RESTRICTED  
  
WT/BFA/W/567  
 
6 July 2021 
(21-5358) Page: 1/2 
Committee on Budget, Finance and Administration    
 
COSTS INCURRED BY THE WTO ON REIMBURSING STAFF MEMBERS CHARGEABLE  
TO U.S. INCOME TAXES  
1. This memorandum sets out the relevant context concerning reimbursement of taxes paid by 
WTO staff members on their WTO income in the United States.  
2. Article VIII.4 of the Marrakesh Agreement establishing the WTO of 15 April 1994 provides that 
"[t]he privileges and immunities to be accorded by a Member to … WTO … officials  … shall be similar 
to the privileges and immunities stipulated in the Con vention on the Privileges and Immunities of 
the Specialized Agencies, approved by the General Assembly of the United Nations on 
21 November  1947." These privileges and immunities include "exemptions from taxation in respect 
of the salaries and emoluments p aid to [officials ] by the specialized agencies". (Article VI of the 
1947 Convention)  
3. On 16 October 1998 , the Staff Regulations and Rules were adopted by Members. 
Staff Regulation  6.3 provides, in relevant part, that " [t]he salaries payable to staff members  shall 
be the net amounts after internal taxation." Staff Rule 106.11 provides that " [n]ational income tax 
on salaries, allowances, indemnities or grants paid by the WTO shall be refunded to the staff member 
by the WTO. " The Staff Regulations and Rules do not specify any calculation method for tax 
reimbursement.  
4. ILO Administrative Tribunal jurisprudence  provides that international organizations are obliged 
to actively protect their employees from national taxation of their earnings as international civil 
servants to avoid that some staff members are deprived of their tax -exempt status when others are 
not.  
5. On 22 December 2000 , the WTO entered into a Tax Reimbursement Agreement (TRA)  with 
the United States . Paragraph 2 of the TRA provides, in relevant part, t hat: " [s]ubject to the 
availability of appropriated funds, the United States shall reimburse the WTO for each taxpayer an 
amount not to exceed the tax that would be due if the specified categories of WTO income were the 
taxpayer's only income". This calcul ation method based on WTO income being the first income to be 
considered for determining tax liability before any other taxable income is referred to as "first -
income" method.  
6. From 2001 to 2003, the Administrative Tribunal of the International Labour Organ ization 
(ILOAT) issued certain judgments on tax reimbursement calculation methods. The ILOAT conclude d 
that the "last-income" method ology be used . Under this method, the reimbursement amount is 
determined by considering, for purposes of tax liability, WTO income after any other income.1 When 
compared to the "first -income" method, the "last -income" method results in a higher reimbursement 
if a staff member has a certain amount of outside taxable income. The ILOAT stated  that: 
In Judgment 2032 , the Tribunal made it abundantly clear that the principle of tax 
exemption is fundamental; that it is ultimately the Organisation's responsibility to 
ensure that staff members are fully reimbursed for any income tax paid on their 
[Organization's ] income; and that the last -income method is the only appropriate 
method for determining tax reimbursements. (ILOAT Judgment No.  2256, under 8)  
 
1 For the ILOAT, " [w]here a State imposes tax upon its nationals who are international civil servants in 
receipt of income - some of which is tax exempt and some of which is not - the only proper method of determining 
how much tax sh ould actually be paid is to calculate the hypothetical amount which would be due if the exempt 
income had not been received." (ILOAT Judgements No.  2032, under 14; No.  2255, under 22) . WT/BFA/W/567  
 
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  7. Since the 2004 fiscal year, the WTO Secretariat  began to apply the "last -income" method in 
the reimbursement of US taxes p aid by staff members on their WTO income. Th e Secretariat did so 
because Staff  Regulation 1.1 provides, in relevant part, that " [t]he WTO shall at all times act … in 
full respect of the Staff Regulations  and the applicable jurisprudence of the Administrati ve Tribunal 
of the International Labour Organization, in its relations with staff members. " The CBFA was 
informed of this action through the document bearing the reference WT/BFA/W/142  (dated 29 
November 2006) at paragraphs 103 to 111. 
 
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