BRUSSELS | NOVEMBER 2025
Last week, the OECD published the 2025 Update to the OECD Model Tax Convention, introducing changes to reflect modern cross-border working arrangements and to clarify the taxation of income from the extraction of natural resources. The update will be incorporated into the revised condensed and full editions of the Model, to be released in 2026.
Cross-Border Working Arrangements
The update clarifies when short-term cross-border remote work, including work performed from a home office in another jurisdiction, constitutes a fixed place of business permanent establishment for treaty purposes. The revised Commentary on Article 5 provides a structured framework for assessing permanence, the proportion of time spent working in the other State, and whether the individual’s presence there serves a commercial purpose for the enterprise. It confirms that most employee-driven remote-working arrangements will not create a taxable presence unless the facts indicate that the enterprise benefits from or requires activities to be performed in that jurisdiction.
Transfer Pricing Issues Arising from Financial Transactions & Interest Deductibility
The update amends the Commentary on Article 9 to address transfer pricing issues arising from financial transactions and to clarify the interaction between Article 9 and domestic rules on interest deductibility, including those developed under BEPS Action 4. Related adjustments are made to the Commentaries on Articles 7 and 24. Further changes to Article 25 highlight language relevant to Amount B, ensuring that non-adopting jurisdictions retain full optionality across dispute-resolution mechanisms. The Commentary on Article 26 is expanded to confirm that exchanged information may be used for tax matters involving persons other than those initially covered, and to reflect agreed guidance on taxpayer access and non-taxpayer-specific information derived from exchanged data.
Taxation of Exploitation of Natural Resources
A new optional provision is introduced to govern the taxation of activities connected with the exploration and exploitation of extractible natural resources. This provision establishes a lower permanent establishment threshold—triggered once a non-resident enterprise carries out relevant activities in a State for more than a bilaterally agreed period—and includes source-country taxing rights over gains associated with natural-resource assets. The accompanying Commentary offers detailed guidance, reflecting common treaty practice and the policy interest of resource-endowed countries.
The 2025 Update also includes a broad set of additions and revisions to OECD Member and non-Member reservations and observations, reflecting diverse policy positions across provisions dealing with residence, fiscal transparency, royalties, capital gains, employment income and administrative cooperation.
A webinar will be held by the OECD on 10 December from 16:00 – 17:00 CET, in which the changes to the Model Tax Convention will be explained and discussed by Manal Corwin, Director of the OECD Centre for Tax Policy and Administration, and other members of the Tax Treaty Team at the OECD.
UN Tax Framework Convention Negotiation Session in Nairobi
The third session of the UN Intergovernmental Committee to draft a Framework Convention on International Tax Cooperation concluded on 19 November 2025 in Nairobi. Held over two weeks, the session advanced detailed deliberations under all three workstreams of the negotiation process. These include: Workstream I (Framework Convention), Workstream II (Protocol 1 on taxation of cross-border services), and Workstream III (Protocol 2 on dispute prevention and resolution).
Workstream I – Framework Convention (Articles 4–10)
Discussions during the first week focused on the draft Framework Convention text circulated on 24 October 2025, with article-by-article review of the core commitments (articles 4 to 10). Article 4, on the fair allocation of taxing rights, attracted extensive debate. The draft provides that jurisdictions where business activities occur—including where value is created, markets are located, or revenues are generated—should have the right to tax the resulting income. Member States discussed the relationship between this provision and existing tax treaties, the interpretation of undefined terms, and the need to balance source and residence taxing rights with taxpayer certainty.
Article 5, on high-net-worth individuals, proposed stronger information-sharing measures to combat avoidance and evasion. Member States considered options for expanding exchange of information (EOI) to cover additional asset types and tax planning structures, with emphasis on enforcement, confidentiality, and cooperation.
Under article 6 on mutual administrative assistance, States debated how to broaden cross-border cooperation through EOI, administrative assistance and joint enforcement. Developing countries emphasised the importance of capacity-building and equitable access, while others highlighted the need for coherence with existing global standards.
