The OECD has released the contents of the 2025 update to the OECD Model Tax Convention.
The main changes are as follows:
- Changes to Article 25 and its Commentary that include as a new paragraph 6 of Article 25 a provision that confirms the role of competent authorities in determining whether a matter falls within the scope of a tax treaty for purposes of the dispute resolution mechanisms provided under the General Agreement on Trade in Services (GATS).
- Changes to the Commentary on Article 5 to clarify the circumstances in which an individual’s home could constitute a “place of business” of the enterprise for which the individual works. These changes are an evolution of existing principles and ensure the Commentary reflects modern working arrangements, providing additional certainty as to when a fixed place of business permanent establishment will, and will not, be created by an individual working from a home or other relevant place.
- Changes to the Commentary on Article 5 that add to the Commentary an alternative (optional) provision on activities in connection with the exploration and exploitation of extractible natural resources, together with related commentary. The centrepiece of the alternative provision is a lower permanent establishment threshold, which would be crossed after a non-resident enterprise had operated in a State for more than a bilaterally agreed time period.
- Changes to the Commentary on Article 9 that respond to questions raised in the context of Working Party 6’s work on the transfer pricing aspects of financial transactions (see Chapter X of the Transfer Pricing Guidelines ) and that clarify the application of Article 9, especially as it relates to domestic laws on interest deductibility, such as those recommended in the final report on BEPS Action 4. Related changes to the Commentary on Article 7 and the Commentary on Article 24 accompany these changes.
- Changes to the Commentary on Article 25 related to Amount B that signpost specific language relating to tax certainty and the elimination of double taxation included in the report on Amount B.
These changes are intended to ensure optionality is preserved in all dispute resolution mechanisms for non-adopting jurisdictions. - Changes to the Commentary on Article 26 to: (i) expressly indicate that information received through exchange of information can be used for tax matters concerning persons other than those in respect of which the information was initially received; and (ii) reflect agreed interpretative guidance on taxpayer access to exchanged information and the disclosure of reflective nontaxpayer specific information about or generated on the basis of exchanged information.
The 2025 Update also includes the changes and additions made to the observations and reservations of OECD Member countries and the positions of non-Members.