COMMENTARY ON Article 18

CONCERNING THE TAXATION OF PENSIONS

1. According to this Article, pensions paid in respect of private employment are taxable only in the State of residence of the recipient. Various policy and administrative considerations support the principle that the taxing right with respect to this type of pension, and other similar remuneration, should be left to the State of residence. For instance, the State of residence of the recipient of a pension is in a better position than any other State to take into account the recipient’s overall ability to pay tax, which mostly depends on worldwide income and personal circumstances such as family responsibilities. This solution also avoids imposing on the recipient of this type of pension the administrative burden of having to comply with tax obligations in States other than that recipient’s State of residence.(Amended on 15 July 2005 see History)

2. Some States, however, are reluctant to adopt the principle of exclusive residence taxation of pensions and propose alternatives to the Article. Some of these alternatives and the issues that they raise are discussed in paragraphs 12 to 21 below, which deal with the various considerations related to the allocation of taxing rights with respect to pension benefits and the reasons supporting the Article as drafted.(Replaced on 15 July 2005 see History)

Scope of the Article3. The types of payment that are covered by the Article include not only pensions directly paid to former employees but also to other beneficiaries (e.g.surviving spouses, companions or children of the employees) and other similar payments, such as annuities, paid in respect of past employment. The Article also applies to pensions in respect of services rendered to a State or a political subdivision or local authority thereof which are not covered by the provisions of paragraph 2 of Article 19. The Article only applies, however, to payments that are in consideration of past employment; it would therefore not apply, for example, to an annuity acquired directly by the annuitant from capital that has not been funded from an employment pension scheme. The Article applies regardless of the tax treatment of the scheme under which the relevant payments are made; thus, a payment made under a pension plan that is not eligible for tax relief could nevertheless constitute a “pension or other similar remuneration” (the tax mismatch that could arise in such a situation is discussed below).(Replaced on 15 July 2005 see History)

4. Various payments may be made to an employee following cessation of employment. Whether or not such payments fall under the Article will be determined by the nature of the payments, having regard to the facts and circumstances in which they are made, as explained in the following two paragraphs (see also paragraphs 2.3 to 2.16 of the Commentary on Article 15, which deal with the application of the Convention to a number of these payments).(Amended on 15 July 2014 see History)

5. While the word “pension”, under the ordinary meaning of the word, covers only periodic payments, the words “other similar remuneration” are broad enough to cover non-periodic payments. For instance, a lump-sum payment in lieu of periodic pension payments that is made on or after cessation of employment may fall within the Article.(Replaced on 23 July 1992 see History)

6. Whether a particular payment is to be considered as other remuneration similar to a pension or as final remuneration for work performed falling under Article 15 is a question of fact. For example, if it is shown that the consideration for the payment is the commutation of the pension or the compensation for a reduced pension then the payment may be characterised as “other similar remuneration” falling under the Article. This would be the case where a person was entitled to elect upon retirement between the payment of a pension or a lump-sum computed either by reference to the total amount of the contributions or to the amount of pension to which that person would otherwise be entitled under the rules in force for the pension scheme. The source of the payment is an important factor; payments made from a pension scheme would normally be covered by the Article. Other factors which could assist in determining whether a payment or series of payments fall under the Article include: whether a payment is made on or after the cessation of the employment giving rise to the payment, whether the recipient continues working, whether the recipient has reached the normal age of retirement with respect to that particular type of employment, the status of other recipients who qualify for the same type of lump-sum payment and whether the recipient is simultaneously eligible for other pension benefits. Reimbursement of pension contributions (e.g.after temporary employment) does not constitute “other similar remuneration” under Article 18. Where cases of difficulty arise in the taxation of such payments, the Contracting States should solve the matter by recourse to the provisions of Article 25.(Replaced on 15 July 2005 see History)

7. Since the Article applies only to pensions and other similar remuneration that are paid in consideration for past employment, it does not cover other pensions such as those that are paid with respect to previous independent personal services. Some States, however, extend the scope of the Article to cover all types of pensions, including Government pensions; States wishing to do so are free to agree bilaterally to include provisions to that effect.(Replaced on 15 July 2005 see History)

Cross-border issues related to pensions8. The globalisation of the economy and the development of international communications and transportation have considerably increased the international mobility of individuals, both for work-related and personal reasons. This has significantly increased the importance of cross-border issues arising from the interaction of the different pension arrangements which exist in various States and which were primarily designed on the basis of purely domestic policy considerations. As these issues often affect large numbers of individuals, it is desirable to address them in tax conventions so as to remove obstacles to the international movement of persons, and employees in particular.(Replaced on 15 July 2005 see History)

9. Many such issues relate to mismatches resulting from differences in the general tax policy that States adopt with respect to retirement savings. In many States, tax incentives are provided for pension contributions. Such incentives frequently take the form of a tax deferral so that the part of the income of an individual that is contributed to a pension arrangement as well as the income earned in the scheme or any pension rights that accrue to the individual are exempt from tax. Conversely, the pension benefits from these arrangements are taxable upon receipt. Other States, however, treat pension contributions like other forms of savings and neither exempt these contributions nor the return thereon; logically, therefore, they do not tax pension benefits. Between these two approaches exist a variety of systems where contributions, the return thereon, the accrual of pension rights or pension benefits are partially taxed or exempt.(Replaced on 15 July 2005 see History)

10. Other issues arise from the existence of very different arrangements to provide retirement benefits. These arrangements are often classified under the following three broad categories:

• statutory social security schemes;

• occupational pension schemes;

• individual retirement schemes.

The interaction between these three categories of arrangements presents particular difficulties. These difficulties are compounded by the fact that each State may have different tax rules for the arrangements falling in each of these categories as well as by the fact that there are considerable differences in the extent to which States rely on each of these categories to ensure retirement benefits to individuals (e.g.some States provide retirement benefits almost exclusively through their social security system while others rely primarily on occupational pension schemes or individual retirement schemes).(Replaced on 15 July 2005 see History)

11. The issues arising from all these differences need to be fully considered in the course of bilateral negotiations, in particular to avoid double taxation or non-taxation, and, where appropriate, addressed through specific provisions. The following sections examine some of these cross-border issues.(Replaced on 15 July 2005 see History)

Allocation of taxing rights with respect to pension benefits12. As explained in paragraph 9 above, many States have adopted the approach under which, subject to various restrictions, tax is totally or partially deferred on contributions to, and earnings in, pension schemes or on the accrual of pension rights, but is recovered when pension benefits are paid.(Replaced on 15 July 2005 see History)

13. Some of these States consider that because a deduction for pension contributions is a deferral of tax on the part of the employment income that is saved towards retirement, they should be able to recover the tax so deferred where the individual has ceased to be a resident before the payment of all or part of the pension benefits. This view is particularly prevalent where the benefits are paid through a lump-sum amount or over a short period of time as this increases risks of double non-taxation.(Replaced on 15 July 2005 see History)

14. If the other State of which that individual then becomes a resident has adopted a similar approach and therefore taxes these pension benefits when received, the issue is primarily one of allocation of taxing rights between the two States. If, however, the individual becomes a resident of a State which adopts a different approach so as not to tax pension benefits, the mismatch in the approaches adopted by the two States will result in a situation where no tax will ever be payable on the relevant income.(Replaced on 15 July 2005 see History)

15. For these reasons, some States seek to include in their tax conventions alternative provisions designed to secure either exclusive or limited source taxation rights with respect to pensions in consideration of past employment. The following are examples of provisions that some members have adopted in consequence of these policy and administrative considerations; States are free to agree bilaterally to include such provisions:Provisions allowing exclusive source taxation of pension payments

Under such a provision, the Article is drafted along the following lines:Subject to the provisions of paragraph 2 of Article 19, pensions and other similar remuneration arising in a Contracting State and paid to a resident of the other Contracting State in consideration of past employment shall be taxable only in the first-mentioned State.

Provisions allowing non-exclusive source taxation of pension paymentsUnder such a provision, the State of source is given the right to tax pension payments and the rules of Article 23 A or 23 B results in that right being either exclusive or merely prior to that of the State of residence. The Article is then drafted along the following lines:Subject to the provisions of paragraph 2 of Article 19, pensions and other similar remuneration paid to a resident of a Contracting State in consideration of past employment shall be taxable only in that State. However such pensions and other similar remuneration may also be taxed in the other Contracting State if they arise in that State.

Provisions allowing limited source taxation of pensionUnder such a provision, the State of source is given the right to tax pension payments but that right is subjected to a limit, usually expressed as a percentage of the payment. The Article is then drafted along the following lines:1. Subject to the provisions of paragraph 2 of Article 19, pensions and other similar remuneration paid to a resident of a Contracting State in consideration of past employment may be taxed in that State.

2. However such pensions and other similar remuneration may also be taxed in the Contracting State in which they arise and according to the laws of that State but the tax so charged shall not exceed [percentage] of the gross amount of the payment.

Where such a provision is used, a reference to paragraph 2 of Article 18 is added to paragraph 2 of Article 23 A to ensure that the residence State, if it applies the exemption method, is allowed to tax the pension payments but needs to provide a credit for the tax levied by the source State.

Provisions allowing source taxation of pension payments only where the State of residence does not tax these paymentsSuch a provision is used by States that are primarily concerned with the structural mismatch described in paragraph 14 above. A paragraph 2 is then added along the following lines:2. However such pensions and other similar remuneration may also be taxed in the Contracting State in which they arise if these payments are not subject to tax in the other Contracting State under the ordinary rules of its tax law.

(Replaced on 15 July 2005 see History)

16. Apart from the reasons presented in paragraphs 13 and 14 above, various policy and administrative considerations should be taken into account when considering such provisions.(Replaced on 15 July 2005 see History)

17. First, the State of residence is in a better position to provide for adequate taxation of pension payments as it is easier for that State to take into account the worldwide income, and therefore the overall ability to pay tax, of the recipient so as to apply appropriate rates and personal allowances. By contrast, the source taxation of pensions may well result in excessive taxation where the source State imposes a final withholding tax on the gross amount paid. If little or no tax is levied in the residence State (e.g.because of available allowances), the pensioner may not be able to claim a credit in the residence State for the tax paid. However, some States have sought to relieve that problem by extending their personal allowances to non-residents who derive almost all their income from these States. Also, some States have allowed the pension payments made to non-resident recipients to be taxed at the marginal rate that would be applicable if that recipient were taxed on worldwide income (that system, however, involves administrative difficulties as it requires a determination of the worldwide income of the non-resident only for the purpose of determining the applicable rate of tax).(Replaced on 15 July 2005 see History)

18. Second, equity considerations could be relevant since the level of pensions paid in the source State will generally have been set factoring local rates of tax. In this situation, an individual who has emigrated to another State with different tax rates will either be advantaged or disadvantaged by receiving an after-tax pension that will be different from that envisaged under the pension scheme.(Replaced on 15 July 2005 see History)

19. Third, alternative provisions under which there is either exclusive or limited source taxation rights with respect to pensions require a determination of the State of source of pensions. Since a mere reference to a pension “arising in” a Contracting State could be construed as meaning either a pension paid by a fund established in that State or a pension derived from work performed in a State, States using such wording should clarify how it should be interpreted and applied.(Replaced on 15 July 2005 see History)

19.1 Conceptually, the State of source might be considered to be the State in which the fund is established, the State where the relevant work has been performed or the State where deductions have been claimed. Each of these approaches would raise difficulties in the case of individuals who work in more than one State, change residence during their career or derive pensions from funds established in a State other than that in which they have worked. For example, many individuals now spend significant parts of their careers outside the State in which their pension funds are established and from which their pension benefits are ultimately paid. In such a case, treating the State in which the fund is established as the State of source would seem difficult to justify. The alternative of considering as the State of source the State where the work has been performed or deductions claimed would address that issue but would raise administrative difficulties for both taxpayers and tax authorities, particularly in the case of individuals who have worked in many States during their career, since it would create the possibility of different parts of the same pension having different States of source.(Added on 15 July 2005 see History)

