Article 2 (Taxes covered)

1. This Convention shall apply to taxes on income and on capital imposed on behalf of a Contracting State or of its political subdivisions or local authorities, irrespective of the manner in which they are levied. 

2. There shall be regarded as taxes on income and on capital all taxes imposed on total income, on total capital, or on elements of income or of capital, including taxes on gains from the alienation of movable or immovable property, taxes on the total amounts of wages or salaries paid by enterprises, as well as taxes on capital appreciation.

3. The existing taxes to which the Convention shall apply are in particular:
    a) (in State A): ..........................................
    b) (in State B): .......................................... 

4. The Convention shall apply also to any identical or substantially similar taxes that are imposed after the date of signature of the Convention in addition to, or in place of, the existing taxes. The competent authorities of the Contracting States shall notify each other of any significant changes that have been made in their taxation laws.

Switzerland's non-exhaustive list of double taxation treaties based on Article 2 of the OECD Model

 CountryCorresponding to Art. 2 Deviations (this section is under construction)
 AustriaArt. 2 (German/French)
  • Art. 2 para. 1: List of political subdivision/local authorities.
  • Art. 2 para. 2
    • Taxes of the total amount of wages or salaries paid by enterprises are mentioned in Art. 2 para. 3.
    • The convention shall not apply to Federal anticipatory tax withheld at the source on prize in a lottery (Art. 6 WHTA)
    • Art. 2 para. 4: Without an explicit obligation to notify.
 ChinaArt. 2 (German/French/English) 
 EU  
 FranceArt. 2 (German/French) 
 GermanyArt. 2 (German/French) 
 Great BritainArt. 2 (German/French/English) 
 Hong-KongArt. 2  (German/French/English) 
 IndiaArt. 2 (German/French/English) 
 ItalyArt. 2 (German/French/English) 
 Liechtensteinpending 
 LuxemburgArt. 2 (German/French/English) 
 MaltaArt. 2 (German/French/English) 
 NetherlandsArt. 2 (German/French/English) 
 SpainArt. 2 (German/French) 
 USAArt. 2 (German/French/English)

Regulations - Verordnungstexte - Ordonnances


Swiss Case law - Rechtsprechung - Jurisprudence



Scholars - Lehre - Doctrine


Materialien (Botschaft - parl. Beratung) - Message et débats

Varia


Article 2 and Commentary of the UN Model Double Taxation Convention between Developed and Developing Countries

last edited 1.6.15 and based on the UN Model Double Taxation Convention between Developed and Developing Countries (2011)

Article 2 (Taxes covered)
1. This Convention shall apply to taxes on income and on capital imposed on behalf of a Contracting State or of its political subdivisions or local authorities, irrespective of the manner in which they are levied. 

2. There shall be regarded as taxes on income and on capital all taxes imposed on total income, on total capital, or on elements of income or of capital, including taxes on gains from the alienation of movable or immovable property, taxes on the total amounts of wages or salaries paid by enterprises, as well as taxes on capital appreciation.

3. The existing taxes to which the Convention shall apply are in particular:
    a) (in State A): ..........................................
    b) (in State B): .......................................... 

4. The Convention shall apply also to any identical or substantially similar taxes that are imposed after the date of signature of the Convention in addition to, or in place of, the existing taxes. The competent authorities of the Contracting States shall notify each other of any significant changes that have been made in their tax laws.


Commentary 2011:
"A. General considerations 

1. Article 2 of the United Nations Model Convention reproduces Article 2 of the OECD Model Convention.

2. This Article is designed to clarify the terminology and nomenclature concerning the taxes to be covered by the Convention. In this connection, it may be observed that the same income or capital may be subject in the same country to various taxes—either taxes which differ in nature or taxes of the same nature levied by different political subdivisions or local authorities. Hence double taxation cannot be wholly avoided unless the methods for the relief of double taxation applied in each Contracting State take into account all the taxes to which such income or capital is subject. Consequently, the terminology and nomenclature relating to the taxes covered by a treaty must be clear, precise and as comprehensive as possible. As noted in the Commentary on Article 2 of the OECD Model Convention, this is necessary:
1. [...] to ensure identification of the Contracting States’ taxes covered by the Convention, to widen as much as possible the field of application of the Convention by including, as far as possible, and in harmony with the domestic laws of the Contracting States, the taxes imposed by their political subdivisions or local authorities, to avoid the necessity of concluding a new convention whenever the Contracting States’ domestic laws are modified, and to ensure for each Contracting State notification of significant changes in the taxation laws of the other State.

