Updates to UN Tax Standards Better Protect Revenues for Resource-Rich Countries

Bilateral tax treaties determine how income from cross-border business activities is taxed, affecting governments’ share of revenues, and ultimately, the support available for climate and development priorities. 

Sometimes, governments deliberately design treaties in a way that limits their taxing rights, often due to political or economic pressures. Other times, companies take advantage of gaps in treaty design to secure tax benefits that countries never intended to offer. 

Resource-rich countries are particularly exposed to these risks, given the scale and cross-border nature of mining operations in a sector dominated by multinational enterprises. Several cases show how mineral-rich countries can lose millions of dollars when risks to mining revenues are not adequately anticipated during tax treaty negotiations.

In Côte d’Ivoire, the company PGS Geophysical carried out two seismic surveys offshore lasting 25 and 41 days, respectively. It initially treated the income as taxable in Côte d’Ivoire and paid tax there, but a ruling by the Norwegian Supreme Court later found the work was too short to meet the treaty threshold required to trigger a taxable presence. Norway then taxed the income in full and denied any relief for taxes already paid abroad. 

The case illustrates the importance of tax treaty rules in securing the ability of countries where activities take place to tax short-term, high-value activities and protect their revenues.

Jaqueline Taquiri, Senior Policy Advisor, IISD

Tax treaties may prevent a country from taxing income earned by subcontractors providing services to extractives projects if the time threshold isn’t met. Because the PGS vessels operated only for a few weeks rather than several months, the treaty’s time threshold was never reached, in the Norwegian Court’s view. Subcontractors, who are more mobile than licence holders, are particularly well-positioned to organize their activities so as to remain below such thresholds.

Tax treaty design can also lead to revenue losses around technical and management services. When a mine pays a foreign company for these services, treaty provisions may prevent the source state from collecting withholding tax on those payments.

The UN Model Tax Convention Between Developed and Developing Countries is a reference document used by countries to negotiate tax treaties. Revising it was a real opportunity to lock in international practices that push for stronger revenue rights for source countries. The Committee's 32nd session, held in March 2026, confirmed that these policy updates were officially being integrated into the UN’s practical negotiation manuals.

Closing Revenue Gaps: The update of the UN Tax Treaty Model

In 2024, drawing on extensive tax treaty experience, the UN Tax Committee proposed a new provision for natural resources, Article 5A, in the UN Model Tax Convention. A year later, the proposal was submitted to the Economic and Social Council and approved, formally incorporating the article in the Model.

The new provision lowers the time required for companies to trigger a taxable presence. It sets a clear 30-day threshold in any 12-month period to trigger a taxable presence from extractive activities, replacing the previous 6-month test applied within the same 12-month frame. Had this rule been in place during the PGS case and adopted by the Ivorian-Norwegian treaty, it would have made clear that Côte d’Ivoire had the right to tax income from activities carried out in its territory, reducing the uncertainty that arose under the earlier framework. 

The provision marks an important step toward curbing tax revenue leakage that tax treaties can generate in the mining and oil and gas sectors. 

Jaqueline Taquiri, Senior Policy Advisor, IISD

That said, governments negotiating such agreements will need to consider the trade-offs between broadening opportunities for revenue collection and the potential for increased compliance and administrative burdens that can arise from lower time thresholds and managing multiple transactions. 

These changes form part of a broader set of updates to the UN Model, including the introduction of an article (Article 12AA) on cross-border services, which combines previous rules on technical fees and independent personal services. The new provision applies to payments for any service and allows the source country to impose a gross withholding tax on payments made within its jurisdiction. Its broad scope makes it a key tool for protecting revenues from technical and management services in the extractives sector.

Informing Tax Treaty Design

Since 2021, IISD has been supporting resource-rich countries by providing technical guidance on negotiating tax treaties, stressing the importance of designing treaties that protect mining revenues, by taking specific industry characteristics into account, as well as related international tax risks. 

Building on this work, IISD contributed to UN discussions through the Subcommittee on Extractive Industry Taxation Issues for Developing Countries, offering practical input on proposals and revisions to the UN Model Double Taxation Convention between Developed and Developing Countries alongside other organizations. IISD’s proposals included shortening the window before a company’s presence triggers a tax obligation, aligning with the new provision.

Why This Matters for Governments Everywhere

Tax treaties are not technical documents confined to narrow use cases; they shape how countries allocate taxing rights and collect revenue in a globalized economy. By reflecting practical realities and sector-specific features, they influence both revenue outcomes and the predictability of the tax system for governments and businesses.

These updates are likely to shape future treaty negotiations, giving resource-rich countries greater leverage to better protect revenues from cross-border activities.