Draft 2017 update to the OECD Model Tax Convention ... - KPMG United Kingdom
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TMD: Draft 2017 update to the OECD Model Tax Convention released

Draft 2017 update to the OECD Model Tax Convention ...

Some aspects of the draft updates are open for consultation.


Partner, National Head of Transfer Pricing in the UK

KPMG in the UK


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The OECD have released the draft version of the expected 2017 update to the OECD Model Tax Convention. Some aspects of the draft Convention are open for consultation, but this does not include certain changes that have already been approved as part of the BEPS package, are expected follow-up work from the treaty-related BEPS measures, or that were already released for comments. Following the consultation period, the draft Convention will be submitted for the approval of the Committee on Fiscal Affairs and the OECD Council later in 2017, and therefore is not yet final.

The measures in the draft 2017 update to the Convention which have been released in draft for information only include:

  • Changes made as part of the BEPS project reports on hybrid mismatch arrangements, treaty benefits, permanent establishments and dispute resolution procedures;
  • Changes to the Commentary on Article 5 on the interpretation and application of the permanent establishment rules, integrating BEPS changes and comments from a previous discussion draft;
  • Changes to Article 8 on international traffic, previously released in a discussion draft; and
  • Changes to reflect the mutual agreement procedure (MAP) and arbitration provision in the BEPS Multilateral Instrument published in November 2016.

Those measures that are currently open for consultation until 10 August include:

  • Changes in relation to whether houses rented to unrelated persons can be a ‘permanent home available to’ a landlord;
  • Changes to clarify the meaning of ‘habitual abode’;
  • The addition of a new paragraph on the impact of registering for VAT/GST on the application and interpretation of the permanent establishment definition; and
  • Changes intended to ensure that the reduced rate of source taxation on dividends is applicable in the case where new Article 1(2) would cause a dividend paid to a transparent entity to be considered income of a resident of a Contracting State because it is taxed either in the hands of the entity or its members.

For further information please contact:

Mario Petriccione

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