Article 7 of the proposed Convention generally follows the standard rules for taxation…

country of the business profits of a resident of the other. The source country's right to tax such profits is generally limited to cases in which the profits are attributable to a permanent establishment located in that country. As do all recent U.S. treaties, this Convention preserves the right of the United States to impose its branch taxes in addition to the basic corporate tax on a branch's business.

Under Article 8 of the proposed Convention, income from the operation of ships and aircraft in international traffic and from the use, maintenance or rental of containers used in international traffic is taxed in a manner consistent with the U.S. Model. Article 8 permits only the country of residence to tax profits from the international operation of ships or aircraft, including profits from the rental of ships and aircraft when the ship or aircraft is operated by the lessee in international traffic, or when the rental activity is incidental to the operation of ships or aircraft by the lessor. All income from the use, maintenance or rental of containers used in international traffic is likewise exempt from source-country taxation under the proposed Convention.

The taxation of income from the performance of personal services under Articles 14 through 16 of the New Convention is essentially the same as that under recent U.S. treaties with some

developing countries but grants a taxing right to the host country with respect to such income that is broader than in the OECD or U.S. Model treaties.