UN Model Double Taxation Convention

Document de Recherche 156, 1 juin 2022

Un choix cornélien ?

Comparaison des recettes fiscales à engranger par les pays en développement au titre des régimes du Montant A et de l’Article 12B du Modèle de convention des Nations Unies

Par Vladimir Starkov et Alexis Jin

Le présent document de recherche se propose d’estimer le montant des recettes fiscales qui seraient engrangé (ou perdu) par les pays membres du Centre Sud et de l’Union africaine dans le cadre de la mise en œuvre du Montant A et de l’Article 12B. Notre analyse s’appuie sur des sources d’information accessibles aux chercheurs du secteur privé et non sur les informations communiquées par les contribuables aux autorités fiscales. Elle démontre que les effets comparatifs sur les recettes de la mise en œuvre du Montant A et de l’article 12B dépendent en grande partie (a) des détails de conception du régime mis en place par l’article 12B, (b) du fait que le pays accueille ou non le siège d’entreprises multinationales susceptibles d’être imposées au titre du montant A ou de l’article 12B, et (c) de l’allégement éventuel de la double imposition qui sera accordé par le pays aux contribuables nationaux imposés au titre du Montant A ou de l’article 12B.

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Research Paper 156, 1 June 2022

A Tough Call? Comparing Tax Revenues to Be Raised by Developing Countries from the Amount A and the UN Model Treaty Article 12B Regimes

By Vladimir Starkov and Alexis Jin

In this research paper, we attempt to estimate the tax revenues to be gained (or lost) by the South Centre and African Union’s Member States under the Amount A and Article 12B regimes. Our analysis relied on sources of information available to private sector researchers but did not involve review of any information that taxpayers provide to tax authorities. Our research demonstrates that the comparative revenue effects of the Amount A and Article 12B taxation regimes largely depend on (a) design details of the Article 12B regime, (b) whether the country hosts headquarters of MNEs that may be in scope of Amount A or Article 12B taxation, and (c) what relief from double taxation, if any, the country will grant to domestic taxpayers subject to taxation under either the Amount A or Article 12B regimes.

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Informes sobre políticas en materia de cooperación tributaria 17, Julio de 2021

Una carga molesta para naciones en vías de desarrollo: Cláusula de NMF en tratados impositivos

Por Deepak Kapoor, IRS 

La cláusula de la nación más favorecida (“NMF”) de los convenios para evitar la doble tributación encarna el principio básico de no discriminación y tiene por objeto aportar paridad a las oportunidades empresariales y de inversión entre los países y las jurisdicciones partes en los tratados. La incorporación de disposiciones como las cláusulas de la NMF y de no discriminación en los tratados de tributación pretende promover la equidad entre las partes en los tratados. En el contexto de los tratados de tributación entre países desarrollados y en desarrollo, las cláusulas de la NMF también actúan como herramienta de negociación para contemplar mejores tipos impositivos en los tratados.

Sin embargo, últimamente, estas cláusulas han empezado a manifestar unos efectos negativos en los países de origen, que en su mayor parte son países en desarrollo. Por lo general, no parece que las cláusulas de la NMF estén creando posibles riesgos si son operativas entre dos países con el mismo grado de desarrollo, pero, cuando la relación se establece entre un país desarrollado y otro en desarrollo, donde una parte recibe de la otra más inversiones de las que hace, ese tipo de riesgo es inevitable. Recientemente, se han producido problemas a raíz de diversas interpretaciones de las cláusulas de la NMF por parte de los tribunales que han obligado a los países de origen a ampliar los beneficios de los tipos reducidos y el ámbito de aplicación restringido a los países parte en el tratado con arreglo a las normas de la NMF. Esa clase de interpretaciones beneficiosas han ido más allá del objetivo y el propósito básicos de las cláusulas de la NMF.

