TAXATION OF NON RESIDENT SERVICE PROVIDERS

Transcription

1 TAXATION OF NON RESIDENT SERVICE PROVIDERS Capacity Building on Tax Treaty Administration New York, May 2013 Ariane Pickering

2 Source taxation under UN Model Articles 5 & 7 Business Profits Profits attributable to fixed place of business PE construction site PE deemed services PE Limited force of attraction Article 8 (alternative B) Appropriate allocation of overall net profits if local shipping operations are more than casual

3 Source taxation under UN Model Article 14 Independent Personal Services Income attributable to fixed base activities from stay of 183+ days Article 15 Dependent Personal Services Remuneration derived from employment exercised in country unless: <183 days presence Paid by non resident employer Not borne by PE

4 Source taxation under UN Model Article 16 Directors & top level Managers Remuneration if paying company is a resident Article 17 Artistes and Sportspersons Income if activities exercised in country Article 19 Government Service Remuneration if paying state unless exercised in other State by resident of that State who Is a national of that State, or Did not become resident solely to provide the services

5 Other common treaty provisions Article 12 Royalties (Technical Services) Limited gross taxation if paid by resident or PE Business profits treatment if attributable to a PE or fixed base Teachers Exemption if visit is less than 2 years Sometimes condition that not for private benefit and/or subject to tax in residence country

6 Relevant factors for administration Entitlement to treaty benefits 1. Residence of Service Provider Other criteria: -Art. 7: Enterprise, business -Art. 12 & Fees for Tech Services: Beneficial owner -Art. 19: National, purpose of becoming a resident

7 Tax Administration issues which article? Characterisation of income Nature of services: Art. 8: operation in international traffic Art. 12 & Fees for Tech Services: technical services or assistance Art. 14: Professional services or other activities of an independent nature Art. 15: employment services Art. 19: government employment

8 Tax Administration issues which article? Qualification of service provider Art. 16: Director or top level manager Art. 17: artiste or sportsperson Teachers article: teacher or professor

9 Tax Administration issues source of income Place of performance Source if services are provided by person who is physically present in the state Deemed services PE (Art. 5(3)(b)) Independent personal services (Art. 14(1)(b)) Entertainment services (Art. 17) Fixed place of business, fixed base (Art.5(1) and Art. 14(1)(a)) Employment (Art 15) International transport (Art. 8)

10 Tax Administration issues source of income Residence of payer Source if payer is a resident of state Company paying director or high level manager (Art. 16) Resident or PE paying fees for technical services (Art. 12 or Fees for Technical Services article) Exemption for short term employment if employer is not a resident or PE

11 Tax Administration issues thresholds for source taxation Fixed place of business or fixed base Article 5(1) Article 14(1)(a) Also relevant to: Article 15(2) Article 12(4) Fees for Technical Services para 4

12 Tax Administration issues thresholds for source taxation Time threshold presence of service provider in source state >183 days in any 12 mth period Art. 14(1)(b) Art. 15(2) OECD alternative services PE para(a)

13 Tax Administration issues thresholds for source taxation Time threshold days during which services are performed >183 days in 12 mth period Services PE Article 5(3)(b) OECD alternative services PE para(b) Last > 6 months Construction site PE

14 Tax Administration issues thresholds for source taxation Other thresholds Shipping activities in country are more than casual Art.8 (alternative B) Monetary threshold Art. 14 or Art. 17 in some treaties

15 Tax Administration issues amount of income subject to source taxation Deductions for expenses Yes Art. 7 and generally Art. 14? Art. 15, Art. 16, Art.17 and Art.19 Limitations Attributable to PE or fixed base Art. 7 and Art. 14(1)(a) Derived from employment exercised in state Art. 15 Appropriate allocation of overall net profits Art. 8 (alternative B)

16 Tax Administration issues method of taxation and collection Taxation by assessment Withholding tax Application of treaty limits Up front Refund