Articles 7 and 8, addressing illicit financial flows, tax avoidance, and harmful tax practices, saw calls for clarity in definitions and stronger international coordination. While there was broad support for addressing tax base erosion, concerns were raised about duplication with OECD initiatives. Proposals included minimum taxation, country-by-country reporting, and stricter substance requirements for tax incentives.
Article 9 on sustainable development received general endorsement, recognising tax cooperation as a lever to support economic, social and environmental development. Article 10, on the prevention and resolution of tax disputes, was introduced at the close of the week and examined more fully under Workstream III.
Workstream III – Protocol 2: Dispute Prevention and Resolution
The second week centred on discussions on prevention and resolution of tax disputes with a presentation from the Co-Leads on 17 November setting out the scope and options for the protocol. The Committee explored the design of a flexible, optional protocol, where mechanisms would be available but not mandatory. Member States discussed how optionality could be implemented—via opt-in, opt-out, or case-by-case application—and agreed that existing bilateral or multilateral mechanisms should not be overridden unless agreed by the parties.
On dispute prevention, the Committee considered whether Protocol 2 should provide a legal basis for cross-border administrative cooperation. Mechanisms discussed included advance pricing agreements (APAs), joint audits and simultaneous examinations. Delegates supported strengthening these tools, particularly in jurisdictions lacking capacity or existing arrangements. It was proposed that the UN could play a role in supporting implementation, with the CoP empowered to issue best practices and non-binding guidance. These discussions align with article 10 of the Framework Convention, as well as Protocol 2.
The Committee also addressed dispute resolution mechanisms. MAP was recognised as the most widely used tool, but concerns were raised about its accessibility, timeframes, and effectiveness—particularly in “no-treaty” situations. Proposals included time limits, improved transparency, and support for developing countries. Member States further discussed making arbitration, mediation, and conciliation available as optional mechanisms under the protocol. Topics included panel composition, procedural costs, and the possible role of the UN in hosting or facilitating disputes through a permanent or ad hoc forum.
Deliberations also touched on the scope of the protocol, with consensus emerging that it should apply to cross-border tax disputes, potentially defined to include dual claims over taxing rights, double taxation risks, differing treaty interpretations, and “no-treaty” cases. There was some support for enabling the CoP to issue guidance on domestic disputes with international implications.
Workstream III – Information Asymmetries and Transfer Pricing Data
On the final day, the Committee examined access to transfer pricing (TP) data, acknowledging that limited access to reliable information hinders effective dispute prevention and resolution. Options discussed included establishing a UN-managed TP database, enabling pooled procurement of commercial data tools, or curating collections of bilateral APA and MAP outcomes. Delegates raised practical concerns around governance, cost, coverage, data quality, confidentiality, and participation modalities. This topic links to both the dispute resolution agenda under Protocol 2 and broader commitments in article 6 (administrative assistance) and article 14 (data collection and analysis) of the Framework Convention.
The next session of the Committee will take place in New York from 2–3 and 6–13 February 2026, where negotiations will resume on revised texts for Workstreams I and III, as well as the first version of the options note for Workstream III.
European Commission Launches Digital-Rule Simplification Package to Boost Business Competitiveness
The European Commission has published a comprehensive digital simplification package aimed at reducing administrative burdens and improving legal clarity for EU businesses, while maintaining high standards of data protection, safety and fairness. The package is built around three core pillars: the Digital Omnibus Regulations, the Data Union Strategy and the European Business Wallet Regulation.
The Digital Omnibus proposes targeted amendments across the EU’s digital acquis, including rules on data protection, cybersecurity and platform governance. It introduces a single entry-point for digital incident reporting, aiming to eliminate duplicative submissions. The proposal also updates cookie consent rules to allow users to set preferences once and enable automated signals, reducing repeated banner interactions. It clarifies several GDPR concepts, including the definition of personal data in line with recent Court of Justice case-law, and expressly recognises the development and operation of AI systems as a legitimate interest for processing.
A separate AI-specific Omnibus adjusts the implementation of the AI Act to facilitate compliance, particularly for SMEs. The proposal delays certain high-risk AI obligations until relevant standards are finalised, expands national and cross-border sandboxes and introduces an EU-level sandbox from 2028 for SMEs and small mid-caps. It provides simplified technical documentation requirements expected to save approximately €225 million annually, and consolidates oversight of general-purpose AI models within the AI Office to streamline governance.