19.2 States that wish to use provisions under which there is either exclusive or limited source taxation rights with respect to pensions should take account of these issues related to the determination of the State of source of pensions. They should then address the administrative difficulties that will arise from the rule that they adopt for that purpose, for example to avoid situations where two States would claim to have source taxation rights on the same pension.(Added on 15 July 2005 see History)

20. Fourth, another argument against these alternative provisions is that exclusive taxation by the State of residence means that pensioners only need to comply with the tax rules of their State of residence as regards payments covered by Article 18. Where, however, limited or exclusive source taxation of pensions is allowed, the pensioner will need to comply with the tax rules of both Contracting States.(Replaced on 15 July 2005 see History)

21. Exclusive residence taxation may, however, give rise to concerns about the non-reporting of foreign pension income. Exchange of information coupled with adequate taxpayer compliance systems will, however, reduce the incidence of non-reporting of foreign pension payments.(Replaced on 15 July 2005 see History)

Exempt pensions22. As mentioned in paragraph 9 above, some States do not tax pension payments generally or otherwise exempt particular categories or parts of pension payments. In these cases, the provisions of the Article, which provides for taxation of pensions in the State of residence, may result in the taxation by that State of pensions which were designed not to be taxed and the amount of which may well have been determined having regard to that exemption. This may result in undue financial hardship for the recipient of the pension.(Replaced on 15 July 2005 see History)

23. To avoid the problems resulting from this type of mismatch, some States include in their tax treaties provisions to preserve the exempt treatment of pensions when the recipient is a resident of the other Contracting State. These provisions may be restricted to specific categories of pensions or may address the issue in a more comprehensive way. An example of that latter approach would be a provision drafted along the following lines:Notwithstanding any provision of this Convention, any pension or other similar remuneration paid to a resident of a Contracting State in respect of past employment exercised in the other Contracting State shall be exempt from tax in the first-mentioned State if that pension or other remuneration would be exempt from tax in the other State if the recipient were a resident of that other State.

(Replaced on 15 July 2005 see History)

Issues related to statutory social security schemes24. Depending on the circumstances, social security payments can fall under this Article as “pensions and other similar remuneration in consideration of past employment”, under Article 19 as “pension[s] paid by, or out of funds created by, a Contracting State ... in respect of services rendered to that State...” or under Article 21 as “items of income ... not dealt with in the foregoing Articles”. Social security pensions fall under this Article when they are paid in consideration of past employment, unless paragraph 2 of Article 19 applies (see below). A social security pension may be said to be “in consideration of past employment” if employment is a condition for that pension. For instance, this will be the case where, under the relevant social security scheme:

• the amount of the pension is determined on the basis of either or both the period of employment and the employment income so that years when the individual was not employed do not give rise to pension benefits,

• the amount of the pension is determined on the basis of contributions to the scheme that are made under the condition of employment and in relation to the period of employment, or

• the amount of the pension is determined on the basis of the period of employment and either or both the contributions to the scheme and the investment income of the scheme.

(Replaced on 15 July 2005 see History)

25. Paragraph 2of Article 19 will apply to a social security pension that would fall within Article 18 except for the fact that the past employment in consideration of which it is paid constituted services rendered to a State or a political subdivision or a local authority thereof, other than services referred to in paragraph 3 of Article 19.(Replaced on 15 July 2005 see History)

26. Social security payments that do not fall within Article 18 or 19 fall within Article 21. This would be the case, for instance, for payments made to self-employed persons as well as a pension purely based on resources, on age or disability which would be paid regardless of past employment or factors related to past employment (such as years of employment or contributions made during employment).(Replaced on 15 July 2005 see History)

27. Some States, however, consider pensions paid out under a public pension scheme which is part of their social security system similar to Government pensions. Such States argue on that basis that the State of source,i.e.the State from which the pension is paid, should have a right to tax all such pensions. Many conventions concluded by these States contain provisions to that effect, sometimes including also other payments made under the social security legislation of the State of source. Contracting States having that view may agree bilaterally on an additional paragraph to the Article giving the State of source a right to tax payments made under its social security legislation. A paragraph of that kind could be drafted along the following lines:Notwithstanding the provisions of paragraph 1, pensions and other payments made under the social security legislation of a Contracting State may be taxed in that State.

Where the State of which the recipient of such payments is a resident applies the exemption method the payments will be taxable only in the State of source while States using the credit method may tax the payments and give credit for the tax levied in the State of source. Some States using the credit method as the general method in their conventions may, however, consider that the State of source should have an exclusive right to tax such payments. Such States should then substitute the words “shall be taxable only” for the words “may be taxed” in the above draft provision.(Renumbered and amended on 15 July 2005 see History)

28. Although the above draft provision refers to the social security legislation of each Contracting State, there are limits to what it covers. “Social security” generally refers to a system of mandatory protection that a State puts in place in order to provide its population with a minimum level of income or retirement benefits or to mitigate the financial impact of events such as unemployment, employment-related injuries, sickness or death. A common feature of social security systems is that the level of benefits is determined by the State. Payments that may be covered by the provision include retirement pensions available to the general public under a public pension scheme, old age pension payments as well as unemployment, disability, maternity, survivorship, sickness, social assistance, and family protection payments that are made by the State or by public entities constituted to administer the funds to be distributed. As there may be substantial differences in the social security systems of the Contracting States, it is important for the States that intend to use the draft provision to verify, during the course of bilateral negotiations, that they have a common understanding of what will be covered by the provision.(Replaced on 15 July 2005 see History)

Issues related to individual retirement schemes29. In many States, preferential tax treatment (usually in the form of the tax deferral described in paragraph 9 above) is available to certain individual private saving schemes established to provide retirement benefits. These individual retirement schemes are usually available to individuals who do not have access to occupational pension schemes; they may also, however, be available to employees who wish to supplement the retirement benefits that they will derive from their social security and occupational pension schemes. These schemes take various legal forms. For example, they may be bank savings accounts, individual investment funds or individually subscribed full life insurance policies. Their common feature is a preferential tax treatment which is subject to certain contribution limits.(Replaced on 15 July 2005 see History)

30. These schemes raise many of the cross-border issues that arise in the case of occupational schemes, such as the tax treatment, in one Contracting State, of contributions to such a scheme established in the other State (see paragraphs 31 to 65 below). There may be, however, issues that are specific to individual retirement schemes and which may need to be addressed separately during the negotiation of a bilateral convention. One such issue is the tax treatment, in each State, of income accruing in such a scheme established in the other State. Many States have rules (such as foreign investment funds (FIF) rules, rules that attribute the income of a trust to a settlor or beneficiary in certain circumstances or rules that provide for the accrual taxation of income with respect to certain types of investment, including full life insurance policies) that may, in certain circumstances, result in the taxation of income accruing in an individual retirement scheme established abroad. States which consider that result inappropriate in light of their approach to the taxation of retirement savings may wish to prevent such taxation. A provision dealing with the issue and restricted to those schemes which are recognised as individual retirement schemes could be drafted along the following lines:For purposes of computing the tax payable in a Contracting State by an individual who is a resident of that State and who was previously a resident of the other Contracting State, any income accruing under an arrangemententered into with a person established outside the first-mentioned State in order to secure retirement benefits for that individual,

in which the individual participates and had participated when the individual was a resident of the other State,

that is accepted by the competent authority of the first-mentioned State as generally corresponding to an individual retirement scheme recognised as such for tax purposes by that State,

shall be treated as income accruing in an individual retirement scheme established in that State. This paragraph shall not restrict in any manner the taxation of any benefit distributed under the arrangement.

(Replaced on 15 July 2005 see History)

The tax treatment of contributions to foreign pension schemesGeneral comments31. It is characteristic of multinational enterprises that their staff are expected to be willing to work outside their home country from time to time. The terms of service under which staff are sent to work in other countries are of keen interest and importance to both the employer and the employee. One consideration is the pension arrangements that are made for the employee in question. Similarly, individuals who move to other countries to provide independent services are often confronted with cross-border tax issues related to the pension arrangements that they have established in their home country.(Renumbered and amended on 15 July 2005 see History)

32. Individuals working abroad will often wish to continue contributing to a pension scheme (including a social security scheme that provides pension benefits) in their home country during their absence abroad. This is both because switching schemes can lead to a loss of rights and benefits, and because many practical difficulties can arise from having pension arrangements in a number of countries.(Renumbered and amended on 15 July 2005 see History)

33. The tax treatment accorded to pension contributions made by or for individuals working outside their home country varies both from country to country and depending on the circumstances of the individual case. Before taking up an overseas assignment or contract, pension contributions made by or for these individuals commonly qualify for tax relief in the home country. When the individual works abroad, the contributions in some cases continue to qualify for relief. Where the individual, for example, remains resident and fully taxable in the home country, pension contributions made to a pension scheme established in the home country will generally continue to qualify for relief there. But frequently, contributions paid in the home country by an individual working abroad do not qualify for relief under the domestic laws of either the home country or the host country. Where this is the case it can become expensive, if not prohibitive, to maintain membership of a pension scheme in the home country during a foreign assignment or contract. Paragraph 37 below suggests a provision which member countries can, if they wish, include in bilateral treaties to provide reliefs for the pension contributions made by or for individuals working outside their home country.(Renumbered and amended on 15 July 2005 see History)

34. However, some member countries may not consider that the solution to the problem lies in a treaty provision, preferring, for example, the pension scheme to be amended to secure deductibility of contributions in the host State. Other countries may be opposed to including the provision below in treaties where domestic legislation allows relief only with respect to contributions paid to residents. In such cases it may be inappropriate to include the suggested provision in a bilateral treaty.(Renumbered and amended on 15 July 2005 see History)

35. The suggested provision covers contributions made to all forms of pension schemes, including individual retirement schemes as well as social security schemes. Many member countries have entered into bilateral social security totalisation agreements which may help to partially avoid the problem with respect to contributions to social security schemes; these agreements, however, usually do not deal with the tax treatment of cross-border contributions. In the case of an occupational scheme to which both the employer and the employees contribute, the provision covers both these contributions. Also, the provision is not restricted to the issue of the deductibility of the contributions as it deals with all aspects of the tax treatment of the contributions as regards the individual who derive benefits from a pension scheme. Thus the provision deals with issues such as whether or not the employee should be taxed on the employment benefit that an employer’s contribution constitutes and whether or not the investment income derived from the contributions should be taxed in the hands of the individual. It does not, however, deal with the taxation of the pension fund on its income (this issue is dealt with in paragraph 69 below). Contracting States wishing to modify the scope of the provision with respect to any of these issues may do so in their bilateral negotiations.(Replaced on 15 July 2005 see History)

Aim of the provision36. The aim of the provision is to ensure that, as far as possible, individuals are not discouraged from taking up overseas work by the tax treatment of their contributions to a home country pension scheme. The provision seeks, first, to determine the general equivalence of pension plans in the two countries and then to establish limits to the contributions to which the tax relief applies based on the limits in the laws of both countries.(Renumbered and amended on 15 July 2005 see History)

Suggested provision37. The following is the suggested text of the provision that could be included in bilateral conventions to deal with the problem identified above:1. Contributions to a pension scheme established in and recognised for tax purposes in a Contracting State that are made by or on behalf of an individual who renders services in the other Contracting State shall, for the purposes of determining the individual’s tax payable and the profits of an enterprise which may be taxed in that State, be treated in that State in the same way and subject to the same conditions and limitations as contributions made to a pension scheme that is recognised for tax purposes in that State, provided that:the individual was not a resident of that State, and was participating in the pension scheme, immediately before beginning to provide services in that State, and

the pension scheme is accepted by the competent authority of that State as generally corresponding to a pension scheme recognised as such for tax purposes by that State.

