Article 22 - OTHER INCOME

This Article provides the rules for the taxation of items of income not dealt with in the other articles of the Convention. An item of income is "dealt with" in an article when an item in the same category is a subject of the article, whether or not any treaty benefit is granted to that item of income. This Article deals both with classes of income that are not dealt with elsewhere, such as lottery winnings, and with income of the same class as income dealt with in another article of the Convention, but from sources in third States, and, therefore, not a subject of the other Article if that article deals only with items of that class of income from sources within one of the States.

Paragraph 1 contains the general rule that such items of income derived by a resident of one of the States will be taxable only in the State of residence. This exclusive right of taxation applies irrespective of whether the residence State exercises its right to tax the income covered by the Article.

Paragraph 2 contains an exception to the general rule of paragraph 1 for income, other than income from real property, that is attributable to a permanent establishment or fixed base maintained in a Contracting State by a resident of the other Contracting State. The taxation of such income is governed by the provisions of Articles 7 (Business profits) and 14 (Independent personal services). Thus, in general, third-country income which is attributable to a permanent establishment maintained in the United States by a resident of Sweden would be taxable by the United States. There is an exception to this rule for income from real property, as defined in paragraph 2 of Article 6 (Income from real property). If, for example, a Swedish resident derives income from real property located outside the United States which is attributable to the resident's permanent establishment or fixed base in the United States, only Sweden and not the United States may tax that income. This special rule for foreign-situs real property is consistent with the general rule, also reflected in Article 6, that only the situs and residence States may tax real property income. Even if such property is part of the property of a permanent establishment or fixed base in a Contracting State, that State may not impose tax if neither the situs of the property nor the residence of the owner is in that State.

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The rule in paragraph 9 of Article 7 (Business profits) dealing with deferred income and expenses of a permanent establishment or fixed base applies to this Article. Thus, income, gain or expense that is from third-country sources and that is attributable to a permanent establishment or fixed base, but is deferred until after the permanent establishment or fixed base no longer exists, may nevertheless be taxed or deducted, as the case may be, in the State in which the permanent establishment or fixed base was located.

This Article is subject to the saving clause of paragraph 4 of Article 1 (Personal scope). Thus, the United States may tax the income of a Swedish resident not dealt with elsewhere in the Convention, if that Swedish resident is a citizen of the United States, subject, however, to the special foreign tax credit provisions of paragraph 3 of Article 23 (Relief from double taxation).

As with any benefit of the Convention, a resident of one of the States claiming the benefit of this Article must be entitled to the benefit under the provisions of Article 17 (Limitation on benefits).