B. Commentary on the paragraphs of article 2

Paragraph 1
3. This paragraph states that the Convention applies to taxes on income and on capital, irrespective of the authority on behalf of which such taxes are imposed (e.g. the State itself or its political subdivisions or local authorities) and irrespective of the method by which the taxes are levied (e.g. by direct assessment or by deduction at the source, in the form of surtaxes or surcharges or as additional taxes).

Paragraph 2
4. This paragraph defines taxes on income and on capital, as taxes on total income, on total capital or on elements of income or of capital, including taxes on gains from the alienation of movable or immovable property, taxes on capital appreciation and taxes on the total amounts of wages or salaries paid by enterprises. Practices regarding the coverage of taxes on the total amount of wages and salaries paid by enterprises vary from country to country and this matter should be taken into account in bilateral negotiations. According to paragraph 3 of the Commentary on Article 2 of the OECD Model Convention, taxes on the total amount of wages do not include “[s]ocial security charges, or any other charges paid where there is a direct connection between the levy and the individual benefits to be received”. The
OECD Commentary further observes:

4. Clearly a State possessing taxing powers—and it alone—may levy the taxes imposed by its legislation together with any duties or charges accessory to them: increases, costs, interest etc. It has not been considered necessary to specify this in the Article, as it is obvious that in the levying of the tax the accessory duties or charges depend on the same rule as the principal duty. 

5. The Article does not mention “ordinary taxes” or “extraordinary taxes”. Normally, it might be considered justifiable to include extraordinary taxes in a Model Convention, but experience has shown that such taxes are generally imposed in very special circumstances. In addition, it would be difficult to define them. They may be extraordinary for various reasons; their imposition, the manner in which they are levied, their rates, their objects, etc. This being so, it seems preferable not to include extraordinary taxes in the Article. But, as it is not intended to exclude extraordinary taxes from all conventions, ordinary taxes have not been mentioned either. The Contracting States are thus free to restrict the convention’s field of application to ordinary taxes, to extend it to extraordinary taxes, or even to establish special provisions.

Paragraph 3 
5. This paragraph provides the Contracting States an opportunity to enumerate the taxes to which the Convention is to apply. According to the Commentary on Article 2, paragraph 3, of the OECD Model Convention, the list “is not exhaustive”, for “it serves to illustrate the preceding paragraphs of the Article”. In principle, however, it is expected to be “a complete list of taxes imposed in each State at the time of signature and covered by the Convention”.

Paragraph 4 
6. The Commentary on Article 2, paragraph 4 of the OECD Model Convention is applicable:

7. This paragraph provides, since the list of taxes in paragraph 3 is purely declaratory, that the Convention is also to apply to all identical or substantially similar taxes that are imposed in a Contracting State after the date of signature of the Convention in addition to, or in place of, the existing taxes in that State.

8. Each State undertakes to notify the other of any significant changes made to its taxation laws by communicating to it, for example, details of new or substituted taxes. Member countries are encouraged to communicate other significant developments as well, such as new regulations or judicial decisions; many countries already follow this practice. Contracting States are also free to extend the notification requirement to cover any significant changes in other laws that have an impact on their obligations under the convention. Contracting states wishing to do so may replace the last sentence of the paragraph by the following: 

The competent authorities of the Contracting States shall notify each other of any significant changes that have been made in their taxation laws or other laws affecting their obligations under the Convention."


Commentary on Article 2 of the OECD Model Tax Convention

Extract from 2014 Commentary:
"1. This Article is intended to make the terminology and nomenclature relating to the taxes covered by the Convention more acceptable and precise, to ensure identification of the Contracting States’ taxes covered by the Convention, to widen as much as possible the field of application of the Convention by including, as far as possible, and in harmony with the domestic laws of the Contracting States, the taxes imposed by their political subdivisions or local authorities, to avoid the necessity of concluding a new convention whenever the Contracting States’ domestic laws are modified, and to ensure for each Contracting State notification of significant changes in the taxation laws of the other State.


Paragraph 1
2. This paragraph defines the scope of application of the Convention: taxes on income and on capital; the term “direct taxes” which is far too imprecise has therefore been avoided. It is immaterial on behalf of which authorities such taxes are imposed; it may be the State itself or its political subdivisions or local authorities (constituent States, regions, provinces, départements, cantons, districts, arrondissements, Kreise, municipalities or groups of municipalities, etc.). The method of levying the taxes is equally immaterial: by direct assessment or by deduction at the source, in the form of surtaxes or surcharges, or as additional taxes (centimes additionnels), etc.