2. For the purposes of paragraph 1:the term “a pension scheme” means an arrangement in which the individual participates in order to secure retirement benefits payable in respect of the services referred to in paragraph 1, and

a pension scheme is recognised for tax purposes in a State if the contributions to the scheme would qualify for tax relief in that State.

(Renumbered and amended on 15 July 2005 see History)

38. The above provision is restricted to pension schemes established in one of the two Contracting States. As it is not unusual for individuals to work in a number of different countries in succession, some States may wish to extend the scope of the provision to cover situations where an individual moves from one Contracting State to another while continuing to make contributions to a pension scheme established in a third State. Such an extension may, however, create administrative difficulties if the host State cannot have access to information concerning the pension scheme (e.g.through the exchange of information provisions of a tax convention concluded with the third State); it may also create a situation where relief would be given on a non-reciprocal basis because the third State would not grant similar relief to an individual contributing to a pension scheme established in the host State. States which, notwithstanding these difficulties, want to extend the suggested provision to funds established in third States can do so by adopting an alternative version of the suggested provision drafted along the following lines:1. Contributions made by or on behalf of an individual who renders services in a Contracting State to a pension schemerecognised for tax purposes in the other Contracting State,

in which the individual participated immediately before beginning to provide services in the first-mentioned State,

in which the individual participated at a time when that individual was providing services in, or was a resident of, the other State, and

that is accepted by the competent authority of the first-mentioned State as generally corresponding to a pension scheme recognised as such for tax purposes by that State,

shall, for the purposes ofdetermining the individual’s tax payable in the first-mentioned State, and

determining the profits of an enterprise which may be taxed in the first-mentioned State,

be treated in that State in the same way and subject to the same conditions and limitations as contributions made to a pension scheme that is recognised for tax purposes in that first-mentioned State.

2. For the purposes of paragraph 1:the term “a pension scheme” means an arrangement in which the individual participates in order to secure retirement benefits payable in respect of the services referred to in paragraph 1; and

a pension scheme is recognised for tax purposes in a State if the contributions to the scheme would qualify for tax relief in that State.

(Replaced on 15 July 2005 see History)

Characteristics of the suggested provision39. The following paragraphs discuss the main characteristics of the suggested provision found in paragraph 37 above.(Replaced on 15 July 2005 see History)

40. Paragraph 1 of the suggested provision lays down the characteristics of both the individual and the contributions in respect of which the provision applies. It also provides the principle that contributions made by or on behalf of an individual rendering services in one Contracting State (the host State) to a defined pension scheme in the other Contracting State (the home State) are to be treated for tax purposes in the host State in the same way and subject to the same conditions and limitations as contributions to domestic pension schemes of the host State.(Renumbered and amended on 15 July 2005 see History)

41. Tax relief with respect to contributions to the home country pension scheme under the conditions outlined can be given by either the home country, being the country where the pension scheme is situated or by the host country, where the economic activities giving rise to the contributions are carried out.(Renumbered and amended on 15 July 2005 see History)

42. A solution in which relief would be given by the home country might not be effective, since the individual might have no or little taxable income in that country. Practical considerations therefore suggest that it would be preferable for relief to be given by the host country and this is the solution adopted in the suggested provision.(Renumbered and amended on 15 July 2005 see History)

43. In looking at the characteristics of the individual, paragraph 1 makes it clear that, in order to get the relief from taxation in the host State, the individual must not have been resident in the host State immediately prior to working there.(Renumbered and amended on 15 July 2005 see History)

44. Paragraph 1 does not, however, limit the application of the provision to individuals who become resident in the host State. In many cases, individuals working abroad who remain resident in their home State will continue to qualify for relief there, but this will not be so in all cases. The suggested provision therefore applies to non-residents working in the host State as well as to individuals who attain residence status there. In some member countries the domestic legislation may restrict deductibility to contributions borne by residents, and these member countries may wish to restrict the suggested provision to cater for this. Also, States with a special regime for non-residents (e.g.taxation at a special low rate) may, in bilateral negotiations, wish to agree on a provision restricted to residents.(Renumbered and amended on 15 July 2005 see History)

45. In the case where individuals temporarily cease to be resident in the host country in order to join a pension scheme in a country with more relaxed rules, individual States may want a provision which would prevent the possibility of abuse. One form such a provision could take would be a nationality test which could exclude from the suggested provision individuals who are nationals of the host State.(Renumbered on 15 July 2005 see History)

46. As already noted, it is not unusual for individuals to work in a number of different countries in succession; for that reason, the suggested provision is not limited to individuals who are residents of the home State immediately prior to providing services in the host State. The provision covers an individual coming to the host State from a third country as it is only limited to individuals who were not resident in the host country before starting to work there. However, Article 1 restricts the scope of the Convention to residents of one or both Contracting States. An individual who is neither a resident of the host State nor of the home State where the pension scheme is established is therefore outside the scope of the Convention between the two States.(Renumbered and amended on 15 July 2005 see History)

47. The suggested provision places no limits on the length of time for which an individual can work in a host State. It could be argued that, if an individual works in the host State for long enough, it in effect becomes his home country and the provision should no longer apply. Indeed, some host countries already restrict relief for contributions to foreign pension schemes to cases where the individuals are present on a temporary basis.(Renumbered and amended on 15 July 2005 see History)

48. In addition, the inclusion of a time limit may be helpful in preventing the possibility of abuse outlined in paragraph 45 above. In bilateral negotiations, individual countries may find it appropriate to include a limit on the length of time for which an individual may provide services in the host State after which reliefs granted by the suggested provision would no longer apply.(Renumbered and amended on 15 July 2005 see History)

49. In looking at the characteristics of the contributions, paragraph 1 provides a number of tests. It makes it clear that the provision applies only to contributions made by or on behalf of an individual to a pension scheme established in and recognised for tax purposes in the home State. The phrase “recognised for tax purposes” is further defined in subparagraph 2 b) of the suggested provision. The phrase “made by or on behalf of” is intended to apply to contributions that are made directly by the individual as well as to those that are made for that individual’s benefit by an employer or another party (e.g.a spouse). While paragraph 4 of Article 24 ensures that the employer’s contributions to a pension fund resident of the other Contracting State are deductible under the same conditions as contributions to a resident pension fund, that provision may not be sufficient to ensure the similar treatment of employer’s contributions to domestic and foreign pension funds. This will be the case, for example, where the employer’s contributions to the foreign fund are treated as a taxable benefit in the hands of the employee or where the deduction of the employer’s contributions is not dependent on the fund being a resident but, rather, on other conditions (e.g.registration with tax authorities or the presence of offices) which have the effect of generally excluding foreign pension funds. For these reasons, employer’s contributions are covered by the suggested provision even though paragraph 4 of Article 24 may already ensure a similar relief in some cases.(Renumbered and amended on 15 July 2005 see History)

50. The second test applied to the characteristics of the contributions is that the contributions should be made to a home State scheme recognised by the competent authority of the host State as generally corresponding to a scheme recognised as such for tax purposes by the host State. This operates on the premise that only contributions to recognised schemes qualify for relief in member countries. This limitation does not, of course, necessarily secure equivalent tax treatment of contributions paid where an individual was working abroad and of contributions while working in the home country. If the host State’s rules for recognising pension schemes were narrower than those of the home State, the individual could find that contributions to his home country pension scheme were less favourably treated when he was working in the host country than when working in the home country.(Renumbered and amended on 15 July 2005 see History)

51. However, it would not be in accordance with the stated aim of securing, as far as possible, equivalent tax treatment of contributions to foreign schemes to give relief for contributions which do not — at least broadly — correspond to domestically recognised schemes. To do so would mean that the amount of relief in the host State would become dependent on legislation in the home State. In addition, it could be hard to defend treating individuals working side by side differently depending on whether their pension scheme was at home or abroad (and if abroad, whether it was one country rather than another). By limiting the suggested provision to schemes which generally correspond to those in the host country such difficulties are avoided.(Renumbered and amended on 15 July 2005 see History)

52. The suggested provision makes it clear that it is for the competent authority of the host State to determine whether the scheme in the home State generally corresponds to recognised schemes in the host State. Individual States may wish, in bilateral negotiations, to specify expressly to which existing schemes the provision will apply or to establish what interpretation the competent authority places on the term “generally corresponding”; for example how widely it is interpreted and what tests are imposed.(Renumbered and amended on 15 July 2005 see History)

53. The contributions covered by the provision are limited to payments to schemes in which the individual was participating before beginning to provide services in the host State. This means that contributions to new pension schemes which an individual joins while in the host State are excluded from the suggested provision.(Renumbered and amended on 15 July 2005 see History)

54. It is, however, recognised that special rules may be needed to cover cases where new pension schemes are substituted for previous ones. For instance, in some member countries the common practice may be that, if a company employer is taken over by another company, the existing company pension scheme for its employees may be ended and a new scheme opened by the new employer. In bilateral negotiations, therefore, individual States may wish to supplement the provision to cover such substitution schemes; this could be done by adding the following subparagraph to paragraph 2 of the suggested provision:a pension scheme that is substituted for, but is substantially similar to, a pension scheme accepted by the competent authority of a Contracting State under subparagraph b) of paragraph 1 shall be deemed to be the pension scheme that was so accepted.

(Renumbered and amended on 15 July 2005 see History)

55. Paragraph 1 also sets out the relief to be given by the host State if the characteristics of the individual and the contributions fall within the terms of the provision. In brief, the contributions must be treated for tax purposes in a way which corresponds to the manner in which they would be treated if these contributions were to a scheme established in the host State. Thus, the contributions will qualify for the same tax relief (e.g.be deductible), for both the individual and the employer (where the individual is employed and contributions are made by the employer) as if these contributions had been made to a scheme in the host State. Also, the same treatment has to be given as regards the taxation of an employee on the employment benefit derived from an employer’s contribution to either a foreign or a local scheme (see paragraph 58below).(Renumbered and amended on 15 July 2005 see History)

56. This measure of relief does not, of course, necessarily secure equivalent tax treatment given to contributions paid when an individual is working abroad and contributions paid when he is working in the home country. Similar considerations apply here to those discussed in paragraphs 50 and 51 above. The measure does, however, ensure equivalent treatment of the contributions of co-workers. The following example is considered. The home country allows relief for pension contributions subject to a limit of 18 per cent of income. The host country allows relief subject to a limit of 20 per cent. The suggested provision in paragraph 37 would require the host country to allow relief up to its domestic limit of 20 per cent. Countries wishing to adopt the limit in the home country would need to amend the wording of the provision appropriately.(Renumbered and amended on 15 July 2005 see History)

57. The amount and method of giving the relief would depend upon the domestic tax treatment of pension contributions by the host State. This would settle such questions as whether contributions qualify for relief in full, or only in part, and whether relief should be given as a deduction in computing taxable income (and if so, which income,e.g.in the case of an individual, only employment or business income or all income) or as a tax credit.(Renumbered and amended on 15 July 2005 see History)

58. For an individual who participates in an occupational pension scheme, being assigned to work abroad may not only mean that this employee’s contributions to a pension scheme in his home country cease to qualify for tax relief. It may also mean that contributions to the pension scheme by the employer are regarded as the employee’s income for tax purposes. In some member countries employees are taxed on employer’s contributions to domestic schemes whilst working in the home country whereas in others these contributions remain exempt. Since it applies to both employees’ and employers’ contributions, the suggested provision ensures that employers’ contributions in the context of the employees’ tax liability are accorded the same treatment that such contributions to domestic schemes would receive.(Renumbered and amended on 15 July 2005 see History)

