The relevance of the OECD and UN Model Conventions and their Commentaries for the interpretation of Hong Kong tax treaties

Introduction

Hong Kong's treaty network is underdeveloped. As of January 2011, it hasconcluded comprehensive tax treaties with eighteen countries. Tax treatynegotiations are in progress with the Czech Republic, Denmark, Finland, India,Italy, Korea (Republic of Korea), Macau Special Administrative Region (MacauSAR), Malaysia, Mexico, Pakistan, Saudi Arabia, Spain and United ArabEmirates.

At present, there are mainly three tax treaty models in the world: the OECDModel, the UN Model and the US Model. These three Models have been regularlyupdated in the last few years since they were first issued. Hong Kong has madereference to these Models in concluding its tax treaties. The following sectionswill examine the impact of these Models, especially the OECD and UN Models onHong Kong's treaties. The US Model is not the subject of this study but it isreferred to where necessary.

The relevance of the Models and their respectiveCommentaries

Hong Kong’s tax treaties have been drafted on the basis of the OECD and UNModels, though in some (rare) cases the US Model is referred to. In the InlandRevenue Department (IRD)’s Departmental Interpretation and Practice Notes No. 44(revised) (DIPN 44), the Commissioner of the Inland Revenue notes: ‘In theinterpretation and application of the provisions of the ComprehensiveArrangement (between Hong Kong and China), both Sides will refer to the ViennaConvention on the Law of Treaties (1969), the Commentaries on the relevantArticles of the Model Tax Conventions of the OECD and the United Nations, aswell as to their respective principles of interpretation of taxation law.’