Article 18. PRIVATE PENSIONS AND ANNUITIES

Except as.provided in Article 20 (Governmental Functions). pensions and other similar remuneration paid to an individual will be taxable under paragraph (1) only in the Contracting State where the service is rendered. Thus. private pensions and similar remuneration derived from sources within one Contracting State by an individual resident or the other Contract­ ing State may be taxed in the first-mentioned Contracting State. The term "pensions and other similar remuneration" is defined in paragraph (4) to include any periodic payments, other than payments covered in Article

19 (Social Security Payments). made by reason or retirement or death and in consideration for services rendered, or by way of compensation for injuries or sickness received in connection with past employment. Thus, where payments are considered to be pensions or similar remunera­ tion under the laws of one of the Contracting States, such payments will be considered to be pensions or similar remuneration for purposes of para­ graph (1), subject to an agre ment to the contrary by the competent authorities acting under paragraph (2) of' Article 2 (General Definitions) to prevent double taxation or to further any other purpose of the Convention. Thus, for example, for United States tax purposes, distributions from independent retirement accounts would be considered to be pensions or similar remuneration to which paragraph (1) applies. On the other hand, the term pension does not include, for United States tax purposes. pay­

ments in respect or the cancellation or premature termination or employ­ ment contracts (e.g .• "golden handshakes" or severance pay). Such pay­ ments are taxable under the provisions of Articles 15 {Independent Per­ sonal Services), 16 (Dependent Personal Services) or 17 (Artistes and Athletes).

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Paragraph (?.) provides that annuities paid "to an individual resident of a Contracting State will be taxable only in that Contracting State. The term "aMuities" is defined in paragraph (5) as a stated sum paid peri­ odically at stated times during life, or during a specified number or years, under an obligation to make the payments in return for adequate and full consideration (other than for services rendered).

Paragraph (3) p·ovides that child support payments made by an individual resident of or.e Contracting State to an individual resident of the other Contracting State will be exempt from tax in that other Con­

tracting State. The term "child support payments" is defined in para­ graph (6) as periodic payments for the support of a minor child made pursuant to a written separation agreement or a decree of divorce, separate maintenance, or compulsory support.

This Article is subject to the saving clause of paragraph (3) of Article 6 (General Rules of TPxation). Therefore, individuals who are citizens or residents of a Contracting State may be taxed by that Con;. tracting State without regard to this Article,