As part of the 29th session of the United Nations Committee of Experts on International Cooperation in Tax Matters (UN Tax Committee) from October 15th to 18th, 2024, in Geneva, a new Article (temporary designation “Article XX") on fees for cross-border services was approved to be included in the 2025 Update of the UN Model Double Taxation Convention between Developed and Developing Countries (UN Model Convention). According to the new Article XX UN Model Convention, the source state should have a limited taxing right on fees for services, irrespective of the place where the services are provided, if the payer of the fees for services is resident in a tax treaty state or the fees are borne by a permanent establishment located in its territory. In the opinion of most of the UN Tax Committee’s members, this approach acknowledges the economic reality of modern business models where substantial involvement in a country’s economy can occur without physical presence. The introduction of Article XX is intended to eliminate Article 12A (“fees for technical services") and Article 14 UN Model Convention (“independent personal services") by very broadly defining the term “fees for services" encompassing a wide range of activities. Stefan Bendlinger gives a first overview of the new article and the corresponding commentary. He deals with doubtful questions and analyzes the impacts on practice.