The Data Union Strategy seeks to expand access to high-quality data for AI development and responsible innovation. It includes new model contractual terms and standard contractual clauses for data access and cloud computing to reduce negotiation complexity and promote interoperability. The strategy also establishes a Data Act Legal Helpdesk to support businesses, and sets out a toolbox to reinforce EU data sovereignty, including safeguards aimed at preventing the leakage of sensitive non-personal data to third countries.
The proposed European Business Wallet Regulation introduces a secure, interoperable digital identity enabling companies and public bodies to authenticate, sign, seal and exchange verified documents across Member States. The Wallet is intended to simplify cross-border administrative interactions, including tax and VAT registration, procurement processes and regulatory filings. The Commission estimates that widespread adoption could generate up to €150 billion in annual savings for businesses.
Across the package, the Commission estimates that the various simplification measures could collectively save up to €5 billion in administrative burdens by 2029. All proposals will proceed through the ordinary legislative procedure in the European Parliament and Council. In parallel, the Commission has launched a two-year Digital Fitness Check consultation, running until March 2026, to assess the coherence, competitiveness and cumulative impact of the EU’s digital regulatory framework.
G20 Leaders’ Declaration & OECD Secretary-General Tax Report
The G20 met last week in Johannesburg and issued a Leaders’ Declaration that places strong emphasis on stabilising the international tax system, progressing the global minimum tax, strengthening international tax cooperation and enhancing domestic resource mobilisation.
Leaders committed to work “as soon as possible” towards a balanced and practical solution on Pillar Two concerns, emphasising the need to address level-playing-field risks, including the treatment of substance-based tax incentives and broader BEPS vulnerabilities, while ensuring tax sovereignty is preserved. The Declaration also notes ongoing negotiations toward a UN Framework Convention on International Tax Cooperation, with participating G20 members reaffirming the objective of reaching a broad consensus that builds on existing achievements and avoids duplication of work.
Leaders further endorsed the Inclusive Framework’s phased, evidence-based approach to exploring global mobility and examining the interaction between tax, inequality and growth, and they welcomed OECD stocktake reports on BEPS and tax transparency. They underlined that developing countries must benefit fully from these advances through inclusive participation and capacity-building, and highlighted the opportunity presented by the new OECD framework for voluntary automatic exchange of immovable-property information. The Declaration’s commitment to Domestic Resource Mobilisation (DRM) stresses its importance as the most effective and sustainable revenue source, calling for coordinated capacity-building and country-owned reform strategies.
Against this backdrop, the OECD’s Secretary-General Tax Report to G20 Leaders provides a detailed account of technical progress across the Inclusive Framework. Work continues on the US-raised concerns regarding duplicative application of Pillar Two rules to US MNEs, with technical discussions underway on a potential “side-by-side” arrangement designed to safeguard the integrity of the GloBE Rules while reducing compliance burdens and preserving certainty. More than 65 jurisdictions have now implemented or advanced legislation for the global minimum tax, with 42 Qualified Income Inclusion and 43 Qualified Domestic Minimum Top-up Tax regimes on record, and ongoing development of simplification tools, administrative coordination through the Amsterdam Dialogue, and a multilateral competent authority agreement for automatic exchange of GloBE information.
Implementation of the BEPS minimum standards continues to broaden and deepen. Over 330 preferential regimes have been reviewed under Action 5, most amended or abolished; more than 58,000 tax rulings have been exchanged; and all no- or nominal-tax jurisdictions now apply economic substance requirements. The BEPS MLI covers 105 jurisdictions and modifies more than 1,500 treaties under Action 6. Country-by-Country reporting under Action 13 is near-universal for large MNE groups, with more than 4,600 exchange relationships in place. Action 14 progress includes more robust MAP processes and reduced resolution times. The 2025 BEPS stocktake shows measurable real-economy effects, including better alignment of profits with substance and reduced tax-rate sensitivity of profit shifting.
