The Organisation for Economic Cooperation and Development (OECD), on 18 December 2017, released the 2017 edition of its Model Tax Convention on Income and Capital (MTC 2017).
MTC 2017 is an update to the Model Tax Convention issued in 2014, and consolidates the changes resulting from the Base Erosion and Profits Shifting (BEPS) Project under the following action plans:
• Action 2 (Neutralising the Effects of Hybrid Mismatch Arrangements)
• Action 6 (Preventing the Granting of Treaty Benefits in Inappropriate Circumstances)
• Action 7 (Preventing the Artificial Avoidance of Permanent Establishment Status) and
• Action 14 (Making Dispute Resolution More Effective)
While it is not binding on countries, OECD’s Model Tax Convention on Income and Capital provides clear modalities for taxing income and capital, with a view to eliminate double taxation in different jurisdictions.
It is expected that MTC 2017 will be a basis for negotiating future bilateral tax treaties and a benchmark for local legislation to prevent BEPS practices. In the same vein, countries with existing Double Tax Treaties may take advantage of the “Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS” (which Nigeria has adopted) to implement the tax treaty-related measures developed through the BEPS project.
We will keep monitoring developments in this space and provide updates as soon as they become available to us. You can access the Model Tax Convention here.