Special Features of the UN Model Convention

1. S. 477Introduction

The update of the UN Model Convention (hereinafter “UN Model”) in 2017 expanded Article 1 UN Model by two paragraphs. The United Nations (hereinafter UN) added the so-called “fiscally transparent entity clause” in Article 1(2) UN Model and the so-called “saving clause” in Article 1(3) UN Model. Since Article 1 UN Model specifies the personal scope of a treaty, the change is fundamental. A person can just receive treaty benefits if the treaty is applicable. Therefore, a person must fulfill, inter alia, the personal scope of a treaty.

The extension of the UN followed the Organization for Economic Co-operation and Development (OECD). The OECD updated the OECD Model Convention (hereinafter “OECD Model”) in 2017 as well and similarly introduced identical provisions in Article 1(2) and Article 1(3) OECD Model. The provisions were based on considerations in the project of the OECD on Base Erosion and Profit Shifting (the so-called “BEPS project”).

Inspiration, both for the OECD and the UN, was the United States Model Income Tax Convention (hereinafter “US Model”). The US had already included a fiscally hybrid entity clause and a saving clause in its model convention and both ...