What is the OECD's Model Tax Convention?

The OECD Model Tax Convention is an international agreement created by the Organisation for Economic Co-operation and Development (OECD). It is a tool that countries use to determine how income from cross-border business activities should be taxed. The convention covers matters such as the allocation of taxation rights between countries, the taxation of specific types of income, and dispute resolution procedures. The Model Tax Convention is used as the basis for many actual tax treaties between countries. In California, the Model Tax Convention is particularly important for businesses that are based in the state but have overseas operations. It helps to ensure that these businesses pay the correct level of tax on their international activities, and that there aren’t any double taxation issues. For example, the convention helps to ensure that businesses don’t have to pay taxes twice on the same income – once in their own country, and once in the country where the income is generated. The Model Tax Convention also helps to resolve any disputes that may arise between countries when it comes to taxation. By creating a framework for dispute resolution, the convention helps to ensure that both countries involved can agree on the appropriate level of taxation and dispute any discrepancies in a fair and consistent manner.

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What is the OECD's Model Tax Convention?

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