ARTICLE 16

Directors' Fees

This Article provides that a Contracting State may tax the fees and other remuneration paid by a company that is a resident of that State for services performed in that State by a resident of the other Contracting State in his capacity as a director of the company. This rule is an exception to the more general rules of Article 14 (Independent Personal Services) and Article 15 (Dependent Personal Services). Thus, for example, in determining whether a director's fee paid to a non-employee director is subject to tax in the country of residence of the corporation, it is not relevant to establish whether the fee is attributable to a fixed base in that State.

This Article is subject to the saving clause of paragraph 4 of Article 1 (General Scope). Thus, if a U.S. citizen who is a resident of South Africa is a director of a U.S. corporation, the United States may tax his full remuneration regardless of where he performs his services, subject to the special foreign tax credit rule of paragraph 2 of Article 23 (Elimination of Double Taxation).