ARTICLE 15 　　　　　　　　　Independent Personal Services 　　The Convention deals in separate articles with different classes of income from personal services. Article 15 deals with the general class of income from independent personal services, and Article 16 (Dependent Personal Services) deals with the general class of dependent personal service income. Exceptions or additions to these general rules are found in Articles 16 through 20 for directors' fees (Article 17); income earned by entertainers and athletes (Article 18); remunerations and pensions in respect of government service (Article 19); private pensions, annuities, alimony, and child support payments (Article 20); payments received by students and apprentices (Article 21); and payments received by professors, teachers, and research scholars (Article 22). 　　Article 15 provides the rule that an individual or firm of individuals (other than a company) who is a resident of a Contracting State and who derives income from the performance of professional services or other independent activities of a similar character will be exempt from tax in respect of that income by the other Contracting State unless certain conditions are satisfied. The income may be taxed in the other Contracting State if the person has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities and the income is attributable to that fixed base or if the person stays in the other Contracting State for a period or periods amounting to or exceeding in the aggregate 90 days in the relevant taxable year. 　　If, however, the individual is an Indian resident who performs independent personal services in the United States, and he is also a U.S. citizen, the United States may, by virtue of the saving clause of paragraph 3 of Article 1 (General Scope) tax his income without regard to the restrictions of this Article. 　　Amounts described in this Article are not subject to tax under Article 12 (Royalties and Fees for Included Services). 　　The term "fixed base" is not defined in the Convention, but its meaning is understood to be analogous to that of the term "permanent establishment", as defined in Article S (Permanent Establishment). Similarly, some rules of Article 7 (Business profits) for attributing income and expenses to a permanent establishment are relevant for attributing income to a fixed base. However, the taxing right conferred by this Article with respect to income from independent personal services is somewhat more limited than that provided in Article 7 for the taxation of business profits. Both Articles 7 and 15 provide that a Contracting State may tax certain income of a resident of the other Contracting State which is attributable to a permanent establishment or fixed base in the first State. In Article 15, however the income must be attributable to services performed in the first State, while Article 7 does not require that all of the income-generating activities be performed in the State where the permanent establishment is located. 　　Paragraph 2 notes that the term "professional services" includes independent scientific, literary, artistic, educational or teaching activities as well as the independent activities of physicians, lawyers, engineers, architects, dentists, and accountants. Other independent activities of a similar character are also covered by this Article. Article 15 applies to all such services performed by an individual for his own account or by a firm of individuals, where the individual or firm of individuals receives the income and bears the risk of loss arising from the services. The taxation of income of an individual from those types of independent services which are covered by Articles 17 through 22 is governed by the provisions of those Articles. 　　Paragraph III of the protocol (Ad Articles 7, 10, 11, 12, 15, and 23) refers to Article 15. With regard to this Article, Paragraph III of the protocol states the understanding of the Contracting States that income which is attributable to a fixed base, but is deferred and received after the fixed base no longer exists, may, nevertheless, be taxed by the State in which the fixed base was located. It permits the United States to apply Code 864(c)(6) ARTICLE 16 Dependent Personal Services 　　This Article deals with the taxation of remuneration derived by a resident of a Contracting State as an employee. 　　Under paragraph 1, remuneration derived by an individual who is a resident of a Contracting State as an employee may be taxed by his State of residence. To the extent his remuneration is derived from an employment exercised in the other Contracting State, the remuneration may also be taxed by that other Contracting State, subject to the conditions specified in paragraph 2. Consistent with the general rule of construction that the more specific rule takes precedence over the more general, income dealt within Articles 17 (Directors' Fees), 18 (Income earned by Entertainers and Athletes), 19 (Remuneration and Pensions in Respect of Government Service), 20 (Private Pensions, Annuities, Alimony and Child Support), 21 (Payments received by Students and Apprentices) and 22 (Payments Received by Professors, Teachers and Research Scholars) is governed by the provisions of those Articles rather than this Article. 　　