59. Subparagraph 2 a) defines a pension scheme for the purposes of paragraph 1. It makes it clear that, for these purposes, a pension scheme is an arrangement in which the individual who makes the payments participates in order to secure retirement benefits. These benefits must be payable in respect of services provided in the host State. All the above conditions must apply to the pension scheme before it can qualify for relief under the suggested provision.(Renumbered and amended on 15 July 2005 see History)

60. Subparagraph 2 a) refers to the participation of the individual in the pension scheme in order to secure retirement benefits. This definition is intended to ensure that the proportion of contributions made to secure benefits other than periodic pension payments on retirement,e.g.a lump sum on retirement, will also qualify for relief under the provision.(Renumbered and amended on 15 July 2005 see History)

61. The initial definition of a pension scheme is “an arrangement”. This is a widely drawn term, the use of which is intended to encompass the various forms which pension schemes (whether social security, occupational or individual retirement schemes) may take in different member countries.(Renumbered and amended on 15 July 2005 see History)

62. Although subparagraph 2 a) sets out that participation in this scheme has to be by the individual who provides services referred to in paragraph 1 there is no reference to the identity of the recipient of the retirement benefits secured by participation in the scheme. This is to ensure that any proportion of contributions intended to generate a pension for other beneficiaries (e.g.surviving spouses, companions or children) may be eligible for relief under the suggested provision.(Renumbered and amended on 15 July 2005 see History)

63. The definition of a pension scheme makes no distinction between pensions paid from State-run occupational pension schemes and similar privately-run schemes. Both are covered by the scope of the provision. Social security schemes are therefore covered by the provision to the extent that contributions to such schemes can be considered to be with respect to the services provided in the host State by an individual, whether as an employee or in an independent capacity.(Renumbered and amended on 15 July 2005 see History)

64. Subparagraph 2 b) further defines the phrase “recognised for tax purposes”. As the aim of the provision is, so far as possible, to ensure that contributions are neither more nor less favourably treated for tax purposes than they would be if the individual were resident in his home State, it is right to limit the scope of the provision to contributions which would have qualified for relief if the individual had remained in the home State. The provision seeks to achieve this aim by limiting its scope to contributions made to a scheme only if contributions to this scheme would qualify for tax relief in that State.(Renumbered and amended on 15 July 2005 see History)

65. This method of attempting to achieve parity of treatment assumes that in all member countries only contributions to recognised pension schemes qualify for relief. The tax treatment of contributions to pension schemes under member countries’ tax systems may differ from this assumption. It is recognised that, in bilateral negotiations, individual countries may wish to further define the qualifying pension schemes in terms that match the respective domestic laws of the treaty partners. They may also wish to define other terms used in the provision, such as “renders services” and “provides services”.(Renumbered and amended on 15 July 2005 see History)

Tax obstacles to the portability of pension rights66. Another issue, which also relates to international labour mobility, is that of the tax consequences that may arise from the transfer of pension rights from a pension scheme established in one Contracting State to another scheme located in the other Contracting State. When an individual moves from one employer to another, it is frequent for the pension rights that this individual accumulated in the pension scheme covering the first employment to be transferred to a different scheme covering the second employment. Similar arrangements may exist to allow for the portability of pension rights to or from an individual retirement scheme.(Added on 15 July 2005 see History)

67. Such transfers usually give rise to a payment representing the actuarial value, at the time of the transfer, of the pension rights of the individual or representing the value of the contributions and earnings that have accumulated in the scheme with respect to the individual. These payments may be made directly from the first scheme to the second one; alternatively, they may be made by requiring the individual to contribute to the new pension scheme all or part of the amount received upon withdrawing from the previous scheme. In both cases, it is frequent for tax systems to allow such transfers, when they are purely domestic, to take place on a tax-free basis.(Added on 15 July 2005 see History)

68. Problems may arise, however, where the transfer is made from a pension scheme located in one Contracting State to a scheme located in the other State. In such a case, the Contracting State where the individual resides may consider that the payment arising upon the transfer is a taxable benefit. A similar problem arises when the payment is made from a scheme established in a State to which the relevant tax convention gives source taxing rights on pension payments arising therefrom as that State may want to apply that taxing right to any benefit derived from the scheme. Contracting States that wish to address that issue are free to include a provision drafted along the following lines:Where pension rights or amounts have accumulated in a pension scheme established in and recognised for tax purposes in one Contracting State for the benefit of an individual who is a resident of the other Contracting State, any transfer of these rights or amounts to a pension scheme established in and recognised for tax purposes in that other State shall, in each State, be treated for tax purposes in the same way and subject to the same conditions and limitations as if it had been made from one pension scheme established in and recognised for tax purposes in that State to another pension scheme established in and recognised for tax purposes in the same State.

The above provision could be modified to also cover transfers to or from pensions funds established and recognised in third States (this, however, could raise similar concerns as those described in the preamble of paragraph 38 above).(Added on 15 July 2005 see History)

Exemption of the income of a pension fund69. Where, under their domestic law, two States follow the same approach of generally exempting from tax the investment income of pension funds established in their territory, these States, in order to achieve greater neutrality with respect to the location of capital, may want to extend that exemption to the investment income that a pension fund established in one State derives from the other State. In order to do so, States sometimes include in their conventions a provision drafted along the following lines:Notwithstanding any provision of this Convention, income arising in a Contracting State that is derived by a resident of the other Contracting State that was constituted and is operated exclusively to administer or provide pension benefits and has been accepted by the competent authority of the first-mentioned State as generally corresponding to a pension scheme recognised as such for tax purposes by that State, shall be exempt from tax in that State.

(Added on 15 July 2005 see History)

Observations on the Commentary70. With regard to paragraphs 24 and 26, theNetherlandsis of the opinion that social security payments can in some circumstances fall within Article 15 if they are paid whilst the employment still continues.(Added on 15 July 2005 see History)

71. Regarding paragraph 24,Germanyconsiders that where the amount of a social security pension is determined on the basis of contributions to the scheme by the employee, that pension cannot be viewed as being covered by Article 18.(Added on 15 July 2014 see History)

Paragraph 1Amended on 15 July 2005 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. In the 1977 Model Convention and until 15 July 2005, paragraph 1 read as follows:“1. According to this Article, pensions paid in respect of private employment are taxable only in the State of residence of the recipient. The provision also covers widows’ and orphans’ pensions and other similar payments such as annuities paid in respect of past employment. It also applies to pensions in respect of services rendered to a State or a political subdivision or local authority thereof which are not covered by the provisions of paragraph 2 of Article 19.”

Paragraph 1 was previously amended when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977. In the 1963 Draft Convention (adopted by the OECD Council on 30 July 1963) and until the adoption of the 1977 Model Convention, paragraph 1 read as follows:“1. According to the rule stipulated in Article 18, pensions in respect of private employment are taxable only in the country of residence of the recipient. The provision also covers “widows” and “orphans” pensions and other similar payments such as annuities paid in respect of past employment. It also applies to pensions in respect of services rendered to a State or a political subdivision or local authority thereof which are not covered by the provision of paragraph 1 of Article 19.”

Paragraph 2Replaced on 15 July 2005 when paragraph 2 was amended and renumbered as paragraph 27 (see history of paragraph 27) and a new paragraph 2 was added by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005.

Paragraph 3Replaced on 15 July 2005 when paragraph 3 of the 1977 Model Convention was deleted and a new paragraph 3 was added together with the preceding heading by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. In the 1977 Model Convention and until 15 July 2005, paragraph 3 read as follows:“3. The treatment under the taxation laws of the OECD member countries of amounts paid to an employee on the cessation of his employment is highly diversified. Some States regard such a payment as a pension, private or Government as the case may be, paid as a lump sum. In such a case it would be natural to consider the income as falling under Article 18 or 19. In the tax laws of other States such a payment is looked upon as the final remuneration for the work performed. Then it should of course be treated under Article 15 or 19, as the case may be. Others again consider such a payment as a bonus which is not taxable under their income tax laws but perhaps subjected to a gift tax or a similar tax. It has not been possible to reach a common solution on the tax treatment of payments of this kind under the Model Convention. If the question of taxing such payments should arise between Contracting States, the matter therefore has to be solved by recourse to the provisions of Article 25.”

Paragraph 3 was added when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977.

Paragraph 4Amended on 15 July 2014 by the Report entitled “The 2014 Update to the Model Tax Convention”, adopted by the Council of the OECD on 15 July 2014. After 15 July 2005 and until 15 July 2014, paragraph 4 read as follows:“4. Various payments may be made to an employee following cessation of employment. Whether or not such payments fall under the Article will be determined by the nature of the payments, having regard to the facts and circumstances in which they are made, as explained in the following two paragraphs.”

Paragraph 4 was replaced on 15 July 2005 when it was amended and renumbered as paragraph 31 (see history of paragraph 31) and a new paragraph 4 was added by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. At the same time, the headings preceding paragraph 4 were moved with it.

Paragraph 5Replaced on 15 July 2005 when paragraph 5 was amended and renumbered as paragraph 32 (see history of paragraph 32) and a new paragraph 5 was added by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005.

Paragraph 6Replaced on 15 July 2005 when paragraph 6 was amended and renumbered as paragraph 33 (see history of paragraph 33) and a new paragraph 6 was added by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005.

Paragraph 7Replaced on 15 July 2005 when paragraph 7 was amended and renumbered as paragraph 34 (see history of paragraph 34) and a new paragraph 7 was added by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005.

Paragraph 8Replaced on 15 July 2005 when paragraph 8 was deleted and a new paragraph 8 was added together with the preceding heading by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 23 July 1992 and until 15 July 2005, paragraph 8 read as follows:“8. The suggested provision does not address itself to contributions made to social security schemes (general State pension schemes dependent upon contribution records, whether or not contributors are employees) as the right or obligation to join a social security scheme is primarily a matter of social legislation rather than tax law. Many member countries have entered into bilateral social security totalisation agreements which may help to avoid the problem with respect to contributions to social security schemes. The provision also does not contain provisions relating either to the deductibility by the employer of employer pension contributions in respect of employees working abroad or to the treatment of income accrued within the plan. All of these issues can be dealt with in bilateral negotiations.”

Paragraph 8 was added on 23 July 1992 by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992, on the basis of Annex C of the Report entitled “The Tax Treatment of Employee’s Contributions to Foreign Pension Schemes” (adopted by the OECD Council on 23 July 1992).

Paragraph 9Replaced on 15 July 2005 when paragraph 9 was deleted and a new paragraph 9 was added by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 29 April 2000 and until 15 July 2005, paragraph 9 read as follows:“9. The provision is confined to the tax treatment of contributions to pension schemes by or on behalf of individuals who exercise employments within the meaning of Article 15 away from their home State. It does not deal with contributions by individuals who perform business activities covered by Article 7. However, States may wish, in bilateral negotiations, to agree on a provision covering individuals rendering services within both Article 7 and Article 15.”

Paragraph 9 was amended on 29 April 2000 by the report entitled “The 2000 Update to the Model Tax Convention”, adopted by the OECD Committee on Fiscal Affairs on 29 April 2000 on the basis of the Annex of another report entitled “Issues Related to Article 14 of the OECD Model Tax Convention” (adopted by the OECD Committee on Fiscal Affairs on 27 January 2000). After 23 July 1992 and until 29 April 2000, paragraph 9 read as follows:“9. The provision is confined to the tax treatment of contributions to pension schemes by or on behalf of individuals who exercise employments within the meaning of Article 15 away from their home State. It does not deal with contributions by individuals who render independent personal services within the meaning of Article 14. However, member countries may wish, in bilateral negotiations, to agree on a provision covering individuals rendering services within both Article 14 and Article 15.”