The report also outlines new Inclusive Framework workstreams, including long-term analytical work on tax, inequality and growth, and initial scoping on global mobility issues linked to evolving cross-border work patterns. Tax transparency efforts continue to expand under the Global Forum, with 172 jurisdictions implementing EOIR and CRS standards, rising participation in CARF, and substantial capacity-building, particularly across Africa. OECD work has also delivered a new voluntary multilateral framework for automatic exchange of real-estate information, using a modular structure covering ownership, acquisitions, disposals and income.
Finally, the OECD highlights broad tax-and-development support: more than 40 developing countries have benefited from bilateral programmes this year; over 10,000 officials have been trained; and TIWB has launched its “TIWB 2.0” model focused on long-term capacity building. Additional initiatives include enhanced developing-country access to CbC reports, regional workshops on Amount B, and new toolkits for mining taxation. Collectively, these developments underscore the G20’s renewed political commitment to tax cooperation and the OECD’s technical work to support the international tax system.
Evaluation of the EU Directive on Administrative Cooperation in Taxation (DAC)
The European Commission has published the 2018-2023 evaluation on the Directive on Administrative Cooperation (DAC), with the report setting out that the Directive has significantly strengthened Member States’ ability to address tax fraud, evasion and avoidance, particularly through the expansion of automatic exchange of information.
The report finds that DAC mechanisms are effective and increasingly used, with timely and generally high-quality data under DAC1 and DAC2 supporting both risk assessment and voluntary compliance. However, gaps remain for DAC3, DAC4 and DAC6, where incomplete information, such as missing taxpayer identification numbers and insufficient detail in rulings or free-text disclosures, continues to limit usability and matching rates. Despite these issues, the DAC delivers substantial financial benefits, estimated at EUR 6.8 billion per year, compared to annual costs of around EUR 646 million, most of which fall on reporting entities under DAC2.
The framework is found to be broadly coherent with EU anti-money-laundering and VAT administrative cooperation rules and aligned with international standards, providing clear EU added value by harmonising reporting requirements, minimising bilateral fragmentation and enabling exchanges through common secure IT systems. The DAC remains highly relevant as tax administrations confront new challenges linked to digital platforms, mobile taxpayers and crypto-assets, with DAC7 and DAC8 expected to play a growing role as new data becomes available.
Implementation lessons highlight that repeated amendments have made the legal framework increasingly complex, particularly with respect to DAC6, where broadly drafted hallmarks and divergent national interpretations drive legal uncertainty, inconsistent application and increased administrative burden. Penalties for non-compliance differ widely between Member States, raising concerns about deterrence and the level playing field. While data quality has improved, especially for DAC1 and DAC2, persistent mismatches still require resource-intensive manual corrections, and use of exchanged data varies, with limited transparency on outcomes.
Looking ahead, the Commission plans to simplify and consolidate the DAC, assess the need to adjust DAC6 hallmarks, and provide more systematic EU-level guidance to improve consistency. It will also engage with Member States to strengthen penalties regimes, explore an EU-wide taxpayer identification number to enhance matching, and encourage more systematic integration of DAC data into domestic tax processes, including pre-filled returns and risk-analysis systems. The report also notes the potential benefits of a more centralised EU IT architecture to reduce costs, increase agility and improve data quality.
OECD Publishes Preliminary 2025 Report on Mutual Agreement Procedures
The OECD has released a preliminary version of its 2025 Consolidated Information on Mutual Agreement Procedures, with the final edition due for publication in mid-November. The report brings together country-specific information on the operation of Mutual Agreement Procedures (MAPs) under BEPS Action 14 for all Inclusive Framework jurisdictions. It provides an overview of each jurisdiction’s MAP programme, peer-review outcomes and 2024 statistical data, offering a single reference point on global dispute-resolution practices.
The statistical data for 2024 were presented by the OECD at this year’s Tax Certainty Day, forming the centrepiece of discussions on international tax dispute prevention and resolution. The figures show that global MAP inventories have reached record levels, exceeding 6,700 pending cases. While closures increased slightly, new cases once again outpaced resolutions – particularly in transfer pricing disputes. Average resolution times improved modestly, with MAP cases concluding in around 27 months on average, down from 29 months the previous year. Transfer pricing cases remain lengthier, averaging 30.9 months compared with 24.5 months for other cases.
