Special Features of the UN Model Convention

1. S. 264Introduction

The allocation of taxing rights between residence country and source country is certainly the major point of divergence between the UN Model and the OECD Model. While the OECD Model is generally residence-oriented, since it was drafted to meet the needs and interests of its members (developed countries), the UN Model provides for broader source taxation in order to protect the taxation rights of developing countries.

With regards to the taxation of royalties, this distinction is evident. Article 12 of the OECD Model provides for exclusive residence taxation, whereas article 12 of the UN Model grants the source country the right to levy a withholding tax. Furthermore, the definition of royalties given by both provisions also differs, with the UN Model including more items under the scope of article 12 than the OECD Model.

Hence, the aim of this paper is to address the issues that arise from the differences between the model conventions and how the 2017 update of the UN Model solved these issues – and whether it did so. Moreover, issues that have been left for future consideration by the Committee of Experts on International Cooperation in Tax Matters (Committee of Exper...