Paragraph 9 was added on 23 July 1992 by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992, on the basis of Annex C of the Report entitled “The Tax Treatment of Employee’s Contributions to Foreign Pension Schemes” (adopted by the OECD Council on 23 July 1992).

Paragraph 10Replaced on 15 July 2005 when paragraph 10 was renumbered as paragraph 36 (see history of paragraph 36) and a new paragraph 10 was added by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. At the same time, the heading preceding paragraph 10 was moved with it.

Paragraph 11Replaced on 15 July 2005 when paragraph 11 was amended and renumbered as paragraph 37 (see history of paragraph 37) and a new paragraph 10 was added by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. At the same time, the heading preceding paragraph 11 was moved with it.

Paragraph 12Replaced on 15 July 2005 when paragraph 12 was amended and renumbered as paragraph 40 (see history of paragraph 40) and a new paragraph 12 was added together with the preceding heading by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005.

Paragraph 13Replaced on 15 July 2005 when paragraph 13 was amended and renumbered as paragraph 41 (see history of paragraph 41) and a new paragraph 13 was added by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005.

Paragraph 14Replaced on 15 July 2005 when paragraph 14 was amended and renumbered as paragraph 42 (see history of paragraph 42) and a new paragraph 14 was added by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005.

Paragraph 15Replaced on 15 July 2005 when paragraph 15 was amended and renumbered as paragraph 43 (see history of paragraph 43) and a new paragraph 15 was added by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005.

Paragraph 16Replaced on 15 July 2005 when paragraph 16 was amended and renumbered as paragraph 44 (see history of paragraph 44) and a new paragraph 16 was added by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005.

Paragraph 17Replaced on 15 July 2005 when paragraph 17 was amended and renumbered as paragraph 45 (see history of paragraph 45) and a new paragraph 17 was added by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005.

Paragraph 18Replaced on 15 July 2005 when paragraph 18 was amended and renumbered as paragraph 46 (see history of paragraph 46) and a new paragraph 18 was added by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005.

Paragraph 19Replaced on 15 July 2005 when paragraph 19 was amended and renumbered as paragraph 47 (see history of paragraph 47) and a new paragraph 19 was added by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005.

Paragraph 19.1Added on 15 July 2005 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005.

Paragraph 19.2Added on 15 July 2005 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005.

Paragraph 20Replaced on 15 July 2005 when paragraph 20 was amended and renumbered as paragraph 48 (see history of paragraph 48) and a new paragraph 20 was added by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005.

Paragraph 21Replaced on 15 July 2005 when paragraph 21 was amended and renumbered as paragraph 49 (see history of paragraph 49) and a new paragraph 21 was added by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005.

Paragraph 22Replaced on 15 July 2005 when paragraph 22 was amended and renumbered as paragraph 50 (see history of paragraph 50) and a new paragraph 22 was added together with the preceding heading, by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005.

Paragraph 23Replaced on 15 July 2005 when paragraph 23 was amended and renumbered as paragraph 51 (see history of paragraph 51) and a new paragraph 23 was added by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005.

Paragraph 24Replaced on 15 July 2005 when paragraph 24 was amended and renumbered as paragraph 52 (see history of paragraph 52) and new paragraph 24 was added together with the preceding heading by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005.

Paragraph 25Replaced on 15 July 2005 when paragraph 25 was amended and renumbered as paragraph 53 (see history of paragraph 53) and a new paragraph 25 was added by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005.

Paragraph 26Replaced on 15 July 2005 when paragraph 26 was amended and renumbered as paragraph 54 (see history of paragraph 54) and a new paragraph 26 was added by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005.

Paragraph 27Corresponds to paragraph 2 of the 1977 Model Convention as it read before 15 July 2005. On that date paragraph 27 was amended and renumbered as paragraph 55 (see history of paragraph 55) and paragraph 2 of the 1977 Model Convention was amended and renumbered as paragraph 27 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. In the 1977 Model Convention and until 15 July 2005, paragraph 2 read as follows:“2. Some States consider pensions paid out under a public pension scheme which is part of their social security system similar to Government pensions. Such States argue on that basis that the State of source,i.e.the State from which the pension is paid, should have a right to tax such pensions. Many conventions concluded by these States contain provisions to that effect, sometimes including also other payments made under the social security legislation of the State of source. Such payments are for instance sickness benefits, unemployment benefits and benefits on account of industrial injury. Contracting States having that view may agree bilaterally on an additional paragraph to the Article giving the State of source a right to tax payments made under its social security legislation. A paragraph of that kind could be drafted along the following lines:“Notwithstanding the provisions of paragraph 1, pensions and other payments made under the social security legislation of a Contracting State may be taxed in that State.”

Where the State of which the recipient of such payments is a resident applies the exemption method the payments will be taxable only in the State of source while States using the credit method may tax the payments and give credit for the tax levied in the State of source. Some States using the credit method as the general method in their conventions may, however, consider that the State of source should have an exclusive right to tax such payments. Such States should then substitute the words “shall be taxable only” for the words “may be taxed” in the above draft provision.”

Paragraph 2 of the 1963 Draft Convention was replaced when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977. At that time, paragraph 2 of the 1963 Draft Convention was deleted and a new paragraph 2 was added. In addition, the heading preceding paragraph 2 was moved immediately before paragraph 4. In the 1963 Draft Convention (adopted by the OECD Council on 30 July 1963) and until the adoption of the 1977 Model Convention, paragraph 2 read as follows:“2. Canadareserves its position on this Article for the purpose of preserving the right to tax certain lump sum payments, described in Section 31 A of the Income Tax Act of Canada, paid to persons formerly employed in Canada in respect of their employment in Canada.”

Paragraph 28Replaced on 15 July 2005 when paragraph 28 was amended and renumbered as paragraph 56 (see history of paragraph 56) and a new paragraph 28 was added by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005.

Paragraph 29Replaced on 15 July 2005 when paragraph 29 was amended and renumbered as paragraph 57 (see history of paragraph 57) and a new paragraph 29 was added together with the preceding heading by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005.

Paragraph 30Replaced on 15 July 2005 when paragraph 30 was amended and renumbered as paragraph 58 (see history of paragraph 58) and a new paragraph 30 was added by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005.

Paragraph 31Corresponds to paragraph 4 as it read before 15 July 2005. On that date paragraph 31 was amended and renumbered as paragraph 59 (see history of paragraph 59), paragraph 4 was amended and renumbered as paragraph 31 and the headings preceding paragraph 4 were moved with it by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 23 July 1992 and until 15 July 2005, paragraph 4 read as follows:“4. It is characteristic of multinational enterprises that their staff are expected to be willing to work outside their home country from time to time. The terms of service under which staff are sent to work in other countries are of keen interest and importance to both the employer and the employee. One consideration is the pension arrangements that are made for the employee in question.”

Paragraph 4 of the 1977 Model Convention was replaced on 23 July 1992 when it was renumbered as paragraph 39 (see history of paragraph 39) and a new paragraph 4 was added by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992, on the basis of Annex C of the Report entitled “The Tax Treatment of Employee’s Contributions to Foreign Pension Schemes” (adopted by the OECD Council on 23 July 1992).

Paragraph 32Corresponds to paragraph 5 as it read before 15 July 2005. On that date paragraph 32 was amended and renumbered as paragraph 60 (see history of paragraph 60) and paragraph 5 was amended and renumbered as paragraph 32 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 23 July 1992 and until 15 July 2005, paragraph 5 read as follows:“5. Employees sent abroad to work will often wish to continue contributing to a pension scheme in their home country during their absence abroad. This is both because switching schemes can lead to a loss of rights and benefits, and because many practical difficulties can arise from having pension arrangements in a number of countries.”

Paragraph 5 of the 1977 Model Convention was replaced on 23 July 1992 when it was renumbered as paragraph 40 (see history of paragraph 40) and new paragraph 5 was added by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992, on the basis of Annex C of the Report entitled “The Tax Treatment of Employee’s Contributions to Foreign Pension Schemes” (adopted by the OECD Council on 23 July 1992).

Paragraph 33Corresponds to paragraph 6 as it read before 15 July 2005. On that date paragraph 33 was amended and renumbered as paragraph 61 (see history of paragraph 61) and paragraph 6 was amended and renumbered as paragraph 33 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 23 July 1992 and until 15 July 2005, paragraph 6 read as follows:“6. The tax treatment accorded to pension contributions of employees who are assigned to work outside their home country varies both from country to country and depending on the circumstances of the individual case. Before taking up an overseas assignment, employees commonly qualify for tax relief on pension contributions paid in the home country. When assigned abroad, employees in some cases continue to qualify for relief. Where an individual, for example, remains resident and fully taxable in the home country, pension contributions made to a pension scheme established in the home country will generally continue to qualify for relief there. But frequently, contributions paid in the home country by an individual assigned to work abroad do not qualify for relief under the domestic laws of either the home country or the host country. Where this is the case it can become expensive, if not prohibitive, to maintain membership of a pension scheme in the home country during a foreign assignment. Paragraph 11 below suggests a provision which member countries can, if they wish, include in bilateral treaties to provide reliefs for the pension contributions of employees assigned to work outside their home country.”

Paragraph 6 of the 1977 Model Convention was replaced on 23 July 1992 when it was amended and renumbered as paragraph 41 (see history of paragraph 41) and a new paragraph 6 was added by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council, on the basis of Annex C of the Report entitled “The Tax Treatment of Employee’s Contributions to Foreign Pension Schemes” (adopted by the OECD Council on 23 July 1992).

Paragraph 34Corresponds to paragraph 7 as it read before 15 July 2005. On that date paragraph 34 was amended and renumbered as paragraph 62 (see history of paragraph 62) and paragraph 7 was amended and renumbered as paragraph 34 on 15 July 2005 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 23 July 1992 and until 15 July 2005, paragraph 7 read as follows:“7. However, some member countries may not consider that the solution to the problem lies in a treaty provision, preferring, for example, the pension scheme to be amended to secure deductibility of contributions in the host State. Other countries may be opposed to including the provision in treaties where domestic legislation allows deductions only for contributions paid to residents. In such cases it may be inappropriate to include the suggested provision in a bilateral treaty.”

Paragraph 7 was added on 23 July 1992 by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992, on the basis of Annex C of the Report entitled “The Tax Treatment of Employee’s Contributions to Foreign Pension Schemes” (adopted by the OECD Council on 23 July 1992).

Paragraph 35Replaced on 23 July 1992 when paragraph 35 was amended and renumbered as paragraph 63 (see history of paragraph 63) and a new paragraph 35 was added by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005.

Paragraph 36Corresponds to paragraph 10 as it read before 15 July 2005. On that date paragraph 36 was amended and renumbered as paragraph 64 (see history of paragraph 64), paragraph 10 was amended and renumbered as paragraph 36 and the heading preceding paragraph 10 was moved with it by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 23 July 1992 and until 15 July 2005, paragraph 10 read as follows:“10. The aim of the provision is to ensure that, as far as possible, an employee is not discouraged from taking up an overseas assignment by the tax treatment of contributions made to a home country pension scheme by an employee working abroad. The provision seeks, first, to determine the general equivalence of pension plans in the two countries and then to establish limits to the deductibility of employee contributions based on the limits in the laws of both countries.”

Paragraph 10 was added on 23 July 1992 by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992, on the basis of Annex C of the Report entitled “The Tax Treatment of Employee’s Contributions to Foreign Pension Schemes” (adopted by the OECD Council on 23 July 1992).

