On October 13, Professor Kasper Dziurdź gave a lecture on the future of taxation of cross-border services and its international structure as part of the lecture series “Future Issues in Tax Law.
Globalization, digitalization, and increasing mobility of people and services are throwing the distribution of taxation rights out of balance, explains Professor Dziurdź at the beginning of his lecture: “The link to physical presence is no longer appropriate or ‘fair.’”
As things stand today, according to domestic law, cross-border services may be taxed where they are physically performed or where they are used. Double Taxation Treaties may further restrict these taxing rights, as they normally condition the taxation of services at the place of use on the existence of a Permanent Establishment. So both the residence and source countries claim taxation rights. According to Dzirudź, there is an urgent need for reform here and new multilateral approaches are necessary to clearly allocate taxation rights in order to prevent double taxation. So where and how should services be taxed in the future?
This issue—or rather the necessary adjustments and possible simplifications—is currently being addressed by two international agreements, which the professor of international tax law explained in more detail this evening.
According to the UN Model Convention 2025, not only technical and automated digital services – regarding which special rules had already existed since 2017 and 2021, respectively – but all independently provided services can also be taxed in the country from which the payments originate, regardless of where they are physically performed. The focus is on the new regulation and equal treatment of technical and personal services in Article 12AA, as well as the extension of withholding tax rights. This will potentially give countries more extensive taxation rights at the source State in the future.
The planned UN framework agreement on international tax cooperation also addresses the issue of taxation of cross-border services. By 2027, new standards are to be created although it is still unclear what the content of these new rules might be.
Looking to the future, Professor Dziurdź suspects that Art. 12AA and Art. 12B will remain “isolated solutions” for the foreseeable future and that a fast-track instrument will do little to change this. “In the longer term, however, there will be a shift towards more source taxation,” says Dziurdź. Linking source to payment (payer) would be the simplest solution here. However, it remains to be seen what will now be negotiated internationally.
Prof. Dr. Kasper Dziurdź is Professor of International Tax Law and Director of the LL.M. program “International and European Tax Law” at Maastricht University. He researches and teaches in the field of international and European tax law, with a focus on double taxation agreements.
October 2025