This article has been updated in December 2025 following the updates to the Organisation of Economic Cooperation and Development (OECD) and United Nations (UN) Model Tax Treaties.
Updates to the UN and the OECD Model Tax Treaties seek to address concerns from resource-rich countries about revenue risks associated with tax treaties. These treaties play an important role in assigning taxing rights between two contracting states on income from cross-border transactions that characterize the global mining sector. They also mitigate double taxation that may arise where taxing rights are not assigned to either country. However, poorly designed tax treaties can also prevent governments from collecting expected mining revenue, as examined in the IGF practice note on tax treaties.
In March 2024, the UN Tax Committee released a proposal to include a new provision for natural resources, Article 5A of the UN Model Tax Convention. This came shortly after the OECD’s bid to add a similar alternative provision to the Commentary on Article 5 of the OECD Model Tax Convention. The UN model has been updated in March 2025¹, and the OECD’s in November 2025. The IGF has been monitoring and contributing to these developments primarily through its work on the UN Subcommittee on Extractive Industry Taxation Issues for Developing Countries. These UN and OECD updates seek to help protect the right of resource-rich countries to collect revenue from mining.
Similarities Between the UN and OECD Proposals
Both updates address the time required to trigger a taxable presence (“permanent establishment”). The UN draft sets a clear 30 days threshold in any 12-month period, replacing the previous six-month test applied within the same 12-month frame for determining whether extractive activities create a permanent establishment. The OECD update introduces an optional provision that allows treaty partners to agree a shorter, resource-specific threshold (e.g. 30, 90 days, or another duration) within a standard 12-month measurement period, reflecting a longstanding practice in oil-producing countries. This is particularly relevant to subcontractors who tend to be more mobile than licence holders and can more easily avoid establishing a taxable presence.
The OECD update gives resource-rich countries the right to tax capital gains from the sale of shares in extractive assets in their jurisdiction—a major source of revenue loss. It also includes an alternative provision inserted into Article 15, making it easier to tax non-resident employment income arising from short-term activities in the sector The UN model already includes these provisions.
Differences Between the UN and OECD Proposals
The OECD’s proposal takes the form of an alternative option to the Commentaries to Article 5 of the OECD model. The Commentaries provide additional technical guidance on the interpretation and operation of the OECD model but are not part of it. Conversely, the UN’s provision codifies that permanent establishment would exist with respect to natural resources even if one would not exist under Article 5, making it the default position. This arguably gives developing countries a greater chance to negotiate the new article with treaty partners.
The UN update expands the scope to cover non-renewable and renewable resources, whereas the OECD stops at non-renewables. The OECD’s approach reflects the distinct taxation of mining, oil, and gas common in resource-rich countries. A special provision dedicated to extractives is a logical extension of this approach and may be easier to negotiate in tax treaties as a result. Other location-specific natural resources—wind, water, and solar—are an increasingly important part of the global energy mix and may warrant special treatment as well.
Challenges Facing Both Proposals
Both updates attempt to define the types of activities subject to the new provisions. In both cases, the activities must relate to natural resource exploration or exploitation. The OECD aims to address this challenge by focusing on “specialized services” for activities. This means engineering services and seismic surveys are included, while supplying a mine operator with electricity or water are excluded in the OECD update.
Governments will need to consider the trade-offs between broadening opportunities for revenue collection with the potential for increased compliance and administrative burdens.
The UN update, by contrast, covers all subcontractors, not only those performing specialized services. This would include catering companies, for example. Article 5A lowers the threshold to 30 days, creating a faster path to source-country taxation of extractive services. Cross-border service fees remain taxable under Articles 12 and 12AA², which determine how income is taxed if no permanent establishment exists.
An Alternative Approach
In its input to the UN Subcommittee on the UN Model Update, the UN Subcommittee on Extractive Industry Taxation had proposed an alternative approach for the UN model. It proposed a standalone extractive industries article—an approach taken by several oil and gas-producing countries.
A standalone article is a special clause addressing permanent establishment issues in the extractives sector, as well as other types of income, such as capital gains and employment income. While some of these issues are already covered in the UN model, they may be harder for developing countries to negotiate because they go against the status quo by allocating more taxing rights to source countries that host the resources. Widespread acceptance that extractives should be taxed differently may make it easier for countries to advance progressive positions on these types of income if captured in a standalone article.
The UN and OECD updates are a step towards stopping tax revenue leakage from mining, oil, and gas caused by tax treaties. The changes reflect emerging tax treaty practices in resource-rich countries. In many cases, governments will need to consider the trade-offs between broadening opportunities for revenue collection with the potential for increased compliance and administrative burdens. The IGF will continue to provide technical inputs to these models and support resource-rich countries in navigating these and other international tax reforms.
¹ In practice, investment decisions are shaped by multiple factors, and expectations of future mineral demand may continue to drive investment. This raises the question of what role ring-fencing rules will play.
² Article 12AA has been introduced to allow countries to tax all fees for services. It replaces former Articles 12A (Fees for Technical Services) and 14 (Independent Personal Services).