handbook-tb

Taxation of income from servicestax base is reduced by the deductions for the pension contributions,it seems reasonable to allow that country to tax the recipient of thepension payments to offset the prior deductions. The country in whichthe employment services that resulted in the pension were rendered isirrelevant for purposes of both versions of Article 18.3.12 Income from government servicesUnder Article 19 of the United Nations Model Convention, the rightto tax salary, wages and other remuneration and pensions in respect ofemployment services provided by an individual to the government ofa country is ordinarily allocated exclusively to the country paying theremuneration. However, if a government employee is a resident and anational of the other contracting State and the services are providedin that State, the remuneration is taxable exclusively by that State.Similarly, pension payments made by a contracting State are taxableexclusively by the other State if the recipient individual is a residentand a national of the other State. 46 Article 19 does not apply to salariesand pensions paid by a contracting State in connection with a businesscarried on by it. 473.13 Other incomeUnder Article 21 of the United Nations Model Convention, income notdealt with in any other article is taxable exclusively by the residencecountry subject to a throwback rule if the taxpayer carries on businessthrough a PE or a fixed base in the source country. 48 However, underArticle 21 (3), a source country is entitled to tax items of income derivedby a resident of the other State if those items of income are not dealtwith in another article of the treaty and arise (that is to say, have theirsource) in the source country. Consequently, the only condition for46See Article 19 (2) of both the United Nations and OECD ModelConventions.47See Article 19 (3) of both the United Nations and OECD ModelConventions.48See Article 21 (2) of both the United Nations and OECD Model Conventions.The right or property in respect of which the income is paid mustbe effectively connected with the PE or fixed base.71