Concerns Regarding the Proposed Amendments to Article 8 of the United Nations Tax Model Convention Persist

Montreal, 27 May 2025 – This Advisory Bulletin follows the initial bulletin titled “Changes in the Global Policies regarding taxation of international air transport,” issued on 3 March 2025. During the 30^th Meeting of the United Nations Committee of Experts on International Tax Matters (UN Tax Committee) the changes to Article 8 of the United Nations Model Double Taxation Convention Between Developed and Developing Countries (UN Model Convention) have been approved.  According to the United Nations’ rules of procedure, the amendments need the approval of the United Nations Economic and Social Council (UN ECOSOC, hereinafter “the Council”) to become final.

On 10–11 June 2025, in New York City, the Council is scheduled to deliberate on the modifications to the UN Model Convention. Changes to Article 8 introduce a choice between residence-based and source-based taxation for international air transport operators. Should the changes be approved by the Council, airlines could be taxed not just in the country where they are headquartered, but also in countries where they have sold tickets. It is not the practice of the Council to reconsider changes proposed by the UN Tax Committee.

While source-based taxation has traditionally applied to international shipping—due to its unique regulatory and tax framework—the global air transport industry has, by contrast, consistently followed a residence-based taxation model. This is in alignment with ICAO Resolutions, Document 8632 – Policies on Taxation in the Field of International Air Transport, ICAO Template Air Service Agreement (Annex A) and the OECD Model Tax Convention on Income and Capital (Annex A).  The interest in source-based taxation lies in the potential to enhance State revenue in developing nations, many of which support the change.

An increased risk of multiple taxation in air transport, and the high level of complexity required to administer the change, will not only harm air transport, but also States’ economies and their competitiveness – particularly in Least Developed Countries, which maintain extensive international networks. This may force airlines to reconsider their destinations, in turn increasing the cost of travel and affecting connectivity – indirectly impacting airports.

The Economic and Social Council (ECOSOC) is one of the six principal organs of the United Nations, established by the UN Charter in 1945. It is the central platform for fostering debate and innovative thinking, forging consensus on ways forward, and coordinating efforts to achieve internationally agreed goals—especially the Sustainable Development Goals (SDGs). ECOSOC is responsible for the economic, social, and environmental dimensions of sustainable development. It serves as the main forum for global policy dialogue, coordination, and review in these areas, and works to promote higher standards of living, full employment, and conditions of economic and social progress and development.

ACI’s position

The proliferation of various taxes and duties on airports, passengers and air transport, as well as disproportionate or unwarranted airport concession fees and rents to governments, represent an impediment to air transport. Only justifiable, equitable and non-discriminatory taxes on airports, passengers and air transport are acceptable, as they otherwise engender a negative economic impact hindering the sustainable development of airports and of air transport^[1].

ACI opposes practices like double taxation, emphasizing their inefficiency as they raise travel costs, suppress connectivity, and diminish economic benefits.

Actions taken by other organizations

ICAO has sent a State Letter to its member States, highlighting the contradiction between these UN developments and ICAO’s own Policies on Taxation (see Annex B). IATA has been at the forefront of these developments and has submitted several documents and positions.

Next steps

ACI World has prepared a letter to the President of UN ECOSOC and is actively coordinating with IATA to ensure that the voice of the global aviation industry is effectively represented. Kindly leverage the letter in support of your advocacy efforts.

ACI Members and Airports are encouraged to assess how the proposed changes could affect air connectivity and the development of air transport in their respective States, and to take the following actions:

• Engage with your Ministry of Finance or Treasury, particularly relevant department heads or policy advisors, to raise awareness of the potential implications.
• Reach out to your country’s Permanent Mission to the United Nations in New York to express concerns and reinforce the importance of aviation to economic development and global connectivity.

