Article 17. GOVERNMENTAL

FUNCTIONS

The existing Convention exempts compensation including pensions paid by one of the States or a political sub­ division or territory thereof to an indi­ vidual (other than a citizen of the other Contracting State who is not also a citizen of the former Contract­ ing State) from taxation by that other Contracting State. The article cover­ ing governmental functions in the ex­ isting Convention also covered private pensions and annuities derived from within one of the Contracting States and paid to individuals residing in the other Contracting State. Private pen­ sions and annuities are now covered in Article 18 (Private Pensions and An­ nuities) of the proposed Convention. With regard to compensation and pensions paid by one of the States, the

proposed Convention continues the exemption but adds a specification that the compensation must be paid in connection with the discharge of func­ tions of a governmental nature.