Revised United Nations Model Taxation Convention between Developed and Developing Countries
- Type: Convention
- Date of signature: 01/01/2000
- Place of signature: New York, USA
- Depositary: Economic and Social Council
- Date of entry into force: N/A
What is it about?
This instrument encourages the conclusion of fiscal bilateral treaties between industrialized and developing countries, establishing rules concerning taxation of an economic actor receiving earnings outside its country of residence. Its purpose is to establish rules to determine, whether the State of residence or the State of revenue source has the competence to levy taxes. It also intends to prevent double taxation. The Convention deals with different categories of income, like business earnings, dividends, interests, royalties, capital gains or other revenues. It examines the status of earnings generated by a person physically or morally residing abroad. Although taxation in the State of revenue source is encouraged, the Convention also establishes rules regarding the alternative. The taxation rate must be reasonable and non discriminatory, and a portion of the revenue must be paid to the State of residence.
Why is it relevant?
The establishment of rules on the double taxation of investments encourages commercial exchange between developed and developing countries. The conclusion of bilateral treaties on double taxation allows investors to enjoy clarity and predictability regarding the return on their investment. Capital exporting countries enable their economic actors to develop internationally and at the same time benefit from the earnings received abroad. Capital importing countries profit from essential revenues towards their development.
Governments may use the present Convention as a model for drafting bilateral treaties on double taxation. The 1980 initial version was modified in 2000, taking into account new developments in trade exchange.
- Manual for the Negotiation of Bilateral Tax Treaties between Developed and Developing Countries (United Nations, 2003)