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Jurisdictions also take different approaches to taxation under this article. Unlike Article 7, which refers to “profits”, Article 14 refers to “income” derived from the relevant services. Since the concept of "income” may be interpreted as referring to either a net amount (i.e. gross fees less expenses) or a gross amount. Article 14 is applied differently in different countries. The majority of countries tax the income on a net basis, but some jurisdictions, including Argentina. South Korea and Ukraine, apply withholding taxes to independent personal services income, resulting in taxation on a gross basis. A variation that is found in some countries, e.g. Austria and Israel, is to tax income from independent personal services on a net basis where it is attributable to a fixed base, and on a gross basis if it is taxable at source by reason of physical presence in excess of the minimum time threshold. In a few treaties where withholding tax is clearly contemplated, such as in Peru's treaties with Chile and Canada, a limit is placed on the rate of source tax that can be imposed on the gross income.

Most branch reporters expressed the view that “fixed base” would be determined on the basis of very similar, if not identical, criteria to “PE”, even though some jurisdictions consider that PE is a concept that belongs to the business context and not to the sphere of professional services. However, a few branch reporters thought that there might be a (small) difference between the two concepts. Some also thought there might be a difference in the operation of Article 7, as compared with Article 14, drawing on the fact that business activities must be carried on “through” a PE, whereas a “fixed base” only had to be “regularly available” to the SP.

An interesting variation on the UN Model Article 14 that is found in some treaties, e.g. those concluded by South Africa, provides that persons who meet a “presence” test will be deemed to have a fixed base regularly available to them. Income derived from independent personal services performed in that jurisdiction is attributed to that fixed base. The effect of this is to ensure that references to income effectively connected to, or pertaining to, a “fixed base” in other articles of the treaty, such as the dividends, interest, royalties and capital gains articles, will also apply to independent personal services income that meets the time threshold under Article 14.

 

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