The Organisation for Economic Co-operation and Development (OECD) has published a public discussion draft on the tax treaty treatment of termination payments, for comment before 13 September 2013.

The OECD's Committee on Fiscal Affairs - through a subgroup of its Working Party 1 on Tax Conventions and Related Questions - are aiming to clarify how termination payments should be treated for tax treaty purposes following findings that the current treaty characterisation of payments received after the termination of employment, are inconsistent and could create risks of double taxation and non-taxation.

The discussion includes proposals for additions and changes to the Commentary on the OECD Model Tax Convention.

As the proposals relate to a variety of payments (eg, payment for unused holidays or sick leave, payment in lieu of notice of termination and severance payment) that may be made to a large number of individuals, the Working Group have decided to invite interested parties and, in particular, people and organisations (including advisers and representatives from human resources departments) who regularly deal with the tax situation of employees who exercise employment activities in different countries to provide their views and experience.

Comments to the discussion will be examined at the September 2013 meeting of the Working Party.

More details are available from OECD HERE