Article 7 of the proposed Convention generally follows the standard rules for taxation…

country of the business profits of a resident of the other. The non-residence country's right to tax such profits is generally limited to cases in which the profits are attributable to a permanent establishment located in that country. The source country may, however, tax sales or activities as though they were performed by a permanent establishment if it is ascertained that such activities were structured with the intent to avoid taxation in the State in which the permanent establishment is situated. As do all recent U.S. treaties, this Convention preserves the right of the United States to impose its branch taxes in addition to the basic corporate tax on a branch's business.

Consistent with U.S. treaty policy, Article 8 of the proposed Convention permits only the country of residence to tax profits from international carriage by ships or aircraft and income from the use, maintenance, or rental of containers used in international traffic. This reciprocal exemption also extends to income from the rental of ships and aircraft if the rental income is incidental to income from the operation of ships and aircraft in international traffic. However, income from the international rental of ships and aircraft that is non-incidental to operation of ships and aircraft is taxed at the rate of five percent as a royalty paid for the use of the equipment.

The taxation of income from the performance of personal services under Articles 14 through 17 of the new Convention is essentially the same as that under recent U.S. treaties with OECD countries.