Under paragraph 2, even where the remuneration of a resident of a Contracting State (described in paragraph 1) is derived from sources within the other Contracting State (i.e., the services are performed there), that other State may not tax the remuneration if three conditions are satisfied: 　　(1) the individual is present in the other Contracting State for a period or periods not exceeding in the aggregate 183 days in the relevant taxable year; 　　(2) the remuneration is paid by, or on behalf of, an employer who is not a resident of that other Contracting State; and 　　(3) the remuneration is not borne by a permanent establishment or fixed base that the employer has in that other State. 　　If a foreign employer pays the salary of an employee, but a host country corporation or permanent establishment reimburses the foreign employer in a deductible payment which can be identified as a reimbursement, neither condition (2) nor (3), as the case may be, will be considered to have been fulfilled. Conditions (2) and (3) are intended to ensure that a Contracting State will not be required both to allow a deduction to the payer for the amount paid and to exempt the employee on the amount received. In order for the remuneration to be exempt from tax in the source State, all three conditions must be satisfied. 　　Paragraph 3 contains a special rule applicable to remuneration for services performed by an individual who is a resident of a Contracting State as an employee aboard a ship or aircraft operated in international traffic. Such remuneration may be taxed only in the Contracting State of residence of the person carrying on the enterprise. This paragraph does not apply to the performance of services by an employee of an enterprise other than the enterprise operating the ship or aircraft in international traffic, such as an insurance salesman who is employed by an insurance company to sell insurance aboard a ship or aircraft. 　　This paragraph does not grant an exclusive taxing right. In this respect, it differs from the comparable provision in the U.S. Model and is like the comparable provision in the OECD Model. The comparable paragraph in the OECD Model provides a different rule in one respect, however. Under paragraph 3 in the OECD Model such income may be taxed on a non-exclusive basis in the Contracting State in which the place of effective management of the employing enterprise is situated. The United States does not use this rule in its Model, because under U.S. law, a taxing right over an employee of an enterprise managed in the United States (or an employee of a U.S. resident) cannot be exercised with respect to non-U.S. source income unless the employee is also a U.S. citizen or resident. 　　If a U.S. citizen who is resident in India performs dependent services in the United States and meets the conditions of paragraph 2, and would, therefore, be exempt from U.S. tax were he not a U.S. citizen, he is, nevertheless, subject to U.S. tax on his remuneration by virtue of the saving clause of paragraph 3 of Article 1 (General Scope) of the Convention. ARTICLE 17 Directors' Fees 　　This Article provides that a Contracting State may tax the fees paid by a company which is a resident of that State for services performed by an individual resident of the other Contracting State in his capacity as a director of the company. This rule is an exception to the more general rules of Article 15 (Independent Personal Services) and Article 16 (Dependent Personal Services). Thus, for example, in determining whether a non-employee director's fee is subject to tax in the country of residence of the corporation, whether the fee is attributable to a fixed base is not relevant. 　　The U.S. Model has no comparable provision. The preferred U.S. policy is to treat a corporate director in the same manner as any other individual performing personal services -- outside directors would be subject to the provisions of Article 15 (Independent Personal Services) and inside directors would be subject to the provisions of Article 16 (Dependent Personal Services). The preferred Indian position, on the other hand, is that reflected in the OECD Model, in which a resident of one Contracting State who is a director of a corporation which is resident in the other Contracting State is subject to tax in that other State in respect of his directors' fees regardless of where the services are performed. The provision in Article 17 of the Convention represents the Indian position. 　　This Article does not grant an exclusive taxing right, nor does it limit the effect of the saving clause of paragraph 3 of Article 1 (General Scope) of the Convention. Thus, if a U.S. citizen is a director of an Indian corporation, the United States may tax his full remuneration, subject, of course, to any foreign tax credit that may be available under the limits of domestic law. ARTICLE 18 Income Earned by Entertainers And Athletes 　　This Article deals with the taxation in a Contracting State of performing artists, entertainers and athletes resident in the other Contracting State from the performance of their services as such. The Article applies both to the income of an entertainer or athlete who performs services on his own behalf and one who performs his services on behalf of another person, either as an employee of that person, or pursuant to any other arrangement. The rules of this Article take precedence over those of Articles 15 (Independent Personal Services) and 16 (Dependent Personal Services). This Article applies, however, only with respect to the income of performing artists, entertainers and athletes. Others involved in a performance or athletic event, such as producers, directors, technicians, managers, coaches, etc., remain subject to the provisions of Articles 15 and 16. 　　