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Some of the uncertainty around the tax treatment of income from cross-border services arises from issues relating to what is encompassed by the term “services”. The branch reports indicate that, while a significant number of jurisdictions treat income from some or all services as a distinct category of income, no country, other than Russia, has a statutory definition of “services” for income tax purposes.

For those jurisdictions where the income is treated in the same way as other business income, the absence of such a definition is perhaps not surprising, since it would have little relevance, at least under domestic law.

It is more surprising that, in jurisdictions where the tax treatment of the income will depend on whether it is income from services, legislatures (other than in Russia) have not seen fit to define the term for income tax purposes. In the absence of a statutory definition, or other judicial or administrative guidance, the ordinary meaning of the term is likely to apply.

In Russia, the term “sendees” is defined in the Civil Code both negatively and positively. “Services” are defined as actions with intangible results that are consumed in the course of action. However, the definition excludes “works” (actions with tangible results which are handed over to a customer), financial, rental and ancillary arrangements (e.g. granting of loans, insurance, leases, granting rights to use intellectual property, warranties, etc.), as well as assignment of rights.

Some South American countries, where services income derived by non-residents is generally subject to withholding tax, have judicial or administrative guidance on the meaning of the term. Venezuelan jurisprudence has interpreted “services” as meaning “any independent activity consisting of executing certain remunerated events, actions, contracts or works in favour of a third party who receives such services”. The Chilean tax authorities take a similar approach but add the requirement that the services be performed by “a person”. The Chilean tax authorities have stated in a ruling that “services” takes its natural and obvious meaning, and requires an action or provision that is performed by a person for remuneration. Brazilian case law suggests that the provision of services encompasses all obligations undertaken by one party to perform some activities for the benefit of the contractor.


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