This note revisits the guidance issued by the OECD Secretariat in April 2020 on the impact of the COVID-19 pandemic on tax treaties. Unprecedented measures imposed or recommended by governments, including travel restrictions and curtailment of business operations (broadly referred to in this guidance as public health measures), have been in effect in most jurisdictions in various forms and stages during most of 2020 due to the COVID-19 pandemic and this situation is expected to continue in 2021. This guidance is intended to provide more certainty to taxpayers during this exceptional period. This guidance represents the Secretariat’s views on the interpretation of the provisions of tax treaties (i.e. each jurisdiction may adopt its own guidance to provide tax certainty to taxpayers). But it reflects the general approach of jurisdictions and illustrates how some jurisdictions have addressed the impact of COVID-19 on the tax situations of individuals and employers. The guidance is relevant only to circumstances arising during the COVID-19 pandemic when public health measures are in effect. It seeks to avoid instances of double taxation but cannot be relied on to create instances of double non-taxation. Much of the analysis covers circumstances where factual determinations by tax administrations are required and the guidance does not purport to replace the judgement of tax administrations in those cases. Introduction. 1. The impact of the coronavirus disease (“COVID-19”) has been profound. The rapid spread of the virus has strained local medical infrastructures, led to restrictions on travel and social contact, and created unprecedented disruptions to the global economy. 2. During the pandemic period, many enterprises have faced curtailment of their operations, and have been forced to close offices and other business premises forcing those businesses to change how their business is conducted (e.g. working from home). In many jurisdictions, international travel was either suspended or severely restricted for a number of weeks leaving people stranded in jurisdictions where they might not otherwise be. This temporary dislocation of people can have tax consequences for those individuals and the businesses for which they work. 3. In light of the exceptional circumstances, on 3 April 2020, the OECD Secretariat issued guidance on the application of international tax treaty rules in circumstances where cross-border workers or individuals were stranded in a jurisdiction that was not their jurisdiction of residence. The guidance was issued as an urgent response to requests from concerned jurisdictions which as a result of the COVID-19 pandemic had taken unprecedented measures that affected the mobility of individuals such as restricting travel and implementing strict quarantine requirements. For that reason, the paper was published under the responsibility of the Secretary-General of the OECD stating that the opinions expressed and the arguments employed therein did not necessarily reflect the official views of OECD member countries. 4. These unprecedented measures imposed or recommended by governments, including travel restrictions and curtailment of business operations, (broadly referred to in this guidance as “public health measures”) have been in effect in most jurisdictions in various forms and stages during most of 2020 and may remain in effect in 2021. This guidance is intended to provide more certainty to taxpayers during this exceptional period when those public health measures were applicable by reflecting the general approach of members and by illustrating how some jurisdictions have addressed the impact of COVID-19 on the tax situations of individuals and employers. This guidance represents the Secretariat’s views on the interpretations on the provisions of tax treaties (i.e., each jurisdiction may adopt different interpretations from those in this guidance). 5. Similarly, this revisited guidance applies only to situations arising during the COVID-19 pandemic while relevant public health measures to restrict the spread of COVID-19 are still in effect. It is temporary in nature and seeks to address the exceptional circumstances of the COVID-19 pandemic only. It seeks to avoid instances of double taxation but cannot be relied on to create instances of double non-taxation. Much of the guidance covers circumstances where factual determinations by tax administrations are required and the guidance does not purport to replace the judgement of tax administrations in those cases. 6. The unique and almost unprecedented restrictions arising from government responses to COVID-19 have led to practical challenges for business and for workers. For example, depending on where the employee is located during the COVID-19 restrictions, new taxing rights over the employee’s income may arise in other jurisdictions. Those new taxing rights may displace existing taxing rights and require refunds of some tax withheld at source. Governments have taken practical approaches to the impact of COVID-19 restrictions in these circumstances and have issued guidance outlining how the rules will be enforced. That guidance has been widely welcomed by business. 7. When the OECD Secretariat guidance was first issued (April 2020), it was unclear how long the restrictions would persist and it was expected that many of the situations analysed would be temporary only. Over nine months have passed since the guidance was issued and some of the measures and the restrictions described remain in place. This guidance considers some additional fact patterns not addressed in detail in April; examines whether the analysis and the conclusions outlined in April continue to apply where the circumstances persist for a significant period; and contains references to country practice and guidance during the COVID-19 period. 8. The following sections outline the application of the existing rules and the OECD Commentary on concerns related to: the creation of permanent establishments (i.e. home office, dependent agent PE) and the interruption of construction sites; changes in residence for entities and individuals and the application of tie-breaker rules to dual residents; and income from employment i.e. payments under stimulus packages, stranded workers, cross-border (frontier) workers and teleworking from abroad.
