Article 14 provides the general rule that income derived by

an individual who is a resident of a Contracting State from the performance of personal services in an independent capacity shall

generally be taxable only in that State. However, such income
may be taxed in the other Contracting State if the services are

performed there and the income is attributable to a fixed base

that is regularly available to the individual in that other State

for the purpose of performing his activities.

The Convention does not define the term "fixed base," but its

**AUSTRIA** **361**

Supp. No. **6** **(1998)**

-42­

meaning is understood to be analogous to that of the term
"permanent establishment," as defined in Article **5** (Permanent

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. However, the taxing right conferred **by** this Article
with respect to income from independent personal services is

somewhat more limited than that provided in Article 7 for the

taxation of business profits. In both articles the income of a

resident of one Contracting State must be attributable to a

permanent establishment or fixed base in the other for that other

State to have a taxing right. In Article 14, in addition, the income must be attributable to services performed in that other State, while Article 7 does not require that all of the income generating activities be performed in the State where the permanent establishment is located.

The Article does not define the term "personal services in an

independent capacity." The term, however, is understood to

include all personal services performed by an individual for his

own account, whether as a sole proprietor or a partner, where he

receives the income and bears the risk of loss arising from the

services. Income from services in which capital is a material

income producing factor will, however, generally be governed by the provisions of Article 7 (Business Profits). The taxation of income of an individual from those types of independent services that are covered by Articles 17 through 20 is governed by the

provisions of those articles. There is no Article in the
Convention that deals specifically with directors' fees. Such
fees paid to "outside-directors" are covered **by** this Article.

The rule in paragraph 9 of Article 7 (Business Profits)

applies to Article 14 as well. That rule clarifies, in the

context of Article 14, that income which is attributable to, a fixed base but is deferred and received after the fixed base no longer exists, may nevertheless be taxed by the State in which

the fixed base was located. Thus, the tax cannot be avoided **by**

deferring the payment.

The taxing rule in paragraph 1 of the Article differs

significantly from that in the **1956** Convention. Under Article X
of that Convention, the host State exempted from tax income from

independent personal services performed by a resident of the other State if the person performing the services was present in the host State for a period or periods aggregating not more than

**183** days in the taxable year, and either the individual was

performing his services under contract with a resident of the

individual's State of residence, and the compensation was borne

**by** that person, or the compensation did not exceed **$3,000.** The

new Convention does not examine the length of time or compensa­ tion received but, instead, considers whether the income received.

**AUSTRIA** **362**

Supp. No. **6** **(1998)**

-43­

from independent personal services performed is attributable to a fixed base.

If the individual is an Austrian resident who performs independent personal services in the United States, and the individual is also a U.S. citizen, the United States may, by virtue of the saving clause of paragraph 4 of Article 1 (Personal Scope) tax the individual's income without regard to the restric­ tions of this Article, subject to the special foreign tax credit rules of paragraph 2 of Article 22 (Relief from Double Taxation).