• Service: Tax, International Executive Services, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 6/26/2013

OECD - Tax treatment of employment termination-related payments 

June 25:  The Organisation for Economic Co-operation and Development (OECD) this week released a “discussion draft” of proposed model treaty provisions concerning the tax treatment of certain payments made to persons following the termination of their employment.

According to the OECD release, the discussion draft addresses the application of the provisions of the OECD Model Tax Convention when employment termination-related payments are made in cross-border situations.

Currently, the OECD Model Tax Convention addresses only the extent to which these payments constitute “pensions or other similar remuneration” and does not address how other provisions may apply to a variety of payments—e.g., non-competition payments—that may be made following the termination of employment. The discussion draft provisions are intended to clarify how such payments would be treated for tax treaty purposes.

Comments on the discussion draft are requested before 13 September 2013, so that they may be considered at a September 2013 meeting.

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