What is covered under Article 14 Independent Personal Services
Article 7 – Activities falling under Article 14 are specifically covered there and not under Article 7
Exception : –
If an activity is carried on as a commercial activity – Clifford Chance, UK v. DCIT
Article 15 – Covers services rendered by employees which are excluded from Article 14.
Taxation of a teacher – Difference Capacities
- Independent services as an individual – Article-14
- Salaried employment – Article-15
- Payment by Government – Article-19
Applicability of Article 14 Independent Personal Services?
Application of article 14 to non individuals
Treaty with – USA
Clause – Income derived by a person who is an individual or firm of individuals (other than a company) who is a resident of a Contracting State…
Remarks – Article 15(1) clearly states that it does not apply to a company.
Treaty with – Germany
Clause – Income derived by an individual who is a resident of a Contracting State…
Remarks – Article 15(1) clearly states that it does not apply to non individuals.
Application of article 14 to non individuals
Treaty with – UK
Clause – Income derived by an individual, whether in his own capacity or as a member of a partnership, who is a resident of a Contracting State…
Linklaters LLP v ITO – Article 15 applies only to individuals and not to partnership firms. (ITAT)
Clifford Chance v DCIT – Article 15 applies to a partnership firm.
MSEB v DCIT – The Mumbai Tribunal applied Article 15 of India-UK Tax Treaty, to a UK partnership firm and supported its decision of applying Article 15 to “non individuals”.
DIT v Paper Products Ltd – Article 14 was applied to a company.
Payments to FCO in respect of the furnishing the activities of Independent contractor
Fact: ICO made payments to FCO in respect of the furnishing the activities of Independent contractor.
FCO paid remuneration to the Independent contractor for performing the activities for ICO.
Issue: Whether Article 14 shall be applied for payments made by ICO to FCO?
Held: Payments made to an FCO in respect of the furnishing activities of Independent contractor shall be covered under Articles 7 read with Article-5.
The remuneration paid by the FCO to the independent contractor who performed the activities shall be covered under Article 14.
Fixed Base – Protocol to the india belarus treaty
For purposes of this Agreement, it is understood that the term “fixed base”
includes a fixed place such as
or a room
or any other place
regularly available to him
through which the activity of a person performing independent personal services
is wholly or partly carried on.
- Is it similar to PE ? – Generally not defined but PE analogy can be applied
- Should it be occasional ? – No, it should be regularly available (at the disposal of) to the IPS provider
- What characterises fixed base ? – Place from which an IPS provider can provide his services — Key centre of activities in Source State
- Who has the right to tax ? – Source State has the right to tax income attributable to fixed base
Examples of fixed base – Inclusion Or Exclusion
- Painter’s office
- Teacher’s Institute
- Chambers of a Solicitor
- Foreign doctor visiting various hospitals on demand once a year
- Foreign advisors attending Indian board meeting
Article 15(2) – India – USA treaty
The term “professional services” includes
independent scientific, literary, artistic, educational or teaching activities
as well as the
independent activities of physicians, surgeons, lawyers, engineers, architects, dentists and accountants.
Article 15(2) – India – USA treaty – Independent Activities
- Educational/ Teaching
Article 15(2) – India – USA treaty – Independent Activities of
Independent activities of
- Lawyers – Tax, Corporates lawyers
- Engineers – For erection/ assembly/ drawing
- Architects – Including Painter/ Sculpture
- Accountants – Auditors
What is not covered in article 14 ?
- Income from industrial activities
- Income from commercial activities
- Salary payments covered under Article 15 (Dependent Personal Services)
- Independent activities covered under specific provisions of Article 16 (non-employee director) and Article 17 (Artistes and Sportsmen)
- Payments to an enterprise in respect of rendering services of employees or other personnel
International Taxation – Interpreting Tax Treaty (DTAA) Notes
Article 2 – Taxes Covered
Article 4 – Concept of Residence in Tax Treaties
Article 5 – Permanent Establishment
Article 6 – Income From Immovable Property
Article 7 – Business Profits
Article 8 – Shipping & Air Transport
Article 9 – Associated Enterprise
Article 10 – Dividend
Article 11 – Interest
Article 12 – Taxation of Royalties and Fee for Technical Services
Article 13 – Capital Gains
Article 14 – Independent Personal Services
Article 15 – Dependent Personal Services (Employment)
Article 16 – Directors Fees
Article 17 – Artistes and Sportspersons
Article 18 – Pension and Other Social Security Payments
Article 19 – Government Services
Article 20 – Students
Article 21 – Other Income
Article 23 – Elimination of Double Taxation
Article 24 – Non-Discrimination & Article 25 – Mutual Agreement Procedure (MAP)
Article 26 – Exchange of information
Artilce 27 – Assistance in the collection of taxes
Article 28 – Member of Diplomatic Mission and Consular Posts
Article 29 – Entry into Force
Article 30 – Termination