Article 19 to services rendered — U.S. Income Tax Treaty

understood to encompass functions traditionally carried on by a government. It would not include functions that commonly are found in the private sector (e.g., air transport, utilities). Rather, it is limited to functions that generally are carried on solely by the government (e.g., military, diplomatic service, tax administrators) and activities that directly support the carrying out of those functions.

The remuneration that is carved out of coverage of Article 19 by the provisions of paragraph 3 is subject to the provisions of Articles 14 (Independent Personal Services), 15 (Dependent Personal Services), 16 (Directors’ Fees), 17 (Entertainers and Sportsmen) or 18 (Pensions and Annuities). Thus, if a local government sponsors a basketball team in an international tournament, and pays the athletes from public funds, the compensation of the players is covered by Article 17 and not Article 19, because the athletes are not engaging in a governmental function when they play basketball.

Relation to Other Articles

Under paragraph 5(b) of Article 1 (General Scope), the saving clause (paragraph 4 of Article 1) does not apply to the benefits conferred by the United States under Article 19 if the recipient of the benefits is neither a citizen of the United States, nor a person who has been admitted for permanent residence there (i.e., a "green card" holder). Thus, a South African resident who in the course of performing functions of a governmental nature for South Africa becomes a resident of the United States (but not a permanent resident), would be entitled to the benefits of this Article. Similarly, an individual who receives a pension paid by the Government of South Africa in respect of services rendered to that Government is taxable on that pension only in South Africa unless the individual is a U.S. citizen or acquires a U.S. green card.