The vast majority of existing treaties deal separately with income from independent personal services.
Prior to 2000. the OECD Model included Article 14. Independent Personal Services, which provided for source taxation of income from professional services and other activities of an independent character where the income was attributable to a fixed base available to the non-resident in the other jurisdiction for the purpose of performing his activities. This article was deleted in 2000. with the result that income from such activities is now covered under the OECD Model by Article 7, Business Profits.
The OECD Commentary on Article 14 explains that the decision to delete Article 14
“reflected the fact that there were no intended differences between the concepts of permanent establishment, as used in Article 7, and fixed base, as used in Article 14. or between how profits were computed and tax was calculated according to which of Article 7 or 14 applied. In addition, it was not always clear which activities fell within Article 14 as opposed to Article 7. The effect of the deletion of Article 14 is that income derived from professional services or other activities of an independent character is now dealt with under Article 7 as business profits.”
The UN Model continues to include Article 14 dealing with such activities. Sub- paragraph 1 (a) of this article adopts a similar approach to the former OECD provision. However, subparagraph 1(b) provides that the income may also be taxed at source, even in the absence of a fixed base, if the person stays in the jurisdiction for a period or periods aggregating more than 183 days in a 12-month period.
The UN Model provision reads:
“1. Income derived by a resident of a Contracting State in respect of professional services or other activities of an independent character shall be taxable only in that State except in the following circumstances, when such income may also be taxed in the other Contracting State:
- if he has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities; in that case, only so much of the income as is attributable to that fixed base may be taxed in that other State; or
- if his stay in the other Contracting State is for a period or periods amounting to or exceeding in the aggregate 183 days in any twelve-month period commencing or ending in the fiscal year concerned; in that case, only so much of the income as is derived from his activities performed in that other State may be taxed in that other State.