On 18 November 2025, the OECD Council approved the 2025 Update to the OECD Model Tax Convention, which remains the primary reference point for negotiating and interpreting thousands of bilateral tax treaties. The update introduces targeted clarifications intended to reflect modern working patterns, improve tax certainty and strengthen the effectiveness of treaty-based dispute resolution

Overview of key changes

The 2025 Update focuses on three main areas: permanent establishment (PE) rules, transfer pricing and financial transactions, and dispute resolution and information exchange. Although most amendments affect the Commentaries rather than treaty text, they are expected to shape how tax authorities interpret and apply existing double tax treaties (DTTs).

Modernized PE rules (Article 5)

The revised Commentary on Article 5 provides detailed guidance on when an employee’s home office may constitute a fixed place PE for the employer in cross-border remote work scenarios. The update also introduces an optional provision and related Commentary that establish a lower PE threshold for activities connected with the exploration and exploitation of natural resources, such as offshore wind and other extractive projects, based on a bilaterally agreed minimum time period.

These natural-resource provisions broaden source-country taxing rights by tying nexus more closely to where the underlying activities occur, and they distinguish “relevant activities” from ancillary services and certain vessel operations. Together, the home-office and natural-resources changes respond to global mobility trends and the growing importance of geographically concentrated projects.

Transfer pricing and financial transactions (Article 9)

The update refines the Commentary on Article 9 (Associated Enterprises) to clarify how transfer pricing principles apply to intragroup financial transactions, including loans and guarantees. It emphasizes that the determination of whether expenses are deductible, and under what conditions, remains a matter of domestic law, subject to treaty provisions such as non-discrimination and relief from double taxation.

The Commentary also highlights that corresponding adjustments should only reflect profits justified under the arm’s length principle and notes that contracting states should consult where they disagree on appropriate adjustments to avoid economic double taxation. Related updates to the Commentaries on Articles 7 and 24 align profit attribution and non-discrimination guidance with these changes.

Dispute resolution and information exchange (Articles 25 and 26)

A new paragraph in Article 25 clarifies the relationship between treaty-based mutual agreement procedures (MAP) and dispute mechanisms under trade agreements such as GATS, confirming when tax measures fall within the scope of a tax treaty. The aim is to avoid overlapping jurisdictions and to reinforce MAP as the primary tool to resolve treaty disputes where the measure is covered by the treaty.

The Commentary on Article 26 is updated to confirm that information obtained through exchange-of-information mechanisms may, subject to agreed safeguards, be used for tax matters involving persons other than those initially identified in the request. Further guidance addresses taxpayer access to exchanged information and the limited circumstances in which non-taxpayer-specific data may be disclosed, while preserving the general confidentiality protections in the Model.

Practical next steps for businesses

Multinational enterprises should expect tax authorities to begin applying these interpretative changes when assessing existing DTT provisions, even before the next consolidated edition of the Model is published. In practice, groups should:

• Review cross-border remote work and home-office arrangements to identify potential new PE risks and consider policy or contractual adjustments where appropriate.
• Revisit documentation for intercompany financial transactions to ensure that pricing, terms and support materials align with evolving transfer pricing guidance and domestic interest limitation rules.
• Evaluate internal processes for handling treaty disputes and information requests, including MAP readiness and data governance, in light of the clarified MAP and exchange-of-information framework.

For tailored advice, consider discussing these developments with your dedicated Sun tax adviser to assess their impact on your group’s structure, remote-work policies and financing arrangements under the relevant treaty network.