What is the OECD's Model Tax Convention?

The OECD Model Tax Convention is an international agreement made by the Organisation for Economic Co-operation and Development (OECD) that outlines a set of rules for international taxation. It is designed to help countries reduce transfer pricing disputes, avoid double taxation, and ensure that tax treaties between countries are administered effectively. The Model Tax Convention is the main tool used by countries to negotiate the terms of their bilateral tax treaties. It outlines how international taxes are shared between countries and is updated periodically to ensure it reflects current international tax practices. The model is composed of a preamble, an article-by-article commentary, and a network of annexes and protocols. The Model outlines a series of rules such as permanent establishment (PE) to determine where taxable income is to be allocated, and how taxes should be shared between countries. The Model also defines rules on the exchange of information and mutual assistance between countries in order to fight international tax evasion and money laundering. The Model Tax Convention does not impose any legal obligations on countries, but rather provides a framework for them to negotiate their own treaties. It can also be used as a reference point when countries are signing double taxation treaties. In Maryland, the Model Tax Convention is used as a guideline when negotiating and signing double tax treaties with other countries.

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What is the OECD's Model Tax Convention?

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