The new OECD Model of the Double Taxation Convention

With the approval on November 21st 2017 of the new model of the Convention against double taxation, the OECD has introduced significant innovations implementing the guidelines elaborated within the BEPS project (Base Erosion and Profit Shifting) divided into 15 Actions.

In particular, the major changes concern the anti-abuse discipline, the concept of permanent establishment and the MAP procedure (Mutual Agreement Procedure).

The main amendments to Article 5 about the establishment are the introduction of the “anti-fragmentation rule”, according to which, in the case of one or more companies connected to one another carry out several activities in a State, there is a establishment if the business are complementary, except if all the activities are preparatory or auxiliary.

New criteria are then established for the configuration of the permanent personal organization, giving importance to the aspects of a substantial nature (stipulation of customary contracts in the name of the company, etc.)

The new art. 29 of the OECD Model contains an anti-abuse clause and the "Limitation on benefit rule" (LOB), with the provision of limits to access to conventional benefits that would result in double non-taxation situations.

Finally, the Article 25 establishes an amicable procedure (MAP),  more accessible, and an arbitration procedure for the resolution of questions of interpretation, as well as of cases of double taxation for which the application of the other provisions of the Convention does not make it possible to achieve solution.