Around 76 % of MAP cases achieved full resolution for taxpayers, and only 4 % were closed without agreement, indicating a high degree of cooperation among competent authorities. The stock of older cases continues to fall, with just 3.3 % dating from before 2016 and more than half of all cases now under two years old.
Transfer pricing disputes continue to dominate MAP activity, representing over 60% of all cases and reflecting ongoing complexity and divergent interpretations of the OECD Transfer Pricing Guidelines. While jurisdictions such as the Netherlands, Canada and Japan report resolution rates above 80%, others face persistent backlogs and extended timelines. The OECD has reiterated the need for consistent implementation of the Action 14 minimum standard and enhanced resources for competent authorities.
The 2025 report also highlights progress in digitalisation and oversight through the MAP Statistics Reporting Framework and the Tax Certainty Hub, which improve transparency and comparability across jurisdictions. The upcoming 2025 peer-review cycle will assess the timely implementation of dispute-prevention measures and follow-up on earlier recommendations.
CJEU Dismisses Appeal Concerning EU Pillar Two Directive Top-up Tax
The Court of Justice of the European Union delivered its judgment in Fugro NV v Council of the European Union (C-146/24 P), concerning an action for annulment brought against the EU’s Pillar Two Directive (Directive 2022/2523). The Court upheld the General Court’s earlier decision that Fugro, a Dutch multinational taxed under the Netherlands’ tonnage tax regime, lacked standing to challenge the Directive. The case centred on Fugro’s claim that the Directive’s limited exclusion for international shipping income effectively neutralised the benefit of the Dutch tonnage tax, authorised by the European Commission, by subjecting it to the Pillar Two top-up tax.
The CJEU found that Fugro was not individually concerned by the Directive, which is a measure of general application applying uniformly to all multinational groups meeting its criteria. The Court rejected arguments that the beneficiaries of national tonnage tax schemes formed a “limited class” of operators, noting that the Dutch regime remained open to any qualifying taxpayer and could not be considered a closed or identifiable group at the time of adoption. As such, Fugro could not demonstrate individual concern within the meaning of Article 263(4) TFEU.
The Court’s decision was confined to procedural admissibility and did not address any substantive issues regarding the compatibility of the Pillar Two Directive with EU law or its interaction with approved State aid regimes. The ruling confirms that companies cannot directly contest the validity of the Pillar Two Directive through annulment proceedings, leaving open broader questions on the Directive’s legal and practical interaction with existing sectoral tax regimes. A separate case referred by the Belgian Constitutional Court, concerning the compatibility of the Undertaxed Payments Rule (UTPR) with EU law, is still pending before the CJEU.
2025 Tax Administration Series Report Published
The 2025 Tax Administration Report published this month by the OECD reflects on a decade of significant digital transformation across 58 tax administrations, with sustained moves towards integrated, automated and data-driven compliance models. Online interactions have tripled since 2014 while in-person contacts have more than halved, reflecting near-universal e-filing and electronic payments across the major taxes.
Pre-filled returns are now used in almost 90% of jurisdictions, underpinned by expanded third-party reporting and advanced data analytics, though on-time filing and payment rates have remained broadly static. A rapid increase in the adoption of artificial intelligence is reshaping administrative operations, with nearly 70% of administrations using AI for risk management, fraud detection, identity verification and automation of high-volume processes.
Administrations also report wider use of e-invoicing, predictive analytics and behavioural insights, though improved upstream compliance may be contributing to declining audit yields. Persistent pressures remain in arrears management—totalling EUR 2.7 trillion in 2023—and workforce capacity, as staffing levels fall and the age profile rises, accelerating investment in automation, new skill sets and restructured operating models.
