double taxation would be achieved using the provisions for corresponding adjustments. This change was a result of the work on base erosion and profit shifting (BEPS). The UN Committee will now examine the equivalent provisions of the UN Model in the light of the OECD revisions.
Other issues
Other issues to be considered by the UN Committee include possible changes to Article 25 (mutual agreement procedure); amendments to the commentary on Article 15 related to payments made upon termination of employment; tax treaty issues relating to emissions permits or credits; the application of the UN Model to sovereign wealth funds; the treatment of accrued interest in the commentary on Article 11; further consideration of permanent establishments with respect to insurance activities; and tax treaty provisions related to the exploration and extraction of natural resources. The Committee may also consider the extent to which a tax treaty can result in increased taxation.
The Committee will need to consider the importance of these issues developing countries, and if there are any other issues relating to the UN Model and its Commentaries that are important to developing countries. A decision must be made on which of these issues are to be given priority in the work programme.
Update of the UN Model
The UN Committee is considering the formation of a new Subcommittee on the Update of the UN Model. The Subcommittee would aim to make recommendations on the timing and content of the next update to the UN Model by 2024. The main focus would be on issues relevant to developing countries. The work would involve consultations with academia, international organizations, civil society and business stakeholders.
