Taxation of Services

Services are becoming more and more important in both developing and developed economies and are increasingly traded internationally. The growth in cross-border trade in services now exceeds the growth in the cross-border trade in goods. Traditionally, double tax treaties were designed to divide taxing rights arising from cross-border trade between countries and were based predominantly on a business model that was focused on goods that were produced in physical locations.
Given the magnitude of the global trade in services, it is imperative that tax authorities ensure that income from the trade in services is taxed efficiently, effectively and equitably. However, technical services are often not taxable by the source country under the current provisions of the United Nations Model Double Taxation Convention. As a result, multinational enterprises often avoid being taxed on fees received for technical, management and consulting services. Some countries, especially developing countries, are concerned that domestic law taxation of such trade in services may be prevented without addressing the issue in bilateral tax treaties. They therefore look for ways to negotiate provisions in their tax treaties or else interpret their tax treaties, even when they do not contain a specific article on technical services, as allowing them to tax income from technical services without the permanent establishment test having been met. In fact, countries have adopted a variety of provisions in their bilateral treaties to deal with income from technical and other service but there is no standard way of dealing with fees for technical services.
The Tax Committee is currently working on guidance as to the provision of technical services for countries that want to have a fees for technical services article thereby, in turn, providing planning security to the business sector as well as tax administrations. This guidance will also help countries decide if such an Article is appropriate in their circumstances.

  • Note from the Coordinator of the Subcommittee on Tax Treatment of Services: Draft Article and Commentary on Technical Services (2014)
  • Proposed Changes to the UN Model Tax Convention Dealing with Cyber-Based Services (2014)
  • Note on a New Article of the UN Model Convention Dealing with the Taxation of Fees for Technical and Other Services (2013)
  • Taxation of Cross-Border Trade in Service: A Review of the Current International Tax Landscape and Possible Future Policy Options (2013)
  • Secretariat Note – Recent Work of the Committee on Tax Treatment of Services (2013)
  • Secretariat Note – Taxation of Fees for Technical and Other Services under the United Nations Model Convention (2012)
  • Follow-up Note on Taxation of Fees for Technical Services and Comments on that Note (2012)
  • Additional Comments on Follow-up Note on Taxation of Fees for Technical Services (2012)
  • Note by the Subcommittee on the Tax Treatment of Services (2011)
  • Note on the Taxation of Services under the United Nations Model Tax Convention (2010)
  • Note Provided by the Coordinator of the Subcommittee on Article 14 and the Tax Treatment of Services (2009)