Paragraph 2
3. This paragraph gives a definition of taxes on income and on capital. Such  taxes comprise taxes on total income and on elements of income, on total capital and on elements of capital. They also include taxes on profits and gains derived from the alienation of movable or immovable property, as well as taxes on capital appreciation. Finally, the definition extends to taxes on the total amounts of wages or salaries paid by undertakings (“payroll taxes”; in Germany, “Lohnsummensteuer”; in France, “taxe sur les salaires”). Social security charges, or any other charges paid where there is a direct connection between the levy and the individual benefits to be received, shall not be regarded as “taxes on the total amount of wages”.

4. Clearly a State possessing taxing powers — and it alone — may levy the taxes imposed by its legislation together with any duties or charges accessory to them: increases, costs, interest, etc. It has not been considered necessary to specify this in the Article, as it is obvious that in the levying of the tax the accessory duties or charges depend on the same rule as the principal duty. Practice among member countries varies with respect to the treatment of interest and penalties. Some countries never treat such items as taxes covered by the Article. Others take the opposite approach, especially in cases where the additional charge is computed with reference to the amount of the underlying tax. Countries are free to clarify this point in their bilateral negotiations.

5. The Article does not mention “ordinary taxes” or “extraordinary taxes”. Normally, it might be considered justifiable to include extraordinary taxes in a model convention, but experience has shown that such taxes are generally imposed in very special circumstances. In addition, it would be difficult to define them. They may be extraordinary for various reasons; their imposition, the manner in which they are levied, their rates, their objects, etc. This being so, it seems preferable not to include extraordinary taxes in the Article. But, as it is not intended to exclude extraordinary taxes from all conventions, ordinary taxes have not been mentioned either. The Contracting States are thus free to restrict the convention’s field of application to ordinary taxes, to extend it to extraordinary taxes, or even to establish special provisions.

Paragraph 3
6. This paragraph lists the taxes in force at the time of signature of the Convention.  The list is not exhaustive. It serves to illustrate the preceding paragraphs of the Article. In principle, however, it will be a complete list of taxes imposed in each State at the time of signature and covered by the Convention.

6.1 Some member countries do not include paragraphs 1 and 2 in their bilateral conventions. These countries prefer simply to list exhaustively the taxes in each country to which the Convention will apply, and clarify that the Convention will also apply to subsequent taxes that are similar to those listed. Countries that wish to follow this approach might use the following wording:

1. The taxes to which the Convention shall apply are:

a) (in State A):........................
b) (in State B):.........................

2. The Convention shall apply also to any identical or substantially similar taxes that are imposed after the date of signature of the Convention in addition to, or in place of, the taxes listed in paragraph 1. The competent authorities of the Contracting States shall notify each other of any significant changes that have been made in their taxation laws. As mentioned in paragraph 3 above, social security charges and similar charges should be excluded from the list of taxes covered.

Paragraph 4
7. This paragraph provides, since the list of taxes in paragraph 3 is purely declaratory, that the Convention is also to apply to all identical or substantially similar taxes that are imposed in a Contracting State after the date of signature of the Convention in addition to, or in place of, the existing taxes in that State.

8. Each State undertakes to notify the other of any significant changes made to its taxation laws by communicating to it, for example, details of new or substituted taxes. Member countries are encouraged to communicate other significant developments as well, such as new regulations or judicial decisions; many countries already follow this practice. Contracting States are also free to extend the notification requirement to cover any significant changes in other laws that have an impact on their obligations under the convention; Contracting States wishing to do so may replace the last sentence of the paragraph by the following: The competent authorities of the Contracting States shall notify each other of any significant changes that have been made in their taxation laws or other laws affecting their obligations under the Convention.

9. [Deleted]

Reservations on the Article

10. Canada, Chile and the United States reserve their positions on that part of paragraph 1 which states that the Convention should apply to taxes of political subdivisions or local authorities.

11. Australia, Japan and Korea reserve their position on that part of paragraph 1 which states that the Convention shall apply to taxes on capital.

12. Greece holds the view that “taxes on the total amounts of wages or salaries paid by enterprises” should not be regarded as taxes on income and therefore will not be covered by the Convention."