handbook-tb

Taxation of income from servicesmanagers of resident companies on their remuneration, irrespective ofwhere the services are performed, must ensure that the provisions oftheir domestic law impose tax in these circumstances and that any taxtreaties that they enter into contain a provision comparable to Article16 of the United Nations Model Convention. However, such countriesmust recognize that, in the absence of a tax treaty, the imposition oftax on the remuneration of non-resident directors and senior managersof resident companies from services performed outside the countrymay result in double taxation. 62 They should also recognize that, wherea tax treaty applies, they give up the first right to tax directors and seniormanagers of companies resident in the other contracting State on theirremuneration from services performed in the source countries.4.5 PensionsPensions paid to non-residents may reduce a source country’s tax basebecause the non-resident recipients are not subject to tax and the payersof the pensions claim deductions for such payments (or for prior contributionsto the pension plan) in computing their income for sourcecountry tax purposes. Source countries that are concerned about thepotential base erosion with respect to pensions should ensure thatpensions paid to non-residents by resident employers, by non-residentemployers with a PE or fixed base in the source country, and by thegovernment are subject to domestic tax. Moreover, they must ensurethat any tax treaties they enter into do not limit their ability to tax suchpensions (that is to say, the treaties should contain Article 18 (alternativeB) of the United Nations Model Convention). 63The extent of any base erosion with respect to pensions relatesto the amount of pension income derived by non-residents from prior62Usually tax will also be imposed by the country in which the directorsand managers are resident and may also be imposed by the country in whichthe services are performed.63Article 18 of the OECD Model Convention and Article 18 (alternativeA) of the United Nations Model Convention provide that pensions (other thansocial security payments and pensions paid by the government under Article18 (2) (alternative A) of the United Nations Model Convention) are taxableexclusively by the country in which the recipient of the pension is resident.81