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The United Nations has published the 2017 update to the UN Model Tax Convention, which incorporates changes agreed as part of the base erosion and profit shifting (BEPS) project.
The updated text of the Convention emphasizes that treaties should not create opportunities for tax avoidance or evasion, including through treaty shopping. Also included is a new version of Article 1 that includes a fiscally transparent entity clause, and a saving clause, which clarifies that residence taxation is generally preserved under tax treaties.
The updated text includes a modified version of Article 4 that includes a new “tie breaker” rule for determining the treaty residence of dual-resident persons other than individuals.
The 2017 update includes a modified version of Article 5 to prevent the avoidance of permanent establishment status, and a modified Article 10 to change the circumstances in which a lower rate applies for dividends on direct ownership of shares above a 25 percent threshold.
A new Article 12A to provide for source taxation of fees for technical services is provided.
Changes to Articles 23A and 23B have been made to clarify that there is no obligation to provide relief for tax imposed on a solely residence basis.
A new Article 29 is included on entitlement to treaty benefits, including a limitation on benefits rule, a third state permanent establishment rule, and a general anti-abuse rule.