Will the UN Tax Framework reinforce certainty or create new fragmentations?

Negotiations at the United Nations on a Framework Convention on International Tax Cooperation are moving into a technically decisive phase. The Intergovernmental Negotiating Committee (INC), established in early 2025, is drafting both a Framework Convention and two early protocols, with the aim of submitting final texts to the UN General Assembly in 2027.

While international tax reform is not new, the current discussions at UN level go beyond incremental adjustment. They revisit core principles: where taxing rights arise, how cross-border services are taxed, and how disputes are prevented and resolved.

For an economy such as the Netherlands, highly integrated into global value chains and deeply dependent on cross-border investment, these discussions are not theoretical. They concern legal certainty, cost structures and risk management for internationally active businesses.

Three Areas of Direct Exposure for Business

1. Allocation of Taxing Rights (Article 5)

The draft Convention addresses the “fair allocation of taxing rights.” Proposals under discussion would recognize taxing rights in jurisdictions where value is created, markets are located or revenues are generated.

Some versions have also referenced the possible renegotiation of existing tax treaties.

For Dutch-headquartered groups and multinational subsidiaries operating in the Netherlands, this raises several practical questions:

• How will new nexus concepts interact with existing permanent establishment standards?

• Could multiple jurisdictions assert taxing rights over the same income?

• Would existing bilateral treaty protections remain intact?

At present, the draft does not yet contain an explicit, enforceable safeguard against double or multiple taxation. Without such clarity, overlapping claims could increase disputes and affect effective tax rates, transfer pricing models and cross-border structuring decisions.

For businesses managing long-term investments, financing structures or intellectual property platforms, predictability in treaty application remains a fundamental element of risk assessment.

2. Taxation of Cross-Border Services

Under the draft Protocol on cross-border services, there is growing discussion of applying gross-basis withholding taxation, potentially as a default model, with a net-basis option in certain circumstances.

For service-intensive sectors, including engineering, consultancy, digital services, logistics and financial services, this has immediate operational implications:

• Gross taxation disregards underlying costs and margins.

• Relief from double taxation may not always be fully available or timely.

• Cash flow exposure may increase if taxes are withheld before profit realization.

An independent economic study commissioned by ICC from Oxford Economics has indicated that gross-basis withholding could affect trade and investment flows, particularly where taxes are not fully creditable.

For smaller firms and scale-ups operating on thin margins, the impact could be proportionally greater.

3. Dispute Prevention and Resolution

A second protocol addresses dispute prevention and resolution. Discussions include advance pricing agreements (APAs), joint audits and whether mandatory binding arbitration should be included as a backstop.

From a business perspective, the effectiveness of dispute resolution mechanisms is not procedural detail, it directly affects:

• Duration of tax uncertainty

• Provisioning and balance sheet treatment

• Access to capital

• Investor confidence

Experience shows that where arbitration exists as a credible mechanism, cases are often resolved earlier in the Mutual Agreement Procedure (MAP) process.

If dispute mechanisms remain optional or weakly structured, unresolved double taxation risks may persist for years.

Interaction with Existing Treaty Networks

A structural question remains unresolved: how will the Framework Convention and its protocols interact with the existing network of bilateral tax treaties?

This issue is expected to be addressed in a future article of the Convention, but no draft text has yet been shared.

For Dutch business, clarity on this point is central. The Netherlands has one of the world’s most extensive treaty networks. If new UN standards operate alongside, or potentially override, treaty provisions, companies could face parallel nexus tests, competing interpretations and increased compliance complexity.

ICC has consistently emphasized that compatibility with existing treaty frameworks and explicit mechanisms for relief from double taxation are essential for legal certainty.

Beyond Policy: Operational and Governance Risks

Beyond allocation and withholding debates, other elements under negotiation, including definitions of illicit financial flows and harmful tax practices, require precise drafting.

Ambiguity in terminology can create divergent national interpretations, reputational exposure and administrative duplication. Alignment with established international standards reduces such risk.

For multinational groups, tax governance is increasingly intertwined with ESG reporting, board oversight and stakeholder scrutiny. Legal clarity and procedural safeguards are therefore not only technical concerns; they are governance issues.

How Dutch Business Is Represented

ICC is the only business organization with UN Permanent Observer Status in these negotiations, representing companies across more than 170 countries.

ICC Netherlands ensures that Dutch perspectives are fed into the global drafting process through:

• Structured input into ICC’s Global Tax Commission

• Contributions to submissions on all three workstreams

• Dialogue with Dutch authorities and international counterparts

Technical drafting language matters. Many negotiations now concern wording choices that will determine how principles are interpreted in practice.

The intersessional period leading up to the August 2026 session, when further draft texts are expected, is therefore a critical window for input.

A Window for Technical Influence

The objective of the Convention is enhanced international tax cooperation. For business, the key question is how cooperation is designed: whether it reinforces predictability or increases fragmentation.

A workable outcome requires:

• Clear allocation principles

• Explicit safeguards against double taxation

• Administrable service taxation rules

• Effective dispute resolution backstops

• Coherence with existing treaty law

The negotiation process remains open, and many Member States recognize the importance of legal certainty and administrability.

For Dutch companies with cross-border exposure, engagement at this stage, through ICC tax commission and consultations, ensures that practical operational perspectives are reflected before texts are finalized.

International tax architecture is being recalibrated. The technical drafting phase now underway will shape how that architecture functions in practice.

Through ICC Netherlands, Dutch business has a direct channel into the global negotiations. Members who wish to contribute to this process are encouraged to engage with our Global Tax Commission as we prepare our next submissions.