THE GLOBAL OECD UN TAX MODEL SELECTED EXAMPLES

THE GLOBAL OECD / UN TAX MODEL: SELECTED EXAMPLES OF DEVIATIONS IN BRICS COUNTRIES KHUSAINOVA ANASTASIA

ARTICLE 1. PERSONS COVERED • OECD and UN Model Convention do not include deviations between each other and include 3 paragraphs. Include the definition ‘resident’ Include the definition ‘permanent residence’ Brazil, India, China South Africa

ARTICLE 2. TAXES COVERED • Article 2 of the UN Model reproduces Article 2 of the OECD Model Br do not include deviations Para. 1 India, China, South Africa Doesn’t include para. 1 (Brazil) Para. 2 Doesn’t include para. 2(Brazil, India) China – doesn’t include ‘taxes on capital appreciation’ South Africa – doesn’t include ‘taxes on the total amounts of wages or salaries paid by enterprises, as well as taxes on capital appreciation’ Para. 3 Brazil, India, China and South Africa – imposes taxes on income only Para. 4 Brazil, India, South Africa, China

ARTICLE 4. RESIDENT do not include deviations Para. 1 Para. 2 Para. 3 deviations Brazil, China - Include ‘place of registration’, Brazil, India, South Africa - doesn’t include provision that the term ‘resident of a Contracting State’ does not include any person who is liable to tax in that State in respect only of income from sources in that State or capital situated therein Brazil, India, South Africa China - include one more sentence in subpara. (d) that if the competent authorities are unable to reach such agreement, such person shall not be considered a resident of either Contracting State and not be entitled to any relief from tax provided by this Agreement Brazil, India, South Africa, China – just place of effective management

ARTICLE 5. PERMANENT ESTABLISHMENT • Article 5 of the UN Model Convention is based on Article 5 of the OECD Model but contains several significant differences (UN Model Convention – six-month test and OECD Model Convention - twelve-month test) OECD India, China, South Africa UN other Brazil – nine-month test

ARTICLE 8. INTERNATIONAL SHIPPING AND AIR TRANSPORT • Two alternative versions are given for Article 8 of the United Nations Model Convention, namely Article 8 (alternative A) and Article 8 (alternative B). Article 8 (alternative A) reproduces Article 8 of the OECD Model Convention. Article 8 (alternative B) introduces substantive changes to Article 8 (alternative A) • With regard to the taxation of profits from the operation of ships in international traffic, many countries support the position taken in Article 8 (alternative A). In their view, shipping enterprises should not be exposed to the tax laws of the numerous countries to which their operations extend.

ARTICLE 14. INDEPENDENT PERSONAL SERVICES • Article 14 of the United Nations Model Convention reproduces in paragraph 1, subparagraph (a) and paragraph 2 the essential provisions of Article 14 of the OECD Model Convention • The do whole text of Article 14 and the Commentary thereon not include deviations from the OECD Model Convention and was removed Russia’s National Model Para. 1 China, India Brazil - Include one more subpara. that ‘such services or activities are performed in the other CS and the beneficiary has habitually in that other State a fixed base for the purpose of performing his/her activities; in such a case, only so much of the income as is attributable to that fixed base may be taxed in that other State South Africa – doesn’t include subpara. (b) Para. 2 Brazil, China, India, South Africa

ARTICLE 20. STUDENTS • Article 20 of the United Nations Model Convention, as presently worded, reproduces substantially Article 20 of the OECD Model Convention. In 1999, paragraph 2, which contained provisions dealing with grants and scholarships and remuneration from employment not covered by paragraph 1, was removed (treaty between RF and India). • At the same time, Russia’s National Model provides in Article 19 the possibility of taxing the incomes of teachers and researchers (Brazil, India, South Africa).

ARTICLE 21. OTHER INCOME • Article 21 of the OECD Model Convention with the exception that paragraph 2 of Article 21 of the United Nations Model Convention also covers the case where the income is attributed to a fixed base which the beneficiary of the income has in the other Contracting State according to Article 14. Article 21 of the United Nations Model Convention also has an additional paragraph 3 containing a general provision relating to items of income of a resident of a Contracting State not dealt with in the preceding articles and arising in the other Contracting State.

ARTICLE 21. OTHER INCOME do not include deviations Para. 1 South Africa, India (UN Model), China (UN Model), Brazil Para. 2 India (UN Model), China (UN Model), Brazil South Africa, Brazil – doesn’t include para. 2 Para. 3 India (UN Model), China (UN Model), Brazil South Africa, Brazil – doesn’t include para. 3

ARTICLE 22. CAPITAL • In the United Nations Model Convention, Article 22 deals with taxes on capital, to the exclusion of taxes on estates and inheritances and on gifts and of transfer duties. • The treaty between Russian Federation and BRICS countries does not include this provision.

ARTICLE 24. NON-DISCRIMINATION • This Article deals with the elimination of tax discrimination in certain precise circumstances. The non-discrimination provisions of the Article seek to balance the need to prevent unjustified discrimination with the need to take account of these legitimate distinctions. For that reason, the Article should not be unduly extended to cover so-called “indirect” discrimination. • Paragraph 1 – treaty between Russia and Brazil, Russia and South Africa does not include second sentence (that this para. also applies to persons who are not residents of one or both of the Contracting States).