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Taxand comments on the OECD discussion on the revised Draft of the new Article 7 of the OECD Model Tax Convention
In our view, the new Article 7 and related Commentaries ensure better certainty for taxpayers as they clarify some of the issues which were underlined in previous. More importantly, in general, the New Article provides taxpayers with the assurance that tax authorities will make coordinated efforts to provide relief from double taxation.
Specifically however there is one paragraph which Taxand believes may present some issues and as such we would like to focus our comments here.
The current wording of paragraph 3 of Article 7 suggests tax authorities’ behaviour could harm the taxpayers’ ability to obtain relief from double taxation.
However, the significance of paragraph 3 seems rather limited since in most cases the relief from double taxation will be ensured by the mutual agreement procedure according to Article 25 of the Model convention.
Nonetheless in order to provide taxpayers with the utmost certainty it is important to keep such provision to ensure that double taxation will be relieved even where divergences in domestic laws may create double taxation.
We encourage the Committee of Fiscal Affairs to consider adopting an approach, whereby there is an obligation for the Contracting States to ensure relief of the double taxation, for Article 25 in parallel with recent efforts to promote arbitration provisions.
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