OECD: 2025 UPDATE – OECD Model Tax Convention on Income and Capital.
Today, the OECD published the 2025 Update to the OECD Model Tax Convention on Income and on Capital (the “OECD Model”), approved on November 18th, 2025, which will be incorporated into the revised version of the OECD Model to be released in 2026.
Although we recommend a comprehensive reading and analysis to assess the impact of the updates introduced in relation to Tax Authorities’ interpretation of Double Tax Treaties already in force, we highlight the following key changes:
1 – Commentary to the Permanent Establishment (PE) Provision (Article 5)
i.Clarifications on when an individual’s home may constitute a “(fixed) place of business” of the enterprise:
The revisions deepen the analysis of situations in which an individual’s home may qualify as a fixed place of business, and include an analysis/test of personal versus business reasons; a threshold to determine continuity under the “place of business” requirement (≥ 50% of total working time for the enterprise in any 12-month period); and an assessment of commercial reasons linked to the enterprise’s business according to the examined indicators.
The increasing prevalence of home-office and remote-work arrangements prompted the need to update the Commentary to provide greater certainty as to when a fixed place of business PE may be deemed created by an individual working from home or another relevant location.
ii.Introduction of an optional alternative provision for natural resource activities:
A new optional provision – and related Commentary – was added for activities related to the exploration and exploitation of extractible natural resources. This alternative introduces a lower PE threshold, which would be met once a non-resident enterprise operates in a Contracting State for more than a bilaterally agreed period.
2 – Mutual Agreement Procedure (MAP) (Article 25) and related Commentary
The Update introduces a new paragraph clarifying how competent authorities determine whether a matter falls within the scope of a tax treaty for purposes of the GATS dispute resolution mechanism. Although this guidance existed in the Commentary, elevating it to the treaty text aims to increase awareness of the potential interaction with GATS non-discrimination obligations.
In addition, the Commentary now reflects elements of Pillar One – Amount B, adopted by the OECD Council in 2024. The changes reinforce language on tax certainty and the elimination of double taxation, while ensuring that all dispute resolution mechanisms maintain optionality for non-adopting jurisdictions.
3 – Commentary on the Associate Enterprises Provision (Article 9)
The update arises in response to the questions raised in the context of Working Party 6’s work on the transfer pricing aspects of financial transactions, and sheds light on the application of this provision in the case of domestic interest deductibility recommended in the final report on BEPS Action 4.
Key points include:
-The determination of whether a purported loan should be respected as debt precedes the arm’s length pricing analysis.
-Once profits are allocated under the arm’s length principle, domestic law determines the tax treatment of those profits, including deductibility of expenses.
-Differences between Contracting States may persist, but they are encouraged to consult to avoid economic double taxation.
-Aligned changes were also made to the Commentaries on Articles 7 and 24.
4 – Commentary on (Article 26)
The amended Commentary confirms that information exchanged between Contracting States may be used for tax matters relating to persons other than the taxpayer to whom the information originally pertains, without requiring notification or authorization from the sending State.
The update clarifies:
-Exchanged information may also be shared with the taxpayer (or their representative) when relevant to the case.
-Confidentiality rules apply to all information, including reflective non-taxpayer-specific data.
-Disclosure to third parties is permitted only if taxpayer identities are protected and both States agree in writing that such disclosure will not impair tax administration.
This specific exception complements the general confidentiality safeguards under Article 26.
As the OECD moves toward releasing the revised Model in 2026, we remain available to assist with evaluating potential impacts on your existing structures, compliance obligations, and dispute-resolution strategies.