Paragraph 1 describes the circumstances in which a Contracting State may tax the performance income of an entertainer or athlete who is a resident of the other Contracting State. Under the paragraph, income derived by a resident of a Contracting State from his personal activities as an entertainer, such as a theatre motion picture, radio or television artiste, or a musician, or as an athlete exercised in the other Contracting State may be taxed in that other State if the amount of the net income derived by the individual (after deduction of all expense incurred by him in connection with his visit and performance) exceeds $1,500 (or its equivalent in Indian Rupees) for the taxable year. If the net income exceeds $1,500, the full amount, not just the excess, may be taxed in the State of performance. 　　The OECD Model provides for taxation by the country of performance of the remuneration of entertainers or athletes with no dollar or time threshold. The United States introduces the dollar threshold test in its treaties to distinguish between two groups of entertainers and athletes -- those who are paid very large sums of money for very short periods of service, and who would, therefore, normally be exempt from host country tax under the standard personal services income rules, and those who earn only modest amounts and are, therefore, not clearly distinguishable from those who earn other types of personal service income. 　　Paragraph 1 applies notwithstanding the provisions of Articles 7 (Business Profits), 15 (Independent Personal Services) or 16 (Dependent Personal Services). Thus, if an individual would otherwise be exempt from tax under those Articles, but is subject to tax under this Article, he may be taxed. An entertainer or athlete who receives less than the $1,500 threshold amount, and who is, therefore, not affected by this Article, may, nevertheless, be subject to tax in the host country under Articles 15 or 16 if the tests for taxability under those Articles are met. For example, if an entertainer who is an independent contractor earns only $1,400 of income for the calendar year, but the income is attributable to a fixed base regularly available to him in the State of performance, that State may tax his income under Article 15. 　　Since it is frequently not possible to know until year end whether the income an entertainer or athlete derived from performance in a Contracting State will exceed $1,500, nothing in the Convention precludes that Contracting State from withholding tax during the year and refunding after the close of the year if the taxability threshold has not been met. If, at the end of the year, it is determined that the entertainer or athlete is not subject to tax in that Contracting State under the provisions of paragraph 1 of Article 18, that State is obligated to refund the tax withheld only upon application at the end of the taxable year concerned. 　　Income derived from a Contracting State by an entertainer or athlete who is a resident of the other Contracting State in connection with his activities as such, but from other than actual performance, such as royalties from record sales and payments for product endorsements, is not covered by this Article, but by other articles of the Convention, as appropriate, such as Article 12 (Royalties and Fees for Included Services) or Article 15 (Independent Personal Services). For example, if an entertainer receives royalty income from the sale of recordings of a concert given in a State, the royalty income would be subject to the provisions of Article 12. Thus, the royalty income would be subject to a gross basis withholding tax by the source State (provided the royalties are not attributable to a fixed base of the entertainer in that State), even if the remuneration from the concert itself may have been covered by Article 18. 　　Paragraph 2 is intended to deal with the potential for abuse when income from a performance by an entertainer or athlete does not accrue to the performer himself, but to another person. Foreign entertainers commonly perform in the United States as employees of, or under contract with, a company or other person. The relationship may truly be one of employee and employer, with no abuse of the tax system either intended or realized. On the other hand, the "employer" may, for example, be a company established and owned by the performer, which is merely acting as the nominal income recipient in respect of the remuneration for the entertainer's performance. The entertainer may be acting as an "employee", receiving a modest salary, and arranging to receive the remainder of the income from his performance in another form or at a later time. In such case, absent the provisions of paragraph 2, the company providing the entertainers services can escape host country tax because it earns business profits but has no permanent establishment in that country. The entertainer may largely or entirely escape host country tax by receiving only a small salary in the year the services are performed, perhaps small enough to place him below the dollar threshold in paragraph 1. He would arrange to receive further payments in a later year, when he is not subject to host country tax, perhaps as salary payments, dividends or liquidating distributions. 　　