from 7 July to 31 December 2008

 

The OECD Committee on Fiscal Affairs has now released as a discussion draft a new version of Article 7 and related Commentary changes.

In December 2006 (see December 2006 version of Parts I, II and III), the Committee on Fiscal Affairs indicated how the conclusions of its work on Attribution of Profits that Report would be implemented:

"In order to provide maximum certainty on how profits should be attributed to permanent establishments, the Committee has decided that the Report’s conclusions should be reflected in a new version of Article 7, together with accompanying Commentary, to be used in the negotiation of future treaties and of amendments to existing treaties. In addition, in order to provide improved certainty for the interpretation of existing treaties based on the current text of Article 7, the Committee has decided that revised Commentary for that current text should also be prepared, to take into account those aspects of the Report that do not conflict with the existing Commentary."

The first part of that implementation package, i.e. a draft of the revised Commentary on the current Article 7 of the OECD Model Tax Convention, was released for comments in April 2007, subsequently revised and included in the 2008 update to the Model Tax Convention which was adopted by the Committee at its meeting of 24-25 June 2008, when the Committee also adopted the Report on Attribution of Profits to Permanent Establishments (i.e. the final version of Parts I-IV). The revised Commentary will be included in the new version of the OECD Model Tax Convention that will soon be published; the Report on Attribution of Profits to Permanent Establishments will similarly be published separately.

At that meeting, the Committee also approved the release of a discussion draft that includes the second part of the implementation package, i.e. a new version of Article 7 with its Commentary together with consequential changes to other parts of the OECD Model Tax Convention. It is expected that once finalised, the new Article and the Commentary changes will be included in the next update to the OECD Model Tax Convention, which is tentatively scheduled for 2010.

The Committee invites interested parties to send their comments on this discussion draft before 31 December 2008. Comments should be sent electronically (preferably in Word format) to [email protected].

Unless otherwise requested at the time of submission, comments submitted to the OECD in response to this invitation will be posted on the OECD website.