ARTICLE 21

Students, Trainees, Teachers and Researchers

Paragraph 1

Paragraph 1 of Article 21 provides that a resident of a Contracting State who visits the other Contracting State for the primary purpose of studying at a university or other recognized educational institution, securing training in a professional speciality, or engaging in research of an educational nature shall be exempt from taxation in that Contracting State with respect to certain items of income during such period of study, research, or training. Paragraph 1(b) defines

those exempt items of income as

(1) payments from abroad, other than compensation for personal services, for maintenance, education, study, research, or training;

(2) grants, allowances, or awards from a governmental, religious, charitable, scientific, literary, or educational institution funding the research or studies; and

(3) income from personal services performed in that other Contracting State not in excess of $5,000 (or the equivalent in Venezuelan bolivares) per taxable year.

The exemptions provided in paragraph 1 are available to the visiting student or trainee for a period not exceeding five years from the beginning of the visit and for such additional period of time as is necessary to complete, as a full-time student, the educational requirements as a candidate for a post-graduate or professional degree from a recognized educational institution.

Paragraph 2

The second paragraph of the Article provides an exemption for residents of a Contracting State who are employed by, or under contract with, a resident of the same Contracting State and who temporarily visit the other Contracting State for the purpose of studying at a university or other recognized educational institution or acquiring technical, professional, or business training or experience in that other Contracting State, provided such training is from a person other than the employer or contractor. Such student or trainee is exempt from taxation in the other Contracting State for a period of twelve months on personal services income not in excess of $8,000 (or the equivalent in Venezuelan bolivares) during that period.

The monetary limits provided in paragraphs 1 and 2 are in addition to, and not in lieu of, other exemptions provided by the Code. Thus, an unmarried resident of Venezuela who is temporarily present in the United States for the primary purpose of studying at a university would be entitled to exclude $5,000 of income from the performance of personal services and, in addition, would be entitled to the personal exemption allowed by section 151 of the Code, as provided by section 873 (b) of the Code.

Paragraph 3

Paragraph 3 provides a limited exemption from tax in a Contracting State for income from personal services of individuals resident in the other Contracting State, who are temporarily present in the first-mentioned State for the purpose of teaching or carrying on research at a recognized educational or research institution in that first State. Unlike the exemptions in paragraphs 1 and 2, no dollar limit to these benefits for teachers and researchers is specified. However, paragraph 3 establishes that the host country exemption provided shall only last for two years from the date of entry of that individual in the host State, and in no case shall the benefits of the paragraph be granted for more than five taxable years to any individual.

Paragraph 4

Paragraph 4 establishes that the exemptions provided in this Article do not apply to income from research if such research is undertaken primarily for the private benefit of a specific

person or persons. For example, personal service income arising from research at a corporate research facility would, in general, not qualify as exempt income.

Relation to Other Articles

The benefits conferred by the other Contracting State under Article 20 are subject to the provisions of the saving clause in paragraph 4 of Article 1 (General Scope) as modified by paragraph 5(b) of Article 1. With respect to the United States, the modified saving clause applies to U.S. citizens and persons having immigrant status in the United States ("green card" holders). Thus, the provisions of paragraph 1 which would exempt a Venezuelan resident from taxation as a student in the United States are overridden by the saving clause if that student is a U.S. citizen or green card holder. On the other hand, if a student (who is not a citizen or a green card holder) acquires residence in the United States for tax purposes during that period of study or training, he will be exempt from tax in the United States on those certain items of income.