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The OECD has unveiled a significant update to its Model Tax Convention, introducing long-awaited guidance on cross-border remote work and a new framework for taxing income from natural resource extraction. Approved by the OECD Council and released on 19 November 2025, the 2025 Update aims to provide clearer, more predictable international tax rules for governments, multinational businesses, and tax practitioners.
Clarifying Tax Presence for Remote Workers
As remote and hybrid work arrangements continue to expand post-pandemic, tax authorities worldwide have struggled with the question of when a home office in another jurisdiction creates a taxable presence—also known as a permanent establishment.
The updated Model Convention directly addresses this challenge. It offers detailed criteria for determining when short-term cross-border remote work—such as an employee working from their home abroad—may trigger taxation rights for the host country.
This clarification is expected to reduce uncertainty for both employers and employees navigating increasingly flexible working arrangements.
New Alternative Rule for Taxing Natural Resource Activities
A major addition to the Model Convention is a new optional treaty provision dedicated to the taxation of activities connected with the extraction of natural resources, such as oil, gas, and minerals.
The provision reinforces the rights of resource-endowed countries—particularly developing economies—to tax income arising from extraction activities carried out within their territory.
This approach strengthens source-country taxation and supports a more equitable distribution of tax revenue, especially in jurisdictions heavily reliant on natural resource sectors.
Broader Enhancements to Treaty Consistency
Beyond remote work and extractives, the 2025 Update includes several refinements aimed at improving consistency in treaty interpretation and boosting tax certainty across jurisdictions. These refinements are expected to streamline treaty application and reduce cross-border tax disputes.
OECD Secretary-General Mathias Cormann highlighted the importance of the changes, noting that the update “helps countries and businesses navigate a rapidly evolving global landscape” and underscores the value of multilateral cooperation in solving modern tax challenges.
The revisions will be reflected in updated condensed and full editions of the Model Tax Convention, scheduled for release in 2026. The OECD will also host a webinar on 10 December 2025, featuring Manal Corwin, Director of the OECD Centre for Tax Policy and Administration, to present the updates in detail.
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