Article 15. INCOME FROM EMPLOYMENT

This Article deals with the taxation of remuneration derived

by a resident of a Contracting State from the performance of personal services as an employee. Paragraph 1 also provides that the more specific rules of Articles 16 (Directors' Fees), 17 (Government Service), and 18 (Pensions, Etc.) apply in the case of employment income described in one of those articles. Thus, even though the State of source has a right to tax employment income generally under Article 15, it may not have the right to tax a particular type of income under the Convention if that right is proscribed by one of the aforementioned articles. Similarly, these other articles may expand the source State's right to tax beyond the circumstances in which Article 15 would permit it to tax.

Under paragraph 1, remuneration derived by an employee who

is a resident of a Contracting State may be taxed by his State of residence. This is the same result achieved by the saving clause of paragraph 3 of Article 1 (General Scope). Under paragraph 2, the remuneration also may be taxed by the other Contracting State if the remuneration is derived from the performance of services in that other State and if one of the following is true: (1) the individual is present in that other State for a period or periods exceeding in the aggregate 183 days in any twelve month period beginning or ending in the taxable year concerned; (2) the remuneration is paid by, or on behalf of an employer who is a resident of that other State; or (3) the remuneration is borne as a deductible (or capitalizable) expense by a permanent establishment or fixed base that the employer has in that other State. If a foreign employer pays the salary of an employee, but a host country corporation or permanent establishment reimburses the foreign employer in a deductible payment that can be identified as a reimbursement, either condition (2) or (3), as the case may be, will be considered to have been fulfilled. Conditions (2) and (3) are intended to ensure that a Contracting State will not be required both to allow a deduction to the payor for the amount paid and to exempt the employee on the amount received. Failure to satisfy any of the three conditions will result in exclusive residence State taxation of employment income.

Paragraph 3 contains a special rule exempting income from tax at source in one particular case. That case involves remuneration for services performed as an employee aboard a ship or aircraft operated in international traffic.