ICC Document & publication

ICC’s further perspectives on the taxation of technical services (2015)

Upon request from the United Nations Committee of Experts on International Cooperation in Tax Matters, ICC has offered further guidance on how to address the taxation of technical services in the UN Model Tax Convention

Following the decision of the UN Committee of Experts on International Cooperation in Tax Matters to incorporate a separate article on technical services into the UN Model Convention, ICC provided further recommendations on how best to address the taxation of technical services in the UN Convention – building on ICC’s initial views as shared with the UN Committee in August 2014.

ICC acknowledges that a model for a separate article on the taxation of technical services may contribute to a more consistent international treatment of technical services in tax and treaty law. However, ICC notes that the negative consequences (e.g. weakening of the Permanent Establishment (PE) concept for business, increased tax and administrative burden and difficulties in defining the scope) would significantly outweigh the potential benefits. In its letter to the UN Committee, ICC advocates for a narrow scope of a new article for consistency purposes and advises that any potential withholding tax rate ought to be set with the utmost caution with a strict ceiling. Furthermore, ICC raises its concern that further discrepancies may arise between the work currently conducted by the OECD on Base Erosion and Profit Sharing (BEPS) and the developments at the UN: the OECD/BEPS-project is focusing increasingly on where value is created, while the UN seems to be parting away from the nexus requirement.

The ICC Commission on Taxation through its long-standing relationship with the UN Committee and active engagement on the G20 mandated OECD/BEPS project, has consistently encouraged a harmonized approach on the taxation of technical services. ICC seeks to avoid inconsistencies between the OECD and UN tax models and warns that uncoordinated bilateral actions will lead to increased risks of double taxation, more unfair competition and increase uncertainty over the tax consequences of cross-border transactions in a way that impede and distort international trade and investment.