Transfer pricing

The OECD approves the 2008 Update to the Model Tax Convention


18 July 2008 - On 17 July 2008, the OECD Council approved the contents of the 2008 Update to the OECD Model Tax Convention . This followed the earlier approval of the update by the Committee on Fiscal Affairs at its meeting of 24-25 June 2008.

Whilst most of the changes included in the update had previously been released for public comments, the update itself was released as a discussion draft in April 2008. 

The Committee carefully examined the comments received on that discussion draft and after extensive review of these comments concluded that no major additional changes should be made to the update as a result of these comments. It did, however, agree that a number of useful clarifying changes were proposed and that these should be included in the update. It also decided to release a detailed response to the comments received.

The contents of the 2008 update result primarily from the following reports:

  • Improving the Resolution of Tax Treaty Disputes That report was adopted by the Committee on Fiscal Affairs on 30 January 2007 following extensive consultations that included the release of a discussion draft on 1 February 2006 and a public consultation meeting in Tokyo on 13 March 2006.
  • Revised Commentary on Article 7.  The revised Commentary on Article 7 was first released as a public discussion draft  on 10 April 2007.  In accordance with earlier decisions by the Committee concerning the implementation of the conclusions from its work on Attribution of Profits to Permanent Establishments, the revised Commentary incorporates those aspects of the conclusions from that work that do not conflict with the existing interpretation of Article 7 reflected in the current version of the Commentary (the Committee has also approved, on 25 June 2008, the public release of the second part of the implementation package, i.e. a new Article 7 and related Commentary changes that will fully incorporate the conclusions of the Report on Attribution of Profits to Permanent Establishments).
  • Application and Interpretation of Article 24 (Non-Discrimination). That report was released as a public discussion draft   on 3 May 2007.  
  • Tax Treaty Issues related to REITs. That report, which was released as a public discussion draft  on 31 October 2007, was prepared in close co-operation with representatives of the real estate industry.
  • The Tax Treaty Treatment of ServicesProposed Commentary Changes. That report was released as a public discussion draft on 8 December 2006.

The update also includes a number of technical changes to the Commentary on the Model Tax Convention that deal with the following topics:

  • The concept of “place of effective management”.
  • The situation of dual-resident persons who are treaty non-residents under the tie-breaker rule.
  • Certain aspects of the definition of royalties.
  • An interpretation issue related to the distribution of software.
  • Whether days of residence should be taken into account for the purposes of the computation of the 183-day rule of subparagraph 2a) of Article 15.
  • A minor drafting change to paragraph 32.6 of the Commentary on Articles 23 A and 23 B.
  • A minor updating of paragraph 12 of the Commentary on Article 21.


The update also includes a number of changes and additions that have been made to the observations, reservations and positions of member and non-member countries.


In addition, the positions on the Model Tax Convention of Armenia, Chile, the Democratic Republic of the Congo, Kazakhstan and India are included for the first time through this update.


It is expected that a revised version of the OECD Model Tax Convention that will incorporate the contents of the update will be released at the beginning of September, in time for the OECD Conference on the 50th Anniversary on the OECD Model Tax Convention.