EU Cross-Border VAT Fraud Evaluation & Reform Proposal
The European Commission’s latest evaluation of the EU framework for VAT administrative cooperation reports on both clear progress and persistent gaps in the fight against cross-border VAT fraud. The report identifies that while tools such as the Eurofisc network and the VAT Information Exchange System (VIES) continue to underpin Member States’ efforts, substantial improvements remain necessary.
The evaluation covers the period 2018-2024 and assesses the framework against five criteria: effectiveness, efficiency, relevance, coherence and EU added value. Key findings show that intra-EU trade in goods increased by 37 % between 2018 and 2023, from EUR 3 018 billion to EUR 4 134 billion, thereby raising stakes for VAT compliance. The estimated VAT compliance gap for 2022 stood at EUR 89 billion or 7.0 % of the total VAT liability in the EU.
On effectiveness, the report acknowledges that the legal basis enables Member States to access a broad toolbox of cooperation means, but usage and timeliness remain issues. For example, the number of information-exchange requests exchanged on request has fallen by almost 25 % over the preceding six years, stabilising at around 30 000 in 2023, yet nearly 28 % of replies arrive after the 30-day deadline. Eurofisc is identified as the most effective cooperation tool, with some EUR 14.8 billion of suspicious transactions uncovered in 2024, though this represents only about 24 % of the estimated minimum level of missing-trader intra-Community (MTIC) fraud.
The report also flags that the framework is still not fully geared to the multidisciplinary, law-enforcement-and-administration style of fraud networks: additional data sources (such as bank-transaction data or beneficiary-ownership registers) could improve detection of more complex fraud chains.
In tandem with the evaluation, the Commission has put forward a proposal for a Regulation to strengthen the access of the European Public Prosecutor’s Office (EPPO) and the European Anti‑Fraud Office (OLAF) to VAT information at Union level. The explanatory memorandum emphasises that MTIC fraud in 2023 was estimated at between EUR 12.5 billion and EUR 32.8 billion, and that current legal arrangements hamper EPPO and OLAF investigations by requiring reliance on national authorities for access.
The proposed amendment seeks to enhance the legal basis for EPPO and OLAF to access centralised data in order to accelerate investigations and improve the dismantling of organised-fraud networks. In this way it seeks to increase inter-agency coordination, improve the timeliness of data exchanges, and ensure deeper scrutiny of cross-border supply chains. This reflects the Commission’s intention to modernise VAT-fraud defence mechanisms at the EU level, complementing national efforts, and leveraging on new data sources for earlier and more precise detection.
OECD Publishes 2025 Effective Carbon Rates Report
The OECD published Effective Carbon Rates 2025 on 13 November 2025, providing updated comparative data on how 79 countries, accounting for about 82% of global greenhouse-gas emissions, price carbon through carbon taxes, emissions trading systems and fuel excise duties. The report confirms that governments continue to pursue a wide range of interconnected objectives when setting carbon and energy tax policy, including revenue raising, energy affordability, competitiveness, energy security and emissions reduction. The 2025 edition shows that countries are increasingly tailoring carbon-pricing instruments to national circumstances, with greater variation in design and coverage than in previous years.
A central finding is the continued expansion of emissions trading systems, both geographically and across new sectors. The report notes that ETSs now cover a growing share of global emissions and increasingly coexist with carbon taxes and fuel excise duties. This coexistence has led to more complex policy mixes, with countries adjusting price levels, exemptions and complementary measures to balance fiscal and economic considerations with environmental ambition. Effective carbon rates differ significantly across sectors, with road fuels often facing the highest price signals, while industry and electricity generation frequently remain subject to lower or no explicit carbon pricing.
The report highlights that although carbon pricing has widened, substantial coverage and price gaps persist, particularly where fossil-fuel support measures offset or dilute price signals. It also observes that policy flexibility has increased, with more countries using transitional arrangements, phased increases and targeted compensation to address distributional impacts and cost-of-living pressures. These adjustments are presented as essential for maintaining public acceptance while advancing climate objectives.
The OECD concludes that aligning carbon price signals with broader economic and social priorities remains a central challenge for governments, with the design of the policy mix increasingly influencing competitiveness, investment decisions and progress towards emissions-reduction commitments.
Aleksandar Ivanovski & Brodie McIntosh