Paragraph 2 seeks to prevent this type of abuse while at the same time protecting the taxpayers' rights to the benefits of the Convention when there is a legitimate employee-employer relationship between the performer and the person providing his services. Under paragraph 2, when the income accrues to a person other than the performer, and the performer (or persons related to him) participate, directly or indirectly, in the profits of that other person, the income nay be taxed in the Contracting State where the performer's services are exercised, without regard to the provisions of the Convention concerning business profits (Article 7) or independent personal services (Article 15). Thus, even if the "employer" has no permanent establishment or fixed base in the host country, its income may be subject to tax there under the provisions of paragraph:2. Taxation under paragraph 2 is on the person providing the services of the entertainer or athlete. This paragraph does not affect the rules of paragraph 1, which apply to the entertainer or athlete himself. To the extent of salary payments to the performer, which are treated under paragraph 1, the income taxable by virtue of paragraph 2 to the person providing his services is reduced. 　　For purposes of paragraph 2, income is deemed to accrue to another person (i.e., the person providing the services of the entertainer or athlete), if that other person has control over, or the right to receive, gross income in respect of the services of the entertainer or athlete. Direct or indirect participation in the profits of a person is defined to include, but is not limited to, the accrual or receipt of deferred remuneration, bonuses, fees, dividends, partnership income or other income or distributions. 　　The paragraph 2 override of the protection of Articles 7 (Business Profits) and 15 (Independent Personal Services) does not apply if it is established that neither the entertainer or athlete, nor any persons related to the entertainer or athlete, participate directly or indirectly in the profits of the person providing the services of the entertainer or athlete. Thus, for example, if a theatrical company owned by a U.S. corporation performs in New Delhi, the Indian promoters of the performance pay the theatrical company, which, in turn, pays salaries to the actors. The theater company has no permanent establishment in India. Since the actors do not participate in the profits of the company, but merely receive their salaries out of the theatrical company's gross receipts, the theatrical company is protected by Article 7 and its income is not subject to Indian tax. Whether the actors are subject to Indian tax depends on whether they exceed the $1,500 threshold in paragraph 1. This exception for non-abusive cases to the paragraph 2 override of the Articles 7 and 15 protection of persons providing the services of entertainers and athletes is not found in the OECD Model. The policy reflected in this exception is, however, consistent with the stated intent of Article 17 of that Model, as indicated in its Commentaries. The Commentaries to Article 17 state that paragraph 2 is intended to counteract certain tax avoidance devices, in which income is diverted from the performer to another person in order to minimize the total tax on the remuneration. It is, therefore, consistent not to apply these rules in non-abusive cases. 　　Paragraph 3 of the Article is not found in the U.S. or OECD Models. It provides an exception to the rules in paragraphs 1 and 2 in the case of a visit to a Contracting State by an entertainer or athlete who is a resident of the other Contracting State, if the visit is wholly or substantially supported from the public funds of his State of residence or of a political subdivision or local authority of that State. In the circumstances described, only the Contracting State of residence of the entertainer or athlete may tax his income from the performances so supported in the other State. 　　Paragraph 4 of the Article is also not found in the U.S. or OECD Models. It provides that the competent authorities of the Contracting States may, by mutual agreement, increase the dollar amounts referred to in paragraph 1 to reflect economic or monetary developments. It is intended that this provision be used to ensure that the threshold for taxation under this Article is not effectively eliminated through inflation. 　　This article is subject to the provisions of the saving clause of paragraph 3 of Article 1 (General Scope). Thus, if an entertainer or athlete who is resident in India is a citizen of the United States, the United States may tax all of his income from performances in the United States without regard to the provisions of this Article.