Guide to Global Payroll Management - 2020 - A-11

Income Tax Treaty Summaries
*

the recipient of the compensation is present in the other country for one or
more periods of no more than 183 days in any 12-month period beginning
or ending in the fiscal year concerned, and the compensation is not paid
by, or on behalf of, a person who is a resident of that other country, and
the compensation is not borne by a permanent establishment in that other
country [Art. XV].

Personal services income-independent contractors/selfemployed
Income that a resident of the U.S. or Canada receives for performing personal services in
an independent capacity in the other treaty country is subject to the provisions of the treaty
governing business profits. In general, the business profits of an enterprise in one treaty
country are taxable only in that country unless the enterprise carries on business in the
other treaty country through a permanent establishment situated in that country (and if this
is the case, the business profits of the enterprise may be taxed by the other treaty country
only to the extent attributable to the permanent establishment in that country) [Art. VII].

Students, trainees, and apprentices
A full-time student, apprentice, or business trainee, from one treaty country visiting another treaty country is exempt from the income tax of the country visited on amounts received
from sources outside the country visited for maintenance, education, or training, if the student, apprentice, or business trainee is, or was immediately before visiting the other treaty
county, a resident from the one treaty country.
In the case of an apprentice or business trainee, the treaty benefits extend only for one
year from the time that the individual first arrives in the host country for the purpose of the
individual's training. If an apprentice or trainee remains in the host country for a second year
(thus losing the treaty benefits), the individual does not retroactively lose the benefits of the
treaty for the first year [Art. XX].

Entertainers and athletes
Income earned by a public entertainer (such as a theater, motion picture, radio, or television entertainer, musician or athlete) from one treaty country for entertainment activities in
the other country is exempt from the other country's income tax if gross receipts, including
reimbursed expenses, do not exceed $15,000 U.S. or the Canadian equivalent in the calendar year. The exemption applies regardless of the dollar limit to athletes participating in team
sports in leagues with regularly scheduled games in both treaty countries [Art. XVI].

Transportation employees
Compensation received by a treaty country resident for services as an employee performed regularly in more than one country on a ship, aircraft, motor vehicle, or train operated
by a resident of the same country as the employee is exempt from tax in the other treaty
country [Art. XV].

Government compensation
Wages, salaries, and similar compensation (other than pensions) paid by a treaty country
or its political subdivisions or local authorities to one of its own citizens for performing governmental functions in the other country is exempt from the other country's income tax. This
exemption does not apply to payments for services in connection with a business carried on by
the country paying the compensation or its political subdivisions or local authorities [Art. XIX].

A-11

Guide to Global Payroll Management - 2020

Table of Contents for the Digital Edition of Guide to Global Payroll Management - 2020