OECD overhauls international double taxation system

Some 70 countries have already signed up to the so-called ‘super treaty’.

Around 70 countries have signed up to a multilateral so-called ‘super treaty’ that aims to reduce the volume and complexity of disputes relating to double taxation and tax evasion.

The super treaty, which was introduced in June by the Organisation for Economic Cooperation and Development (OECD), will in many cases supercede individual bilateral treaties between countries.

It will also enable taxpayers to take their double taxation disputes to relevant authorities in either of the countries involved in the matter, irrespective of what remedies are available under domestic law. In the past, taxpayers could only present their case to authorities in their country of residence and they were merely required to endeavour to resolve the dispute rather than be obliged to do so.

But because the OECD has not imposed a single, uniform model for its super treaty around the globe, countries with different internal tax regulatory systems are able to pick and choose whether to implement certain provisions in domestic legislation or existing bilateral treaties. These provisions include optional updated dispute resolution rules, which have so far been adopted by 25 countries.

As most treaty signatories are still in the process of updating their regulatory frameworks, it is incumbent upon payroll professionals to keep abreast of any imminent changes.