Article 14 - INDEPENDENT PERSONAL SERVICES

   The Convention deals in separate articles with different

classes of income from personal services. Article 14 deals with the general class of income from independent personal services

and Article 15 deals with the general class of income from
employment, referred to as dependent personal service income.
Exceptions or additions to these general rules are found in
Articles 16 through 20 for directors' fees (Article 16);
performance income of artistes and athletes (Article 17); pen­
sions in respect of personal service income, social security

benefits, and annuities (Article 18); government service salaries

and pensions (Article 19); and students, apprentices, and teach­
ers (Article 20).

Paragraph 1

   Article 14 provides the general rule that an individual who
is a resident of a Contracting State and who derives income from
the performance of personal services in an independent capacity
will be exempt from tax in respect of that income by the other
Contracting State unless certain conditions are satisfied. The

income may be taxed by the other State (the "host State") if the

services are performed in the host State and if the income is
attributable to a fixed base that is regularly available to the
individual in the host State for the purpose of performing his

services. Even if there is no fixed base, the host State may tax

the income from services performed there if the individual

deriving the income is present in the host State to perform the

services for a period or periods exceeding in the aggregate 183
days in any continuous 12-month period.

   The term "fixed base" is not defined in the Convention, but
its meaning is understood to be analogous to that of the term

"permanent establishment," as defined in Article 5 (Permanent

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Establishment). Similarly, the rules of Article 7 (Business Profits) for attributing income and expenses to a permanent

establishment are generally relevant for attributing income to a

fixed base. In particular, the income attributed to the services

must be taxed on a net basis, after allowance of deductions for

business expenses. The taxing right conferred by this Article

with respect to income from independent personal services is,

however, somewhat more limited than that provided in Article 7

for the taxation of business profits. In both Articles 7 and 14

the income of a resident of one Contracting State must be
attributable to a permanent establishment or fixed base in the

host State in order for that State to have a taxing right. In

Article 14, however, the income also must be attributable to
services that are performed in the host State, while Article 7 is
not concerned with the place of performance of the incomegenerating activities so long as the income is attributable to
the permanent establishment.

The rule in Point V of the Protocol dealing with deferred

income of a permanent establishment or fixed base applies to this

Article. Thus, income or gain that is attributable to a fixed base but is deferred until after the fixed base is no longer

available to the performer of the services may nevertheless be
taxed by the State in which the fixed base was located.

Paragraph 2

   Article 14 also applies to permit the non-resident State to
tax an enterprise of the other State in respect of personal
services if those services are performed in the non-resident
State and are either attributable to a permanent establishment in

that State or are performed over a period that exceeds 183 days

in any continuous 12-month period. The enterprise deriving this

income may elect to be taxed on a net basis, consistent with the

provisions of Article 7 (Business Profits). This provision was

added to accommodate Turkish rules that treat all personal

services income derived by a nonresident alike, regardless of
whether the services are performed by an individual or by a

business entity. Paragraph 2 permits Turkey to apply its

withholding tax to the professional services income of a U.S.

enterprise taxable under Article 14 only if Turkey permits the

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enterprise to elect to be subject to net basis taxation by
claiming the same deductions to which it would be entitled were
the provisions of Article 7 (Business Profits) to apply; Article
7 ordinarily applies to this type of income earned by an
enterprise, and the United States will rely on Article 7 when a
Turkish enterprise provides personal services in the United
States.

   By permitting the taxation of an enterprises's profits

derived from services that continue for more than 183 days,

whether or not there is a fixed place of business, paragraph 2
effectively broadens the source taxation of services income

beyond what would be permitted under Articles 7 (Business Prof­ its) and 5 (Permanent Establishment). Although the preferred

U.S. treaty policy is that services do not give rise to a perma­

nent establishment and are not taxable at source unless they are

performed through a fixed place of business or by a dependent

agent, the United States has agreed to provisions similar to those in paragraph 2 in other treaties with developing countries.

Relation to other articles

   If an individual who performs independent personal services
in the United States is a Turkish resident and is also a U.S.
citizen, the United States may, by virtue of the saving clause of
paragraph 3 of Article 1 (Personal Scope), tax the income of that
person without regard to the restrictions of this Article.