handbook-tb

Taxation of income from servicescountries that consider income derived from services consumed orused by residents of that country or non-residents with a PE or fixedbase in that country to be sourced in that country, there should be noviolation of the GATS. If, however, a developing country imposes taxon fees for services performed outside the country by non-residentseven where the fees are considered to be sourced in another country,under that developing country’s domestic law, the tax would violatethe national treatment under the GATS unless it is necessary to ensurethe imposition or collection of tax in the country or to prevent taxavoidance or evasion. It is unclear what “the imposition or collectionof taxes in the Member’s territory” in the footnote is intended to mean.Since all of a country’s taxes would appear to be imposed and collectedin its territory, the reference to taxes in a country seems to be meaningless.The exception for measures to prevent tax avoidance and evasionis potentially broad and a gross withholding tax imposed on fees forservices performed outside a country could be justified on that basis.In conclusion, although developing countries should carefullyconsider the provisions of the GATS, in particular the requirementto provide national treatment to non-resident services providers andthe exception in Article XIV (d), it seems that there are reasonablearguments that a gross withholding tax on payments for servicesperformed outside the country but consumed or used in the countrywould not violate the GATS.5.3 Article 24 of the United Nations Model Convention(Non-discrimination)Article 24 of the United Nations Model Convention provides three typesof protection against discrimination relevant to income from services.First, Article 24 (3) prevents a contracting State from taxing aPE of an enterprise of the other contracting State less favourably thanit taxes its own enterprises carrying on the same activities. This provisionprevents a country from taxing non-resident service providers thatare carrying on business through a PE in the country less favourablythan resident service providers. Thus, if resident service providers aresubject to tax on their net profits, non-resident service providers (that101