[1] ACI Policy Handbook, 10th edition – 2020 – Store | ACI World, page 12, “2.3. Taxation on airport business and civil aviation”

About ACI

Airports Council International (ACI), the trade association of the world’s airports, is a federated organization comprising ACI World, ACI Africa, ACI Asia-Pacific and Middle East, ACI EUROPE, ACI Latin America and the Caribbean and ACI North America. In representing the best interests of airports during key phases of policy development, ACI makes a significant contribution toward ensuring a global air transport system that is safe, secure, efficient, and environmentally sustainable. As of January 2025, ACI serves 830 members, operating 2.181 airports in 170 countries.

ANNEX A

Article 8 – UN Model Convention

International Shipping and Air Transport

(Alternative A)

1. Profits from the operation of ships or aircraft in international traffic shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.

2. Profits from the operation of boats engaged in inland waterways transport shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.

3. If the place of effective management of a shipping enterprise or of an inland waterways transport enterprise is aboard a ship or a boat, then it shall be deemed to be situated in the Contracting State in which the home harbour of the ship or boat is situated, or, if there is no such home harbour, in the Contracting State of which the operator of the ship or boat is a resident.

4. The provisions of paragraph 1 shall also apply to profits from the participation in a pool, a joint business or an international operating agency.

(Alternative B)

1.  Profits from the operation of aircraft in international traffic shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.

2. Profits from the operation of ships in international traffic shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated unless the shipping activities arising from such operation in the other Contracting State are more than casual. If such activities are more than casual, such profits may be taxed in that other State. The profits to be taxed in that other State shall be determined on the basis of an appropriate allocation of the over-all net profits derived by the enterprise from its shipping operations. The tax computed in accordance with such allocation shall then be reduced by ___ per cent. (The percentage is to be established through bilateral negotiations).

3. Profits from the operation of boats engaged in inland waterways transport shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.

4. If the place of effective management of a shipping enterprise or of an inland waterways transport enterprise is aboard a ship or boat, then it shall be deemed to be situated in the Contracting State in which the home harbour of the ship or boat is situated, or if there is no such home harbour, in the Contracting State of which the operator of the ship or boat is a resident.

5. The provisions of paragraphs 1 and 2 shall also apply to profits from the participation in a pool, a joint business or an international operating agency.

Article 8 OECD Model Convention

International Shipping and Air Transport

1.  Profits of an enterprise of a Contracting State from the operation of ships or aircraft in international traffic shall be taxable only in that State.

2. The provisions of paragraph 1 shall also apply to profits from the participation in a pool, a joint business or an international operating agency

ANNEX B – ICAO POLICIES ON TAXATION

ICAO’S Policies on Taxation in the Field of International Air Transport (Doc. 8632) and related ICAO Council Resolution (pdf)

Available here.

2. With respect to the taxation of income of international air transport enterprises and taxation of aircraft and other moveable property:

a) each Contracting State shall, to the fullest possible extent grant reciprocally:

i) exemption from taxation on the income of air transport enterprises of other Contracting States derived in that Contracting State from the operation of aircraft in international air transport

3. With respect to taxes on the sale and use of international air transport: each Contracting State shall reduce to the fullest practicable extent and make plans to eliminate as soon as its economic conditions permit all forms of taxation on the sale or use of international transport by air, including taxes on gross receipts of operators and taxes levied directly on passengers;

ICAO – Template for Air Service Agreement

Article 14 – Taxation

Option 1

1. Profits from the operation of the aircraft of a designated airline in international traffic shall be taxable only in the territory of the Party in which the place of effective management of that airline is situated.

Option 2

1. Profits or income from the operation of aircraft in international traffic derived by an airline of one Party, including participation in inter-airline commercial agreements or joint business ventures, shall be exempt from any tax on profits or income imposed by the Government of the other Party.

ANNEX C – IATA DOCUMENTS SUBMITTED TO UN TAX COMMITTEE

• Position paper prepared by IATA (pdf) to explain the problems faced by international airlines in relation to taxation on income imposed by States in which they operate other than their own fiscal domicile.
• IATA’s public statement on the revision of Article 8 of the UN Model Convention (pdf) at the 28th Session of the Committee of Experts on International Cooperation in Tax Matters (“UN Tax Committee”), 19-22 March 2024.