Article 14 provides the general rule that an individual who is a resident of a Contracting

State and who derives income from the performance of personal services in an independent capacity will be exempt from tax in respect of that income by the other Contracting State unless certain conditions are satisfied. The income may be taxed in the other Contracting State if the services are performed there and the income is attributable to a fixed base which is regularly available to the individual in that other State for the purpose of performing his services. If, however, the individual is a German resident who performs independent personal services in the United States, and he is also a U.S. citizen, the United States may, by virtue of the saving clause of subparagraph (a) of Paragraph 1 of the Protocol, tax his income without regard to the restrictions of this Article, subject to the special foreign tax credit rules of paragraph 3 of Article 23 (Relief from Double Taxation).

The term "fixed base" is not defined in the Convention, but its meaning is understood to be analogous to that of the term "permanent establishment", as defined in Article 5 (Permanent Establishment). Similarly, some rules of Article 7 (Business Profits) for attributing income and expenses to a permanent establishment are relevant for attributing income to a fixed base. However, the taxing right conferred by this Article with respect to income from independent personal services is somewhat more limited than that provided in Article 7 for the taxation of business profits. In both articles the income of a resident of one Contracting State must be attributable to a permanent establishment or fixed base in the other in order for that other State to have a taxing right. In Article 14, in addition, the income must be attributable to services performed in that other State, while Article 7 does not require that all of the income generating activities be performed in the State where the permanent establishment is located.

Paragraph 2 notes that the term "personal services in an independent capacity" includes independent scientific, literary, artistic, educational or teaching activities, as well as the independent activities of physicians, lawyers, engineers, economists, architects, dentists, and accountants. This list is clearly not exhaustive. The term includes all personal services performed by an individual for his own account, whether as a sole proprietor or a partner, where he receives the income and bears the risk of loss arising from the services. Income from services in which capital is a material income producing factor will, however, generally be governed by the provisions of Article 7 (Business Profits). The taxation of income of an individual from those types of independent services which are covered by Articles 16 through 20 is governed by the provisions of those Articles.

Paragraph 3 of the Protocol refers to this Article as well as Article 5. The Paragraph provides that a resident of a Contracting State that engages in artistic performances in the other Contracting State and is not subject to tax in that other State under the provisions of Article 17 (Artistes and Athletes), will not be deemed to have a fixed base (or permanent establishment) in that other State if the person's presence there does not exceed 183 days in the calendar year.

There is no special rule in the Protocol with respect to this Article comparable to Paragraph 4 of the Protocol which is applicable to Articles 7 (Business Profits) and 13 (Gains). That rule clarifies that income which is attributable to a permanent establishment, but is deferred and received after the permanent establishment no longer exists, may nevertheless be taxed by the State in which the permanent establishment was located. An analogous rule applies with

respect to Article 14, under which income derived by an individual resident of a Contracting State from services performed in the other Contracting State and attributable to a fixed base there may be taxed by that other State even if the income is deferred and received after there is no longer a fixed base there available to the resident. It was not considered necessary to specify this rule in the Protocol with respect to Article 14 because there is nothing in the text of the Article which requires that the performance of services and the receipt of income be in the same time frame.

The taxing rule in paragraph I of the Article differs from that in the 1954 Convention. Under Article X of the 1954 Convention the host State may tax income from independent personal services performed by a resident of the other State only if the person performing the services is present in the host State for a period or periods aggregating more than 183 days in the taxable year or is under contract with a person not resident in the taxpayer's State of residence.