Paragraph 37Corresponds to paragraph 11 as it read before 15 July 2005. On that date paragraph 37 was amended and renumbered as paragraph 65 (see history of paragraph 65), paragraph 11 was amended and renumbered as paragraph 37 and the heading preceding paragraph 11 was moved with it by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 29 April 2000 and until 15 July 2005, paragraph 11 read as follows:“11. The following is the suggested text of the provision that could be included in bilateral conventions to deal with the problem identified above:Contributions borne by an individual who renders services in the course of an employment in a Contracting State to a pension scheme established in and recognised for tax purposes in the other Contracting State shall be deducted, in the first-mentioned State, in determining the individual’s taxable income, and treated in that State, in the same way and subject to the same conditions and limitations as contributions made to a pension scheme that is recognised for tax purposes in that first-mentioned State, provided that:

the individual was not a resident of that State, and was contributing to the pension scheme, immediately before he began to exercise employment in that State; and

the pension scheme is accepted by the competent authority of that State as generally corresponding to a pension scheme recognised as such for tax purposes by that State.

For the purposes of subparagraph a):

the term “a pension scheme” means an arrangement in which the individual participates in order to secure retirement benefits payable in respect of the employment referred to in subparagraph a); and

a pension scheme is recognised for tax purposes in a State if the contributions to the scheme would qualify for tax relief in that State.”

Paragraph 11 was amended on 29 April 2000, by replacing the words “dependent personal services” with “services in the course of an employment” and replacing the words “dependent personal services” with the word “employment”, by the report entitled “The 2000 Update to the Model Tax Convention”, adopted by the OECD Committee on Fiscal Affairs on 29 April 2000 on the basis of the Annex of another report entitled “Issues Related to Article 14 of the OECD Model Tax Convention” (adopted by the OECD Committee on Fiscal Affairs on 27 January 2000). After 23 July 1992 and until 29 April 2000, paragraph 11 read as follows:“11. The following is the suggested text of the provision that could be included in bilateral conventions to deal with the problem identified above:Contributions borne by an individual who renders dependent personal services in a Contracting State to a pension scheme established in and recognised for tax purposes in the other Contracting State shall be deducted, in the first-mentioned State, in determining the individual’s taxable income, and treated in that State, in the same way and subject to the same conditions and limitations as contributions made to a pension scheme that is recognised for tax purposes in that first-mentioned State, provided that:

the individual was not a resident of that State, and was contributing to the pension scheme, immediately before he began to exercise employment in that State; and

the pension scheme is accepted by the competent authority of that State as generally corresponding to a pension scheme recognised as such for tax purposes by that State.

For the purposes of subparagraph a):

the term “a pension scheme” means an arrangement in which the individual participates in order to secure retirement benefits payable in respect of the dependent personal services referred to in subparagraph a); and

a pension scheme is recognised for tax purposes in a State if the contributions to the scheme would qualify for tax relief in that State.””

Paragraph 11 was added on 23 July 1992 by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992, on the basis of Annex C of the Report entitled “The Tax Treatment of Employee’s Contributions to Foreign Pension Schemes” (adopted by the OECD Council on 23 July 1992).

Paragraph 38Replaced on 15 July 2005 when paragraph 38 was deleted and a new paragraph 38 was added by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. At the same time, the heading preceding paragraph 38 was moved immediately before paragraph 70 (see history of paragraph 70). After 23 July 1992 and until 15 July 2005, paragraph 38 read as follows:“38. Franceconsiders that the scope of the proposed provision in paragraph 11 above must be determined by taking into account not only the pension scheme to which the taxpayer contributed before his departure but also any scheme substituted therefore.”

Paragraph 38 was added on 23 July 1992 together with the heading preceding it by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992.

Paragraph 39Replaced on 15 July 2005 when paragraph 39 and the heading preceding it were deleted and a new paragraph 39 was added by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 28 January 2003 and until 15 July 2005, paragraph 39 and the preceding heading read as follows:“Reservations on the Article39. Australia,Greece,Mexico,New ZealandandPortugalreserve the right to propose that all pensions be taxable only in the country of residence of the recipient.”

Paragraph 39 was amended on 28 January 2003, by adding Greece and Mexico to the list of countries making the reservation, by the report entitled “The 2002 Update to the Model Tax Convention”, adopted by the OECD Council on 28 January 2003. After 29 April 2000 and until 28 January 2003, paragraph 39 read as follows:“39. Australia,New ZealandandPortugalreserve the right to propose that all pensions be taxable only in the country of residence of the recipient.”

Paragraph 39 was previously amended on 29 April 2000, by adding New Zealand and Portugal as countries making the reservation, by the report entitled “The 2000 Update to the Model Tax Convention”, adopted by the OECD Committee on Fiscal Affairs on 29 April 2000. After 23 October 1997 and until 29 April 2000, paragraph 39 read as follows:“39. Australiareserves the right to propose that all pensions be taxable only in the country of residence of the recipient.”

Paragraph 39 was previously amended on 23 October 1997 by the report entitled “The 1997 Update to the Model Tax Convention”, adopted by the OECD Council on 23 October 1997. After 31 March 1994 and until 23 October 1997, paragraph 39 read as follows:“39. When negotiating with other member countries,Australiawill propose that all pensions be taxable only in the country of residence of the recipient.”

Paragraph 39 was previously amended on 31 March 1994 by the report entitled “1994 Update to the Model Tax Convention”, adopted by the OECD Council on 31 March 1994. After 23 July 1992 and until 31 March 1994, paragraph 39 read as follows:“39. Australiareserves its position on this Article. When negotiating with other member countries, the Australian authorities will propose that all pensions be taxable only in the country of residence of the recipient.”

Paragraph 39 as it read after 23 July 1992 corresponded to paragraph 4 of the 1977 Model Convention. On 23 July 1992 paragraph 4 of the 1977 Model Convention was renumbered as paragraph 39 and the heading preceding paragraph 4 was moved with it by the report entitled “The Revision of the 1977 Model Convention”, adopted by the OECD Council on 23 July 1992.

Paragraph 4 was added when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977. At the same time, the heading preceding paragraph 2 was moved immediately before paragraph 4.

Paragraph 40Corresponds to paragraph 12 as it read before 15 July 2005. On that date paragraph 40 was deleted and paragraph 12 was amended and renumbered as paragraph 40 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 29 April 2000 and until 15 July 2005, paragraph 12 read as follows:“12. Subparagraph a)of the suggested provision lays down the characteristics of both the employee and the contributions to which the provision applies. It also provides the principle that contributions borne by an individual rendering services in the course of an employment within the meaning of Article 15 in one Contracting State (the host State) to a defined pension scheme in the other Contracting State (the home State) are to be relieved from tax in the host State, subject to the same conditions and limitations as relief for contributions to domestic pension schemes of the host State.”

Paragraph 12 was previously amended on 29 April 2000, by replacing the words “dependent personal services” with “services in the course of an employment”, by the report entitled “The 2000 Update to the Model Tax Convention”, adopted by the OECD Committee on Fiscal Affairs on 29 April 2000 on the basis of the Annex of another report entitled “Issues Related to Article 14 of the OECD Model Tax Convention” (adopted by the OECD Committee on Fiscal Affairs on 27 January 2000). After 23 July 1992 and until 29 April 2000, paragraph 12 read as follows:“12. Subparagraph a) of the suggested provision lays down the characteristics of both the employee and the contributions to which the provision applies. It also provides the principle that contributions borne by an individual rendering dependent personal services within the meaning of Article 15 in one Contracting State (the host State) to a defined pension scheme in the other Contracting State (the home State) are to be relieved from tax in the host State, subject to the same conditions and limitations as relief for contributions to domestic pension schemes of the host State.”

Paragraph 12 was added on 23 July 1992 by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992, on the basis of Annex C of the Report entitled “The Tax Treatment of Employee’s Contributions to Foreign Pension Schemes” (adopted by the OECD Council on 23 July 1992).

Paragraph 40 as it read after 31 March 1994 was deleted on 15 July 2005 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 31 March 1994 and until 15 July 2005, paragraph 40 read as follows:“40. Canadareserves its position on this Article. When negotiating conventions, the Canadian authorities will propose that the country in which the pensions arise be given a limited right to tax.”

Paragraph 40 was amended on 31 March 1994, by deleting the third sentence of the paragraph, which was incorporated in part into a new paragraph 45 (see history of paragraph 45) by the report entitled “1994 Update to the Model Tax Convention”, adopted by the OECD Council on 31 March 1994. After 23 July 1992 and until 31 March 1994, paragraph 40 read as follows:“40. Canadareserves its position on this Article. When negotiating conventions, the Canadian authorities will propose that the country in which the pensions arise be given a limited right to tax. Canada would also wish to apply this rule to pensions referred to in Article 19 in order to achieve uniformity of treatment.”

Paragraph 40 as it read after 23 July 1992 corresponded to paragraph 5 of the 1977 Model Convention. On 23 July 1992 paragraph 5 of the 1977 Model Convention was renumbered as paragraph 40 by the report entitled “The Revision of the 1977 Model Convention”, adopted by the OECD Council on 23 July 1992.

Paragraph 5 was added when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977.

Paragraph 41Corresponds to paragraph 13 as it read before 15 July 2005. On that date paragraph 41 was deleted and paragraph 13 was amended and renumbered as paragraph 41 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 23 July 1992 and until 15 July 2005, paragraph 13 read as follows:“13. Relief for contributions to the home country pension scheme under the conditions outlined can be given by either the home country, being the country where the pension scheme is situated or by the host country, where the economic activities giving rise to the contributions are carried out.”

Paragraph 13 was added on 23 July 1992 by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992, on the basis of Annex C of the Report entitled “The Tax Treatment of Employee’s Contributions to Foreign Pension Schemes” (adopted by the OECD Council on 23 July 1992).

Paragraph 41 as it read after 23 October 1997 was deleted on 15 July 2005 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 23 October 1997 and until 15 July 2005, paragraph 41 read as follows:“41. FinlandandSweden, when negotiating conventions, would wish to retain the right to tax pensions paid to non-residents, where such pensions are paid in respect of past services rendered mainly within their respective territory.”

Paragraph 41 was amended on 23 October 1997 by the report entitled “The 1997 Update to the Model Tax Convention”, adopted by the OECD Council on 23 October 1997. After 23 July 1992 and until 23 October 1997, paragraph 41 read as follows:“41. FinlandandSweden, when negotiating conventions with other member countries, would wish to retain the right to tax pensions paid to non-residents, where such pensions are paid in respect of past services rendered mainly within their respective territory.”

Paragraph 41 as it read after 23 July 1992 corresponded to paragraph 6 of the 1977 Model Convention. On 23 July 1992 paragraph 6 of the 1977 Model Convention was amended and renumbered as paragraph 41 by the report entitled “The Revision of the 1977 Model Convention”, adopted by the OECD Council on 23 July 1992. In the 1977 Model Convention and until 23 July 1992, paragraph 6 read as follows:“6. Sweden, when negotiating conventions with other member countries, would wish to retain the right to tax pensions paid to non-residents of Sweden, where such pensions are paid in respect of past services rendered mainly within Sweden.”

Paragraph 6 was added when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977.

Paragraph 42Corresponds to paragraph 14 as it read before 15 July 2005. On that date paragraph 42 was deleted and paragraph 14 was amended and renumbered as paragraph 42 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 23 July 1992 and until 15 July 2005, paragraph 14 read as follows:“14. A solution in which relief would be given by the home country might not be effective, since the employee might have no or little taxable income in that country. Practical considerations therefore suggest that it would be preferable for relief to be given by the host country and this is the solution adopted in the suggested provision.”

Paragraph 14 was added on 23 July 1992 by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992, on the basis of Annex C of the Report entitled “The Tax Treatment of Employee’s Contributions to Foreign Pension Schemes” (adopted by the OECD Council on 23 July 1992).

Paragraph 42 as it read after 28 January 2003 was deleted on 15 July 2005 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 28 January 2003 and until 15 July 2005, paragraph 42 read as follows:“42. When negotiating bilateral conventions,Belgiumwill propose that the State of source be given the right to tax pensions arising from that State.”

