OECD Releases 2025 Update to Model Tax Convention

News, dated 19-11-2025

The Organisation for Economic Co-operation and Development (OECD) has released the ‘2025 Update to the OECD Model Tax Convention’. This update was approved by the Committee on Fiscal Affairs on 13 October 2025 and by the OECD Council on 18 November 2025.

The following are the key changes to the OECD Model Tax Convention included in the 2025 Update:

1. Dispute Resolution (Article 25)

OECD amends Article 25 and its Commentary to clarify the relationship between the Model Convention and the General Agreement on Trade in Services (GATS). A new paragraph 6 is added, which clarifies that, for purposes of GATS Article XXII(3), a measure will fall within a tax treaty’s scope only if Article 24 applies to it.

Any dispute between treaty partners over whether a measure falls within the scope of the treaty must be resolved under the Mutual Agreement Procedure (MAP) under Article 25(3) or by such other procedure mutually agreed. This amendment prevents overlapping or contradictory dispute-settlement routes between the tax treaty and WTO’s GATS, thereby reinforcing the primacy of MAP for tax-related jurisdictional disputes.

2. An Individual’s Home Could Constitute a “Place of Business”

Recognising rising remote-work models, Commentary to Article 5 (Permanent Establishment) is amended to clarify the circumstances in which an individual’s home could constitute a “place of business” of the enterprise for which the individual works. The OECD notes that these clarifications are an evolution of established principles but have been refined to provide modern certainty.

3. Optional Alternative PE Rule for Extractible Natural Resources

The Commentary to Article 5 now includes an optional alternative provision addressing activities relating to exploration and exploitation of natural resources. This provision introduces a lower PE threshold that is crossed once a non-resident enterprise operates in a source State for a bilaterally agreed period.

4. Transfer Pricing and Interest Limitation

The Commentary on Article 9 has been revised to address queries arising from Working Party 6’s review of transfer pricing rules for financial transactions (as detailed in Chapter X of the Transfer Pricing Guidelines). These updates clarify the operation of Article 9, particularly in relation to domestic interest-deductibility rules, including those recommended under the BEPS Action 4 final report. Corresponding amendments have also been made to the Commentaries on Articles 7 and 24.

5. Update to Article 25 Commentary on Amount B

The Commentary on Article 25 has been modified to incorporate references to the tax-certainty framework and double-taxation relief outlined in the Amount B report. These revisions aim to ensure that all dispute-resolution mechanisms remain optional for jurisdictions that choose not to adopt Amount B.

6. Exchange of Information (Article 26)

Two major changes are introduced in Article 26 Commentary:

• Information received under exchange-of-information provisions may be used for tax matters relating to persons other than those for whom the information was originally obtained.
• Agreed interpretative guidance has been incorporated on taxpayer access to exchanged information and the disclosure of reflective, non-taxpayer-specific information generated from or based on exchanged data.

Click Here To Read The Full Update