The OECD has published a discussion draft for public comment on the tax treaty treatment of cross-border termination payments for the purposes of updating the OECD Model Tax Convention.

The limited guidance currently included in the Commentary of the OECD Model Tax Convention concerning such payments deals exclusively with the extent to which they constitute “pensions or other similar remuneration”. It does not address how other provisions such as non-competition payments may be made following the termination of an employment. Since the inconsistent treaty characterisation of payments received following the termination of employment creates risks of double taxation and non-taxation, the OECD Committee on Fiscal Affairs, has undertaken work aimed at clarifying how such payments should be treated for tax treaty purposes. This public discussion draft includes proposals for additions and changes to the Commentary on the OECD Model Tax Convention resulting from the work of that subgroup.

The Committee invites interested parties to send their comments on this discussion draft before 13 September 2013.