Paragraph 42 was amended on 28 January 2003 by the report entitled “The 2002 Update to the Model Tax Convention” adopted by the OECD Council on 28 January 2003. After 23 July 1992 and until 28 January 2003, paragraph 42 read as follows:“42. When negotiating bilateral conventions,Belgiumwill propose that the State of source be given in any case the right to tax pensions and allowances paid pursuant to the social legislation of a Contracting State or under a general scheme set up by this Contracting State to supplement the benefits provided under this social legislation.”

Paragraph 42 was added on 23 July 1992 by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992.

Paragraph 43Corresponds to paragraph 15 as it read before 15 July 2005. On that date paragraph 43 was deleted and paragraph 15 was amended and renumbered as paragraph 43 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 23 July 1992 and until 15 July 2005, paragraph 15 read as follows:“15. In looking at the characteristics of the employee, subparagraph a)makes it clear that, in order to get the relief from taxation in the host State, the employee must not have been resident in the host State immediately prior to working there.”

Paragraph 15 was added on 23 July 1992 by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992, on the basis of Annex C of the Report entitled “The Tax Treatment of Employee’s Contributions to Foreign Pension Schemes” (adopted by the OECD Council on 23 July 1992).

Paragraph 43 as it read after 29 April 2000 was deleted on 15 July 2005 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 29 April 2000 and until 15 July 2005, paragraph 43 read as follows:“43. Denmarkand theUnited Statesreserve their position on this Article, including the right to insert a provision according to which pensions paid under the social security legislation of a Contracting State shall be taxable only in that State.”

Paragraph 43 was amended on 29 April 2000, by adding the United States as a country making the reservation, by the report entitled “The 2000 Update to the Model Tax Convention”, adopted by the OECD Committee on Fiscal Affairs on 29 April 2000. After 23 July 1992 and until 29 April 2000, paragraph 43 read as follows:“43. Denmarkreserves its position on this Article, including the right to insert a provision according to which pensions paid under the social security legislation of a Contracting State shall be taxable only in that State.”

Paragraph 43 was added on 23 July 1992 by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992.

Paragraph 44Corresponds to paragraph 16 as it read before 15 July 2005. On that date paragraph 44 was deleted and paragraph 16 was amended and renumbered as paragraph 44 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 23 July 1992 and until 15 July 2005, paragraph 16 read as follows:“16. Subparagraph a)does not, however, limit the application of the provision to secondees who become resident in the host State. In many cases employees working abroad who remain resident in their home State will continue to qualify for relief there, but this will not be so in all cases. The suggested provision therefore applies to non-residents working in the host State as well as to secondees to the host State who attain residence status there. In some member countries the domestic legislation may restrict deductibility to contributions borne by residents, and these member countries may wish to restrict the suggested provision to cater for this. Also, States with a special regime for non-residents (e.g.taxation at a special low rate) may, in bilateral negotiations, wish to agree on a provision restricted to residents.”

Paragraph 16 was added on 23 July 1992 by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992, on the basis of Annex C of the Report entitled “The Tax Treatment of Employee’s Contributions to Foreign Pension Schemes” (adopted by the OECD Council on 23 July 1992).

Paragraph 44 as it read after 28 January 2003 was deleted on 15 July 2005 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 28 January 2003 and until 15 July 2005, paragraph 44 read as follows:“44. Canada,Irelandand theUnited Kingdomreserve the right to include within the Article an explicit reference to “annuities” (see paragraph 1 above).”

Paragraph 44 was amended on 28 January 2003, by deleting the words “paragraph 1 of”, by the report entitled “The 2002 Update to the Model Tax Convention” adopted by the OECD Council on 28 January 2003. After 21 September 1995 and until 28 January 2003, paragraph 44 read as follows:“44. Canada,Irelandand theUnited Kingdomreserve the right to include within paragraph 1 of the Article an explicit reference to “annuities” (see paragraph 1 above).”

Paragraph 44 was previously amended on 21 September 1995, by adding Ireland to the list of countries making the reservation, by the report entitled “The 1995 Update to the Model Tax Convention” adopted by the OECD Council on 21 September 1995. After 23 July 1992 and until 21 September 1995, paragraph 44 read as follows:“44. Canadaand theUnited Kingdomreserve the right to include within paragraph 1 of the Article an explicit reference to “annuities” (see paragraph 1 above).”

Paragraph 44 was added on 23 July 1992 by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992.

Paragraph 45Corresponds to paragraph 17 as it read before 15 July 2005. On that date paragraph 45 was deleted and paragraph 17 was renumbered as paragraph 45 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005.

Paragraph 17 was added on 23 July 1992 by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992, on the basis of Annex C of the Report entitled “The Tax Treatment of Employee’s Contributions to Foreign Pension Schemes” (adopted by the OECD Council on 23 July 1992).

Paragraph 45 as it read after 28 January 2003 was deleted on 15 July 2005 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 28 January 2003 and until 15 July 2005, paragraph 45 read as follows:“45. Belgium,CanadaandNorwayreserve the right to extend the application of Article 18 to pensions referred to in Article 19 in order to achieve uniformity of treatment.”

Paragraph 45 was amended on 28 January 2003, by adding Belgium to the list of countries making the reservation, by the report entitled “The 2002 Update to the Model Tax Convention” adopted by the OECD Council on 28 January 2003. After 31 March 1994 and until 28 January 2003, paragraph 45 read as follows:“45. CanadaandNorwayreserve the right to extend the application of Article 18 to pensions referred to in Article 19 in order to achieve uniformity of treatment.”

Paragraph 45 as it read after 31 March 1994 was incorporated in part into the third sentence of paragraph 40 and duplicated the reservation in paragraph 12 of the Commentary on Article 19 (see history of paragraph 40 and of paragraph 12 of the Commentary on Article 19), by the report entitled “1994 Update to the Model Tax Convention”, adopted by the OECD Council on 31 March 1994.

Paragraph 46Corresponds to paragraph 18 as it read before 15 July 2005. On that date paragraph 18 was amended and renumbered as paragraph 46 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 23 July 1992 and until 15 July 2005, paragraph 18 read as follows:“18. As it is not unusual for employees to be seconded to a number of different countries in succession, the suggested provision is not limited to employees who are residents of the home State immediately prior to exercising employment in the host State. The provision covers an employee coming to the host State from a third country as it is only limited to employees who were not resident in the host country before taking up employment there. However, Article 1 restricts the scope of the Convention to residents of one or both Contracting States. An employee who is neither a resident of the host State nor of the home State where the pension scheme is established is therefore outside the scope of the Convention between the two States.”

Paragraph 18 was added on 23 July 1992 by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992, on the basis of Annex C of the Report entitled “The Tax Treatment of Employee’s Contributions to Foreign Pension Schemes” (adopted by the OECD Council on 23 July 1992).

Paragraph 47Corresponds to paragraph 19 as it read before 15 July 2005. On that date paragraph 19 was amended and renumbered as paragraph 47 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 23 July 1992 and until 15 July 2005, paragraph 19 read as follows:“19. The suggested provision places no limits on the length of time for which an employee can work in a host State. It could be argued that, if an employee works in the host State for long enough, it in effect becomes his home country and the provision should no longer apply. Indeed, some host countries already restrict relief for contributions to foreign employee/employer pension schemes to cases where the seconded employees are present on a temporary basis.”

Paragraph 19 was added on 23 July 1992 by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992, on the basis of Annex C of the Report entitled “The Tax Treatment of Employee’s Contributions to Foreign Pension Schemes” (adopted by the OECD Council on 23 July 1992).

Paragraph 48Corresponds to paragraph 20 as it read before 15 July 2005. On that date paragraph 20 was amended and renumbered as paragraph 48 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 23 July 1992 and until 15 July 2005, paragraph 20 read as follows:“20. In addition, the inclusion of a time limit may be helpful in preventing the possibility of abuse outlined in paragraph 17 above. In bilateral negotiations, individual countries may find it appropriate to include a limit on the length of time for which an employee may exercise an employment in the host State after which reliefs granted by the suggested provision would no longer apply.”

Paragraph 20 was added on 23 July 1992 by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992, on the basis of Annex C of the Report entitled “The Tax Treatment of Employee’s Contributions to Foreign Pension Schemes” (adopted by the OECD Council on 23 July 1992).

Paragraph 49Corresponds to paragraph 21 as it read before 15 July 2005. On that date paragraph 21 was amended and renumbered as paragraph 49 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 23 July 1992 and until 15 July 2005, paragraph 21 read as follows:“21. In looking at the characteristics of the contributions, subparagraph a)provides a number of tests. It makes it clear that the provision applies only to contributions borne by an individual to a pension scheme established in and recognised for tax purposes in the home State. The phrase “recognised for tax purposes” is further defined in subdivision b)(ii)of the suggested provision.”

Paragraph 21 was added on 23 July 1992 by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992, on the basis of Annex C of the Report entitled “The Tax Treatment of Employee’s Contributions to Foreign Pension Schemes” (adopted by the OECD Council on 23 July 1992).

Paragraph 50Corresponds to paragraph 22 as it read before 15 July 2005. On that date paragraph 22 was amended and renumbered as paragraph 50 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 23 July 1992 and until 15 July 2005, paragraph 22 read as follows:“22. The second test applied to the characteristics of the contributions is that the contributions should be made to a home State scheme recognised by the competent authority of the host State as generally corresponding to a scheme recognised as such for tax purposes by the host State. This operates on the premise that only contributions to recognised schemes qualify for relief in member countries. This limitation does not, of course, necessarily secure equivalent tax treatment of contributions paid where an employee was working abroad and of contributions while working in the home country. If the host State’s rules for recognising pension schemes were narrower than those of the home State, the employee could find that contributions to his home country pension scheme were less favourably treated when he was working in the host country than when working in the home country.”

Paragraph 22 was added on 23 July 1992 by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992, on the basis of Annex C of the Report entitled “The Tax Treatment of Employee’s Contributions to Foreign Pension Schemes” (adopted by the OECD Council on 23 July 1992).

Paragraph 51Corresponds to paragraph 23 as it read before 15 July 2005. On that date paragraph 23 was amended and renumbered as paragraph 51 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 23 July 1992 and until 15 July 2005, paragraph 23 read as follows:“23. However, it would not be in accordance with the stated aim of securing, as far as possible, equivalent tax treatment of employee contributions to give relief for contributions which do not — at least broadly — correspond to domestically recognised schemes. To do so would mean that the amount of relief in the host State would become dependent on legislation in the home State. In addition, it could be hard to defend treating employees working side by side differently depending on whether their pension scheme was at home or abroad (and if abroad, whether it was one country rather than another). By limiting the suggested provision to schemes which generally correspond to those in the host country such difficulties are avoided.”

Paragraph 23 was added on 23 July 1992 by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992, on the basis of Annex C of the Report entitled “The Tax Treatment of Employee’s Contributions to Foreign Pension Schemes” (adopted by the OECD Council on 23 July 1992).

Paragraph 52Corresponds to paragraph 24 as it read before 15 July 2005. On that date paragraph 24 was amended and renumbered as paragraph 52 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 23 July 1992 and until 15 July 2005, paragraph 24 read as follows:“24. The suggested provision makes it clear that it is for the competent authority of the host State to determine whether the scheme in the home State generally corresponds to recognised schemes in the host State. Individual States may wish, in bilateral negotiations, to establish what interpretation the competent authority places on the term “generally corresponding”; for example how widely it is interpreted and what tests are imposed.”

Paragraph 24 was added on 23 July 1992 by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992, on the basis of Annex C of the Report entitled “The Tax Treatment of Employee’s Contributions to Foreign Pension Schemes” (adopted by the OECD Council on 23 July 1992).

