Monday, 22 October 2012

OECD Model Tax Convention: revised discussion draft on tax treaty issues related to emissions permits and credits

The OECD Committee on Fiscal Affairs (CFA) invites public comments on a . This analysis addresses the application of the provisions of the OECD Model Tax Convention to the cross-border trading of emissions permits.
On 31 May 2011, the OECD released a public discussion draft entitled Tax treaty issues related to the trading of emissions permits.
The few comments received on the discussion draft included the suggestion that the scope of the discussion draft be expanded to cover tax treaty issues arising from the trading of CERs (Certified Emission Reduction credits) and ERUs (Emission Reduction Units) as well as tax treaty issues arising from the issuance, as opposed to the trading, of emissions permits, CERs and ERUs.
In accordance with these suggestions, the CFA, through its Working Party 1 on Tax Conventions and Related Questions, has refined the analysis included in the discussion draft to cover the trading of CERs and ERUs as well as treaty issues that would arise if a State decided to tax emissions permits, CERS and ERUs at the time of their issuance rather than upon their alienation.
This revised discussion draft includes the revised analysis of the Working Party. Section 1 provides an overall background explaining the nature of emissions permits, CERs and ERUs. Section 2 analyses the tax treaty issues related to these instruments (collectively referred to as “emission permits/credits”). Section 3 includes proposed changes to the Commentary on the OECD Model Tax Convention that reflect the analysis in section 2.
The CFA invites comments on this discussion draft before 15 January 2013. These comments will be reviewed at the February 2013 meeting of Working Party 1.