OECD Model Tax Convention: Discussion draft on the tax treaty treatment of termination payments



OECD has issued discussion draft on the tax treaty treatment of termination payments.

This public discussion draft includes proposals for additions and changes to the Commentary on the OECD Model Tax Convention so as to avoid risks of double taxation and non-taxation of termination payments.


Presently, Article 15 does not address provisions for payments such as non-competition payments.

The draft proposes commentary on the following issues:

1 Remuneration for previous work.
2 Payment for unused holidays or sick leave.
3 Payment in lieu of notice of termination .
4 Severance payment.
5 Payment of damages for unlawful dismissal.
6 Non-competition payment.
7 Payment related to pension rights.
8 Deferred remuneration.
9 Payment under an incentive compensation arrangement.
10 Fringe benefits for the period after employment.
11 Compensation for loss of earnings on or after termination following injury or disability.
12 Compensation for loss of future commissions.
13 Partial retirement payments.

Comments on this discussion draft should be sent electronically (in Word format) by email to taxtreaties@oecd.org and should be addressed to:

            Tax Treaties, Transfer Pricing and Financial Transactions Division
            OECD/CTPA
Unless otherwise requested at the time of submission, comments submitted in response to this invitation will be posted on the OECD website

The discussion draft can be downloaded from here.

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OECD: Discussion draft on the tax treaty treatment of termination payments


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