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Page 47

Like Article 7, Article 14 establishes a threshold below which a non-resident SP would not be subject to tax in a jurisdiction on income from professional or other independent services performed in that jurisdiction.

Where a treaty adopts the language of the pre-2000 OECD Model Article 14. and the article is interpreted to provide no difference in outcome to Article 7, the comments above in respect of Article 7 are equally applicable to Article 14.

However, not all jurisdictions share the OECD view that there is no intended difference between the concepts of PE and fixed base, or between how profits are computed and tax calculated in the two articles. Furthermore, many treaties provide, in accordance with Article 14 of the UN Model, for source taxation of income from independent personal services where the non-resident SP stays in the jurisdiction for more than 183 days in any 12-month period, a different outcome is likely to result than would have occurred under Article 7. In these circumstances, the non-resident SP will need to determine whether the services provided are “professional services or other activities of an independent character”, the income from which falls within Article 14.

The imposition of an interim non-final withholding tax on income from professional or other independent personal services is not uncommon. This assists tax administrations in collecting tax owed by non-resident providers of independent personal services, especially in cases where the activities are mobile and the income there from is difficult for the tax administration to identify. It may also simplify compliance for such non-residents if they choose not to go through the complexities of filing tax returns, etc. However, it imposes a compliance burden on payers and adds considerable administrative complexity for tax administrations.


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