The OECD Model Tax Convention on Income and on Capital is the internationally accepted template used by governments when negotiating bilateral double-tax treaties. Published and periodically updated by the OECD, the Model allocates taxing rights between the country of residence of the taxpayer and the country where income arises (the source country). Its Articles cover employment income, business profits, dividends, interest, royalties, capital gains, and pensions, among others.
The Model Convention does not have legal force on its own; it acquires binding effect only when two countries incorporate its provisions into their bilateral treaty. However, because most of the world's approximately 3,500 tax treaties follow the OECD template closely, practitioners use the Model and its Commentary as the primary interpretive tool when resolving treaty disputes.
The 2017 update introduced changes resulting from the OECD/G20 BEPS (Base Erosion and Profit Shifting) project, including revised provisions on permanent establishment, a principal purpose test to combat treaty abuse, and updated commentary on the taxation of the digital economy. These changes now appear in newly negotiated treaties and in modifications made through the Multilateral Instrument (MLI).