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Branch reporters were in agreement that the term “services” would encompass a broad range of activities. Activities involving functions performed by one or more individuals at a particular location for the benefit of another person would generally be regarded as services. Such activities would include, for example, providing assistance or advice, construction activities, acting as a broker, performing as an entertainer or providing air or sea transportation.

There was much less agreement on whether wholly or almost wholly automated activities would also be regarded as services. In some jurisdictions, activities such as the provision of access to a database (although this would instead be viewed as a licence in other jurisdictions), transmission of communications, or provision of online games or gambling facilities would be regarded as services. However, this is an area where there are differing views, especially concerning the characterisation of transactions involving computer software or application of specialised knowledge or skills. In some countries such transactions are regarded as giving rise to royalties rather than income from services (see section 1.2.2 below).

Other activities that are sometimes regarded as services include the provision of financial backing or support, such as the provision of insurance or a financial guarantee or financial hedge.

In many countries, the term “services” is defined for the purposes of VAT or GST. However, it is doubtful whether this definition would be influential in determining the meaning of “services” for income tax purposes. Frequently “services” are defined for consumption tax purposes as a sort of catch-all, i.e. any transaction other than a sale of goods or. in some countries, a transfer of rights in intangible property. This is clearly broader than the concept of services for income tax purposes.

Similarly, definitions of “services” for transfer pricing purposes are often very broad. Since these definitions often include transactions that give rise to royalties, they are clearly too broad to be indicative of what may be encompassed by the term “services” as a category of income for income tax purposes.

Definitions of specific categories of services are commonly found where special rules apply to income from such services. For example, where jurisdictions apply a different tax treatment to professional services or independent personal services, the types of activities are frequently described in the legislation.


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