OECD model tax convention

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Companies often operate in a number of different countries and, as a result, may be resident in more than one country under the different domestic tax laws of each country.

Many developed countries have entered into bilateral international tax agreements, known as double tax treaties, with other countries.

Many, but not all, of the tax treaties follow the OECD model tax convention.

The OECD model convention provides a basis that can be used to draw up a bilateral tax agreement between two states, that seeks to eliminate double taxation.

Double tax treaties also help to encourage cross border trade.

The OECD model tax convention contains a 'tie breaker' clause that determines a company’s tax residence for the purposes of the treaty.

This is taken to be the place where ‘effective management’ and control (POEM) is carried on.

In a tie context this test requires a review of where the day to day management of the company takes place.

See also