SC Inputs on Workstream II on Taxation of Services, 26 August 2026

South Centre Inputs on Workstream II on Taxation of Services (Co-Lead’s Draft Protocol on the Taxation of Income from Cross-Border Services)

26 August 2026

The South Centre welcomes the Draft Protocol on the Taxation of Income from Cross-Border Services and submits the following comments:

1. Scope: Cover all cross-border services broadly, not limiting it to technical and digital services alone, to avoid fragmentation.
2. Optionality: No reservations on key substantive provisions (Articles 5, 6, 7, 9); reservations permitted only for non-key administrative/procedural matters (e.g., rates, timelines).
3. Article 1. Subject to tax rule can apply to cross-border services income within Protocol scope, with the statutory rate fixed in the Protocol; extend paragraph 4’s residence state preservation to Articles 5–11.
4. Taxes covered: Exclude excise taxes.
5. Define “beneficial owner,” “payer,” “payment,” and “special relationship“; as applied in Articles 5 and 6.
6. The automated digital services list in Article 6(4) should be expressly non-exhaustive.
7. The protocol should provide guidance on nexus and revenue-sourcing rules under Articles 5 and 6, particularly for remote/data-driven monetization with no direct in-country payment.
8. The protocol should broaden “physical presence” beyond employees/agents and provide guidance on profit-allocation methods, including simplified profit allocation approaches under Article 9.
9. Existing treaties: Where inconsistent with an existing treaty, the Protocol should ideally automatically override the relevant provisions. However, in case treaty-by-treaty renegotiation is preferred, then the Protocol should trigger mandatory renegotiation within a defined timeframe aligned with Article 21 of the Framework Convention.
10. Implementation: In case the option of treaty-by-treaty renegotiation is chosen, then implementation can be done by a UN Fast-Track Instrument to streamline bilateral treaty alignment.

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South Centre Inputs on Workstream II on Taxation of Services (Co-Lead’s Draft Protocol on the Taxation of Income from Cross-Border Services)