The U.N. Model Double Taxation Convention Between Developed and Developing Countries does not contain a specific article dealing with consideration for services. However, the source country can tax consideration for some types of services under different articles. Those articles and their relevant conditions are summarized in the table.
Source Country Taxing Rights
Although there are several provisions in the U.N. model addressing the taxation of consideration for services, the source country’s right to tax most of those services provided cross-border in the normal course of business depends on the existence of a permanent establishment or fixed base in the source country. A deduction would be allowed for fees paid by a resident of the source country to a resident of the other country, but there is no corresponding right of the source country to tax those services when:
• The service provider visits the source country and performs the services there, but the rendition of services does not create a PE, fixed base, or any other condition that would trigger article 14 (the 183-day test); or
• The service provider does not visit the source country and performs services from his country of residence or another country. Advances in technology have made it possible to render a significant number of services without visiting the source country or to completely render the services in the source country without breaching the PE threshold.
Click here to read more.
Kommentare