A new model tax convention for a world of increasing remote work and mobility of individuals

Abstract

The models of tax treaties have long been the subject of endless and heated debates regarding corporate taxation, especially in recent times following the BEPS Project and its aftermath (the Pillars). However, very little attention has been paid to the challenges and risks that the widespread adoption of remote work presents for tax treaties—a phenomenon that is on the rise, particularly after the 2020 pandemic—and the resulting increased opportunities for individuals to move from one jurisdiction to another, relocate temporarily or permanently to new jurisdictions, or even adopt a nomadic lifestyle.

In this document, the author will attempt to reflect in depth on the impact that these phenomena may have on the application of tax treaties regarding the taxation of income of both individuals and entities related to them. Subsequently, adjustments to the Tax Treaty Models will be proposed, such as a revision of the tie-breaker rules to address issues of dual residence (Article 4), a reinterpretation or modification of the concept of permanent establishment for the taxation of business profits (Article 5), consideration of the removal of the clause on independent personal services (Article 14), and a review of the rules on the taxation of employment income (Article 15). In all cases, specific and nearly final proposals for the redrafting of the relevant articles will be presented.