By Julie Martin, Editor, MNE Tax
The United Nations Committee of Experts on International Cooperation in Tax Matters kicked off its 21st session today, meeting virtually to discuss transfer pricing matters.
During its 21st session, the UN tax committee will consider proposed updates to its influential UN Model Double Taxation Convention between Developed and Developing Countries, the United Nations Practical Manual on Transfer Pricing for Developing Countries, the Handbook on Selected Issues for Taxation of the Extractive Industries by Developing Countries, and several other UN documents.
The 21st session will be held as a series of virtual meetings running from October 20–23 and October 26–29.
As is the case at the OECD, a rival international tax standard-setting body, the tax consequences of the digitalized economy will be a focus of this UN meeting. The tax committee will consider a controversial new proposal prepared by a drafting group to add an automated digital services article to the UN model tax convention.
The tax committee will also discuss clarifications to the UN model addressing the inclusion of software payments in the definition of royalties.
The UN tax committee will be asked to approve several other model tax treaty changes, including new language on offshore indirect transfers; commentary changes concerning permanent establishments; and changes related to CIVs, pension funds, and REITs.
A subcommittee working on transfer pricing matters plans to seek final approval from the full committee on several updates to the UN practical manual on transfer pricing.
These changes include new examples to the transfer pricing manual’s financial transactions chapter, new guidance on centralized sales functions, and updated language to a chapter on tax dispute avoidance and resolution. Versions of these revisions have been considered at earlier committee sessions.
The transfer pricing subcommittee will present a new transfer pricing chapter on Kenya’s transfer pricing practices prepared by the Kenyan government. Further, the transfer pricing subcommittee will present updated chapters describing transfer pricing practices in South Africa, Mexico, China, and India written by officials from each country.
The country chapters do not purport to represent the UN tax committee’s views and, as such, these chapters will be added to the UN transfer pricing manual or amended without UN tax committee approval.
The committee will also be asked to approve updates to the Handbook on Selected Issues for Taxation of the Extractive Industries by Developing Countries. These chapters relate to tax incentives, the tax treatment of subcontractors and service providers, production sharing contracts, and the tax treatment of financial transactions in the extractive industries.
New papers for the extractives manual will be presented for discussion relating to auditing oil, gas, and mining activities and on the tax treatment of decommissioning.
The committee will also consider material for new UN handbooks under development that will address environmental taxes and tax dispute avoidance and resolution.
Along with papers for the 21st session of the UN tax committee, the committee released a report describing the outcome of its 20th session, which was held virtually June 22–July 31.
The following documents were released in advance of the 21st session:
Transfer pricing – updating of the UN Practical Manual on Transfer Pricing for Developing Countries
- Update of the United Nations Practical Manual on Transfer Pricing for Developing Countries (E/C.18/2020/CRP40)
- Update of the United Nations Practical Manual on Transfer Pricing for Developing Countries (E/C.18/2020/CRP40 Add.1)
- Presentation on Transfer Pricing Manual Update – Article 9
UN Model – updating the UN Model Double Taxation Convention between Developed and Developing Countries
- Minority view dealing with the meaning of beneficial owner (E/C.18/2020/CRP32)
- Minority view dealing with the application of Art. 13(5) to transparent entities (E/C.18/2020/CRP33)
- Revised changes to the UN Model related to CIVs, pension funds and REITs (E/C.18/2020/CRP34)
- Suggested changes to the Commentary on Article 5 (Permanent Establishment) (E/C.18/2020/CRP35)
- Capital gains on Offshore Indirect Transfers (E/C.18/2020/CRP36)
- Suggested technical changes to be included in the 2021 Update(E/C.18/2020/CRP37)
- Application of Article 12 to software payments (E/C.18/2020/CRP38)
Tax consequences of the digitalized economy
Tax treatment of official development assistance (ODA) projects
- Revised version of the Guidelines on the Tax Treatment of Government-to-Government Aid Projects (E/C.18/2020/CRP30)
- Proposed recommendation on Transparency of Tax Provisions in Government-to-Government Aid Agreements (E/C.18/2020/CRP31)
Extractive industries – updating the Handbook on Selected Issues for Taxation of the Extractive Industries by Developing Countries
- Handbook on Taxation of Extractive Industries – Coordinator’s Report (E/C.18/2020/CRP48)
- Chapter xx: Tax incentives & the oil industry (Extractives Handbook) (E/C.18/2020/CRP49)
- Chapter xx: Tax treatment of sub-contractors (Extractives Handbook)(E/C.18/2020/CRP50)
- Chapter xx: Production sharing contracts (Extractives Handbook) (E/C.18/2020/CRP51)
- Chapter xx: Tax treatment of financial transactions (Extractives Handbook) (E/C.18/2020/CRP52)
- Chapter xx: Auditing and trade mispricing (E/C.18/2020/CRP53)
- Chapter xx: Decommissioning (E/C.18/2020/CRP54)
Environmental tax issues
- Coordinator’s Report (E/C.18/2020/CRP42) (unavailable)
- Chapter 2: Carbon Taxation: An Introduction for Policymakers – Carbon Taxation Handbook (E/C.18/2020/CRP45)
- Chapter 4: From Design to Administration: Practical Application of a Carbon Tax – Carbon Taxation Handbook (E/C.18/2020/CRP44)
- Chapter 5: Revenue use (E/C.18/2020/CRP46)
- Chapter 6: Carbon Taxation: Interaction with other rules and instruments (E/C.18/2020/CRP47)
- Chapter [XX]: Public acceptability of a carbon tax: conceptual model and policy implications (E/C.18/2020/CRP43)
Dispute avoidance and resolution