Article 16 - DIRECTORS' FEES

This Article provides that one of the States may tax the fees paid by a company which is a resident of that State for services performed by a resident of the other State in his capacity as a director of the company. Only the State of residence of the director, however, may tax any portion of the remuneration that is derived in respect of services performed in that State.

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 non-employee director's fee is subject to tax in the country of residence of the corporation, whether the fee is attributable to a fixed base is not relevant.

This Article is subject to the saving clause of paragraph 4 of Article 1 (Personal scope). Thus, if a U.S. citizen who is a Swedish resident is a director of a U.S. corporation, the United States may tax his full remuneration regardless of the place of performance of his services, subject, however, to the special foreign tax credit provisions of paragraph 3 of Article 23 (Relief from double taxation).

The prior Convention contains no special rule dealing with corporate directors. They are subject to the normal rules regarding the taxation of persons performing personal services.