Paragraph 53Corresponds to paragraph 25 as it read before 15 July 2005. On that date paragraph 25 was amended and renumbered as paragraph 53 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 23 July 1992 and until 15 July 2005, paragraph 25 read as follows:“25. The contributions covered by the provision are limited to payments to schemes to which the employee was contributing before he began to exercise his employment in the host State. This means that contributions to new pension schemes which an employee joins while in the host State are excluded from the suggested provision.”

Paragraph 25 was added on 23 July 1992 by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992, on the basis of Annex C of the Report entitled “The Tax Treatment of Employee’s Contributions to Foreign Pension Schemes” (adopted by the OECD Council on 23 July 1992).

Paragraph 54Corresponds to paragraph 26 as it read before 15 July 2005. On that date paragraph 26 was amended and renumbered as paragraph 54 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 23 July 1992 and until 15 July 2005, paragraph 26 read as follows:“26. It is, however, recognised that special rules may be needed to cover cases where new pension schemes are substituted for previous ones. For instance, in some member countries the common practice may be that, if a company employer is taken over by another company, the existing company pension scheme for its employees may be ended and a new scheme opened by the new employer. In bilateral negotiations, therefore, individual States may wish to supplement the provision to cover such substitution schemes.”

Paragraph 26 was added on 23 July 1992 by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992, on the basis of Annex C of the Report entitled “The Tax Treatment of Employee’s Contributions to Foreign Pension Schemes” (adopted by the OECD Council on 23 July 1992).

Paragraph 55Corresponds to paragraph 27 as it read before 15 July 2005. On that date paragraph 27 was amended and renumbered as paragraph 55 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 23 July 1992 and until 15 July 2005, paragraph 27 read as follows:“27. Subparagraph a)also sets out the relief to be given by the host State if the characteristics of the employee and the contributions fall within the terms of the provision. In brief, the relief is to be given in a way which corresponds to the manner in which relief would be given if the contributions were to a scheme established in the host State.”

Paragraph 27 was added on 23 July 1992 by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992, on the basis of Annex C of the Report entitled “The Tax Treatment of Employee’s Contributions to Foreign Pension Schemes” (adopted by the OECD Council on 23 July 1992).

Paragraph 56Corresponds to paragraph 28 as it read before 15 July 2005. On that date paragraph 28 was amended and renumbered as paragraph 56 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 23 July 1992 and until 15 July 2005, paragraph 28 read as follows:“28. This measure of relief does not, of course, necessarily secure equivalent tax treatment given to contributions paid when an employee is working abroad and contributions paid when he is working in the home country. Similar considerations apply here to those discussed in paragraphs 22 and 23 above. The measure does, however, ensure equivalent treatment of the contributions of colleagues. The following example is considered. The home country allows relief for pension contributions subject to a limit of 18 % of income. The host country allows relief subject to a limit of 20 %. The suggested provision in paragraph 11 would require the host country to allow relief up to its domestic limit of 20 %. Countries wishing to adopt the limit in the home country would need to amend the wording of the provision appropriately.”

Paragraph 28 was added on 23 July 1992 by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992, on the basis of Annex C of the Report entitled “The Tax Treatment of Employee’s Contributions to Foreign Pension Schemes” (adopted by the OECD Council on 23 July 1992).

Paragraph 57Corresponds to paragraph 29 as it read before 15 July 2005. On that date paragraph 29 was amended and renumbered as paragraph 57 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 23 July 1992 and until 15 July 2005, paragraph 29 read as follows:“29. The amount and method of giving the relief would depend upon the domestic tax treatment of pension contributions by the host State. This would settle such questions as whether contributions qualify for relief in full, or only in part, and whether relief should be given as a deduction in computing taxable income (and if so, which income,e.g.only employment income or all income) or as a tax credit.”

Paragraph 29 was added on 23 July 1992 by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992, on the basis of Annex C of the Report entitled “The Tax Treatment of Employee’s Contributions to Foreign Pension Schemes” (adopted by the OECD Council on 23 July 1992).

Paragraph 58Corresponds to paragraph 30 as it read before 15 July 2005. On that date paragraph 30 was amended and renumbered as paragraph 58 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 23 July 1992 and until 15 July 2005, paragraph 30 read as follows:“30. Being assigned to work abroad may not only mean that an employee’s contributions to a pension scheme in his home country cease to qualify for tax relief. It may also mean that contributions to the pension scheme by the employer are regarded as the employee’s income for tax purposes. In some member countries employees are taxed on employer’s contributions to domestic schemes whilst working in the home country whereas in others these contributions remain exempt. The provision, therefore, is silent on the treatment of such contributions, although member countries may wish to extend the suggested provision in bilateral treaties, to ensure that employers contributions in the context of the employees’ tax liability are accorded the same treatment that such contributions to domestic schemes would receive.”

Paragraph 30 was added on 23 July 1992 by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992, on the basis of Annex C of the Report entitled “The Tax Treatment of Employee’s Contributions to Foreign Pension Schemes” (adopted by the OECD Council on 23 July 1992).

Paragraph 59Corresponds to paragraph 31 as it read before 15 July 2005. On that date paragraph 31 was amended and renumbered as paragraph 59 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 23 July 1992 and until 15 July 2005, paragraph 31 read as follows:“31. Subdivision b)(i) defines a pension scheme for the purposes of subparagraph a). It makes it clear that, for these purposes, a pension scheme is an arrangement in which the individual who makes the payments participates in order to secure retirement benefits. These benefits must be payable in respect of the exercise of the employment in the host State. All the above conditions must apply to the pension scheme before it can qualify for relief under the suggested provision.”

Paragraph 31 was added on 23 July 1992 by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992, on the basis of Annex C of the Report entitled “The Tax Treatment of Employee’s Contributions to Foreign Pension Schemes” (adopted by the OECD Council on 23 July 1992).

Paragraph 60Corresponds to paragraph 32 as it read before 15 July 2005. On that date paragraph 32 was amended and renumbered as paragraph 60 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 23 July 1992 and until 15 July 2005, paragraph 32 read as follows:“32. Subdivision b)(i) refers to the participation of the individual in the pension scheme in order to secure retirement benefits. This definition is intended to ensure that the proportion of contributions made to secure benefits other than periodic pension payments on retirement,e.g.a lump sum on retirement, will also qualify for relief under the provision.”

Paragraph 32 was added on 23 July 1992 by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992, on the basis of Annex C of the Report entitled “The Tax Treatment of Employee’s Contributions to Foreign Pension Schemes” (adopted by the OECD Council on 23 July 1992).

Paragraph 61Corresponds to paragraph 33 as it read before 15 July 2005. On that date paragraph 33 was amended and renumbered as paragraph 61 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 23 July 1992 and until 15 July 2005, paragraph 33 read as follows:“33. The initial definition of a pension scheme is “an arrangement”. This is a widely drawn term, the use of which is intended to encompass the various forms which pension schemes may take in individual member countries.”

Paragraph 33 was added on 23 July 1992 by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992, on the basis of Annex C of the Report entitled “The Tax Treatment of Employee’s Contributions to Foreign Pension Schemes” (adopted by the OECD Council on 23 July 1992).

Paragraph 62Corresponds to paragraph 34 as it read before 15 July 2005. On that date paragraph 34 was amended and renumbered as paragraph 62 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 23 July 1992 and until 15 July 2005, paragraph 34 read as follows:“34. Although subdivision b)(i)sets out that participation in this scheme has to be by the individual who exercises the employment referred to in subparagraph a), there is no reference to the identity of the recipient of the retirement benefits secured by participation in the scheme. This is to ensure that any proportion of contributions intended to generate a widow or dependent’s pension may be eligible for relief under the suggested provision.”

Paragraph 34 was added on 23 July 1992 by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992, on the basis of Annex C of the Report entitled “The Tax Treatment of Employee’s Contributions to Foreign Pension Schemes” (adopted by the OECD Council on 23 July 1992).

Paragraph 63Corresponds to paragraph 35 as it read before 15 July 2005. On that date paragraph 35 was amended and renumbered as paragraph 63 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 29 April 2000 and until 15 July 2005, paragraph 35 read as follows:“35. The definition of a pension scheme makes no distinction between pensions paid from State-run occupational pension schemes and similar privately-run schemes. Both are covered by the scope of the provision. Any pensions, such as pensions from general State pension schemes dependent on contribution records whether or not contributors are employees, are excluded from the provision as the individual will not contribute to such schemes in order to receive benefits payable in respect of his employment.”

Paragraph 35 was previously amended on 29 April 2000, by deleting the words “dependent personal services rendered”, by the report entitled “The 2000 Update to the Model Tax Convention”, adopted by the OECD Committee on Fiscal Affairs on 29 April 2000 on the basis of the Annex of another report entitled “Issues Related to Article 14 of the OECD Model Tax Convention” (adopted by the OECD Committee on Fiscal Affairs on 27 January 2000). After 23 July 1992 and until 29 April 2000, paragraph 35 read as follows:“35. The definition of a pension scheme makes no distinction between pensions paid from State-run occupational pension schemes and similar privately-run schemes. Both are covered by the scope of the provision. Any pensions, such as pensions from general State pension schemes dependent on contribution records whether or not contributors are employees, are excluded from the provision as the individual will not contribute to such schemes in order to receive benefits payable in respect of dependent personal services rendered.”

Paragraph 35 was added on 23 July 1992 by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992, on the basis of Annex C of the Report entitled “The Tax Treatment of Employee’s Contributions to Foreign Pension Schemes” (adopted by the OECD Council on 23 July 1992).

Paragraph 64Corresponds to paragraph 36 as it read before 15 July 2005. On that date paragraph 36 was amended and renumbered as paragraph 64 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 23 July 1992 and until 15 July 2005, paragraph 36 read as follows:“36. Subdivision b)(ii) further defines the phrase “recognised for tax purposes”. As the aim of the provision is, so far as possible, to ensure that contributions are neither more nor less favourably treated for tax purposes than they would be if the employee was resident in his home State, it is right to limit the provision to contributions which would have qualified for relief if the employee had remained in the home State. The provision seeks to achieve this aim by limiting its scope to contributions made to a scheme only if contributions to this scheme would qualify for tax relief in that State.”

Paragraph 36 was added on 23 July 1992 by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992, on the basis of Annex C of the Report entitled “The Tax Treatment of Employee’s Contributions to Foreign Pension Schemes” (adopted by the OECD Council on 23 July 1992).

Paragraph 65Corresponds to paragraph 37 as it read before 15 July 2005. On that date paragraph 37 was amended and renumbered as paragraph 65 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 23 July 1992 and until 15 July 2005, paragraph 37 read as follows:“37. This method of attempting to achieve parity of treatment assumes that in all member countries only contributions to recognised pension schemes qualify for relief. The tax treatment of contributions to pension schemes under member countries’ tax systems may differ from this assumption. It is recognised that, in bilateral negotiations, individual countries may wish to further define the qualifying pension schemes in terms that match the respective domestic laws of the treaty partners.”

Paragraph 37 was added on 23 July 1992 by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992, on the basis of Annex C of the Report entitled “The Tax Treatment of Employee’s Contributions to Foreign Pension Schemes” (adopted by the OECD Council on 23 July 1992).

Paragraph 66Added on 15 July 2005 together with the heading preceding it, by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005.

Paragraph 67Added on 15 July 2005 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005.

Paragraph 68Added on 15 July 2005 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005.

Paragraph 69Added on 15 July 2005 together with the heading preceding it, by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005.

Paragraph 70Added on 15 July 2005 and the heading preceding paragraph 38 was moved immediately before paragraph 70 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005.

Paragraph 71Added on 15 July 2014 by the report entitled “The 2014 Update to the Model Tax Convention” adopted by the Council on 15 July 2014.