handbook-tb

Taxation of income from servicesis given to the country in which the enterprise has its place of effectivemanagement. Article 8 (2) (alternative B) of the United Nations ModelConvention allows a country to tax shipping activities (not air transportation)within the country if those activities are more than casual.The tax must be levied on a net basis.International shipping and air transportation services presentproblems of base erosion for developing countries where the profitsderived by non-residents from such activities are not subject to tax bydeveloping countries and where the payments made for such servicesare deductible against the developing country’s tax base. Some developingcountries impose a low-rate, gross-based withholding tax onincome from international shipping and air transportation derived bynon-residents from goods or passengers taken on board in the developingcountry. Developing countries that wish to tax such incomemust carefully consider whether to include in their tax treaties a provisionsimilar to Article 8 (alternative A) of the United Nations ModelConvention, because that provision will preclude source country taxcompletely, or Article 8 (alternative B), because that provision limitssource country tax to shipping activities in the source country that aremore than casual and requires net basis taxation.4.11 Fees for technical services4.11.1 IntroductionThe United Nations Committee of Experts has been working since2008 on the provisions of the United Nations Model Convention dealingwith the taxation of income from services, including income fromtechnical, managerial, consulting and other similar services (referredto here for convenience as “technical services”). 71 A Subcommitteeon Tax Treatment of Services (Subcommittee) with Ms. Liselott Kana71See “Secretariat Note — Recent Work of the Committee on Tax Treatmentof Services,” 11 October 2013, presented at the ninth session of the UnitedNations Committee of Experts (21 – 25 October 2013), E/C.18/2013/CRP.17,available at http://www.un.org/esa/ffd/wp-content/uploads/2014/09/9STM_CRP17_Services.pdf.89