A tenor de causas judiciales que han tenido lugar recientemente en Sudáfrica y la India, parece que las cláusulas de la NMF están creando oportunidades de “reducción de impuestos” y están dando lugar a una erosión involuntaria de la base imponible de los países de origen. El problema también radica en la redacción y las formulaciones ambiguas de las cláusulas de la NMF, que finalmente provocan resultados negativos inesperados para los países que están obligados por compromisos futuros. Por consiguiente, en estos momentos, las jurisdicciones de origen necesitan con urgencia un examen exhaustivo de las cláusulas de la NMF existentes en los tratados de tributación, sus relaciones cruzadas y sus posibles efectos secundarios negativos en otros tratados.

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Rapports sur les politiques en matière de coopération fiscale 17, Juillet 2021

Un albatros autour du cou des pays en développement – Clause NPF dans les conventions fiscales

Par Deepak Kapoor, IRS

L’inclusion dans les conventions en matière de double imposition d’une clause de la nation la plus favorisée (« NPF ») est une incarnation du principe fondamental de la non-discrimination et vise à permettre aux pays signataires de tirer également parti des perspectives en matière de commerce et d’investissement. L’objectif de dispositions telles que les clauses NPF et de non-discrimination dans les conventions fiscales est de favoriser l’équité entre les différents pays signataires. Dans les conventions fiscales conclues entre pays développés et pays en développement, les clauses NPF servent également d’outils de négociation pour obtenir de meilleurs taux d’imposition.

Cependant ces clauses ont aujourd’hui des effets négatifs pour les pays de source des revenus, qui sont pour la plupart des pays en développement. Lorsqu’elles sont appliquées entre deux pays également développés, les clauses NPF ne constituent pas, généralement, une source de danger potentielle, mais lorsque la convention est conclue entre un pays développé et un pays en développement, où l’un des pays reçoit plus d’investissements de l’autre qu’il n’en réalise, le danger est réel. De fait, des difficultés sont apparues récemment en raison d’interprétations divergentes de ces clauses par les tribunaux, qui ont contraint les pays source à appliquer, sur la base des termes contenus dans la clause NPF, un taux d’imposition plus avantageux que celui prévu dans la convention fiscale et à modifier son champ d’application, remettant en cause l’objectif et l’utilité même des clauses NPF.

Il ressort des procédures judiciaires intentées en Afrique du Sud et en Inde que les clauses NPF peuvent aboutir à une réduction de la fiscalité et entrainer une érosion involontaire de la base d’imposition des pays de source des revenus. Le problème réside également dans la rédaction et la formulation ambiguë des clauses NPF, qui entrainent des répercussions négatives inattendues pour les pays ayant pris des engagements dans le cadre de ces conventions. Il est aujourd’hui urgent pour les pays source de procéder à un examen approfondi des clauses NPF figurant dans les conventions fiscales existantes, de la manière dont elles s’articulent entre elles et des retombées négatives qu’elles pourraient avoir sur  d’autres conventions.

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Submission on Draft Agenda of the UN Tax Committee, September 2021

Comments on Draft Agenda of the UN Tax Committee

The South Centre welcomes the UN Tax Committee’s invitation of public comments into its draft agenda and four-year work plan. By engaging the public in preparing the work plan, the UN Tax Committee’s work can be more responsive to the needs of developing countries, and of UN Member States as a whole. By stating that “the goal to ensure that the Committee’s agenda is practical and relevant to developing countries and includes the most pressing challenges they face in tax policy and administration” the Committee has shown a laudable intent which is also in line with its mandate, which is to give special attention to developing countries. The South Centre offers its written comments on the three topics on which inputs have been requested. These have been prepared based on consultation with the South Centre’s Member States, which are exclusively developing countries.

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Tax Cooperation Policy Brief 17, July 2021

An Albatross Around the Neck of Developing Nations – MFN Clause in Tax Treaties

By Deepak Kapoor, IRS

The Most Favoured Nation (“MFN”) clause in double taxation avoidance conventions epitomises the basic principle of non-discrimination and intends to bring parity in business and investment opportunities among treaty partner countries and jurisdictions. Inclusion of provisions like MFN and non-discrimination clauses in tax treaties are intended to promote equity among treaty partners. In the context of tax treaties between developed and developing countries, the MFN clauses also act as negotiating tools to bargain for better treaty tax rates.

