Article 21 - Other Income - International Taxation - Income Tax

Article 21 - Other Income As per OECD Model Tax Convention Confers right to tax Contracting State Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Convention shall be taxable only in that State. [ Para 1 of Article 21 ] The provisions of paragraph 1 shall not apply to income, other than income from immovable property as defined in paragraph 2 of Article 6, if the recipient of such income, being a resident of a Contracting State, carries on business in the other Contracting State through a permanent establishment situated therein and the right or property in respect of which the income is paid is effectively connected with such permanent establishment. In such case the provisions of Article 7 (Business Profit) shall apply. [ Para 2 of Article 21 ] OECD approach envisage that the exclusive right tax is with the residence Sate. UN Model contains an additional para, Article 21(3), which provides that source State may also tax other Income. As per UN Model Tax Convention Article 21 of the United Nations Model Convention reproduces Article 21 of the OECD Model Convention except The UN Model Convention varies from the OECD Model convention in the Following aspect :- The provisions of paragraph 1 shall not apply to income, other than income from immovable property as defined in paragraph 2 of Article 6, if the recipient of such income, being a resident of a Contracting State, carries on business in the other Contracting State through a permanent establishment situated in Contracting State, [Taxation is governed by the provisions of Article 7 (Business Profit)] , or performs in that other State independent personal services from a fixed base situated in Contracting State, and the right or property in respect of which the income is paid is effectively connected with such permanent establishment or fixed base. [Taxation is governed by the provisions of Article 14 (Independent personal services)] In such case the provisions of Article 7 or Article 14, as the case may be, shall apply. [ Para 2 of Article 21 ] Notwithstanding the provisions of paragraphs 1 and 2, items of income of a resident of a Contracting State not dealt with in the foregoing Articles of this Convention and arising in the other Contracting State may also be taxed in that other State. [ Para 3 of Article 21 ] Analysis This article deals with taxation of items of income which are not specifically taxable under any other specific article (i.e. upto Article 20).