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This section explores how taxation of services is dealt with under treaties, and whether treaties effectively reconcile the differences in treatment of such income under the domestic law of different jurisdictions in a way that eliminates double taxation and facilitates international trade and investment.

The focus of this topic is on income from services that falls within Article 7. Business Profits, of the OECD Model, or Article 7, Business Profits, and Article 14, Independent Personal Services, of the UN Model. This includes income such as technical fees, which may be dealt with in some treaties under a different article, but which would be covered by Article 7 of the OECD Model or Articles 7 or 14 of the UN Model. Taxation of income under the specific articles of the OECD or UN Models, such as income from international transport (Article 8), entertainment (Article 17) or directors’ fees (Article 16) are not dealt with in this report.

A variety of approaches to taxation of income from sendees are adopted in treaties. Many treaties follow the OECD Model approach of providing for source taxation only where the income is attributable to activities conducted through a fixed place of business or by a dependent agent. Many others provide for source taxation under a broader range of circumstances, such as those set out in the UN Model, e.g. where the services are performed in the jurisdiction for more than six months or where the SP is present in that jurisdiction for more than 183 days. The intra- ASEAN Model Double Tax Convention also allows source taxation of income from independent personal services if the remuneration is borne by a resident or PE and exceeds USS 10,000. Yet other treaties provide for royalty-type treatment of income from certain services, especially technical services. The Andean Model provides for exclusive source taxation of income from professional services or technical assistance rendered in that jurisdiction, while the CARICOM Treaty also provides for exclusive source taxation of management fees (limited to 15 per cent of gross fees) and of net income from professional services.


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