However, lately these clauses have started demonstrating disadvantageous effects for the source countries, which are mostly developing countries. The MFN clauses generally do not appear to be creating potential risks if they are operational between two equally developed countries but when the relationship is between a developed and developing country, where one partner receives more investments from the other than it makes, such risks are inevitable. Lately, problems have started arising due to various interpretations of the MFN clauses by the courts forcing the source countries to extend benefits of reduced rates and restricted scope to treaty partner countries under the MFN rules. Such beneficial interpretations have gone beyond the basic objective and purpose of the MFN clauses.

In light of recent court cases in South Africa and India, it appears that the MFN clauses are creating opportunities for “reduced taxation” and leading to unintended erosion of tax base of source countries. The problem also lies with the ambiguous drafting and formulations of the MFN clauses, which eventually leads to unexpected negative outcomes for countries who have bound themselves with the future commitments. Therefore, a comprehensive review of existing MFN clauses in tax treaties, their cross connections and possible negative spill over effects to other treaties is the urgent need of the hour for the source jurisdictions.

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Tax Cooperation Policy Brief 14, June 2021

The Tax Sovereignty Principle and Its Peaceful Coexistence with Article 12B of the UN Model Tax Convention

By Kuldeep Sharma, ADIT (CIOT, UK)

Article 12B of the United Nations (UN) Model Tax Convention (MTC) provides developing countries with a practical and easy way to administer policy solutions for taxing the digital economy, in particular income from Automated Digital Services. It merges seamlessly with the existing provisions of the UN MTC and it is completely aligned and coexistent with the Tax Sovereignty Principle.

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SouthViews No. 219, 31 May 2021

Opportunities and Challenges: Tax Cooperation and Governance for Asia-Pacific Countries

 By Sakshi Rai

An informal technical meeting was organised on April 8th 2021 by the Secretariat of the High Level Panel on International Financial Accountability, Transparency and Integrity for Achieving the 2030 Agenda (FACTI Panel) for tax officials from the Asia-Pacific, to discuss the relevance of the Panel’s recommendations in the context of the region as well as to familiarise tax officials with its final report.

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Submission on Discussion Draft: Taxation of Software Payments as Royalties, March 2021

Comments on Discussion Draft: Taxation of Software Payments as Royalties

South Centre Tax Initiative

The South Centre supports the proposal being discussed in the UN Committee of Experts on International Cooperation in Tax Matters (UN Tax Committee) to tax payments for computer software as royalties. This will help developing countries more effectively tax the digitalized economy and will bring clarity to the application of existing bilateral tax treaties.

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SouthViews No. 210, 30 November 2020

Redistributing Taxing Rights to the Global South through the Digitalized Economy

By Carlos Protto

A historic discussion is underway within both the United Nations (UN) and the Organisation for Economic Co-operation and Development (OECD) on redistributing taxing rights to the Global South through proposals on taxing the digitalized economy. An overview of the issues at stake is provided in this SouthViews by Carlos Protto, Member of the UN Committee of Experts on International Cooperation in Tax Matters and Argentina’s representative in the Steering Group of the OECD/Group of Twenty (G20) Inclusive Framework on Base Erosion and Profit Shifting (BEPS). The text is based on his presentation at the international virtual seminar co-organized by the South Centre on “Equity in Global Tax Regimes and Implications for the SDGs” held on 7 October 2020. The recording is available here: https://www.youtube.com/watch?v=3wAESmfvRN4&ab_channel=uomlive.

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Submission on Changes to the United Nations Model Double Taxation Convention, October 2020

Comments on Discussion Draft: Possible Changes to the United Nations Model Double Taxation Convention Between Developed and Developing Countries Concerning Inclusion of software payments in the definition of royalties

The South Centre Tax Initiative (SCTI) offers its comments on the discussion draft on inclusion of software payments in the definition of royalties. As is well known, this is an important issue that developing countries have been fighting for, for a while now. The SCTI supports the proposed change which seeks to insert the phrase “computer software” in article 12(3) of the United Nations Model Double Taxation Convention Between Developed and Developing Countries. The COVID-19 pandemic adds special urgency to resolving this long-pending issue as revenue from software payments made from developing countries continues to increase.

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