Article 15

Cases

Hale v. The Queen, 90 DTC 6481 (FCTD), aff'd 92 DTC 6473 (FCA)

While resident in Canada, the taxpayer was granted rights under the employee stock option plan of his Canadian employer and further rights (the "share appreciation rights") to be paid amounts based on the appreciation in the shares of his employer over the strike price in lieu of exercising his stock option rights. Amounts paid to the taxpayer while he was a non-resident of Canada pursuant to the share appreciation rights were not exempted by Article 15 of the U.K.-Canada Convention. The presumption in s. 7(4) of the Act that the employment in issue was exercised in Canada was not incompatible with Article 15.

Words and Phrases
an

See Also

Garcia v. The Queen, 2007 DTC 1593, 2007 TCC 548 (Informal Procedure)

"derived" referred to geographic source

A bonus received in 2003 by the taxpayer when he was a resident of Canada was taxable in Canada, notwithstanding that the bonus was earned in 2002 when he may have been a resident only of the United States for Treaty purposes. The word "derived" meant "having its source", and the bonus was taxable at the time of receipt, regardless of when or where the employment to which it related was exercised.

Words and Phrases
derived

Sutcliffe v. The Queen, 2006 DTC 2076, 2005 TCC 812

The taxpayer was a U.S. resident who was employed by Air Canada as a pilot on domestic flights (between Toronto and other Canadian cities) and international flights (between Toronto and U.S. cities). His income from performing or exercising his employment in Canada was to be determined by reference to the estimated portion of his flights that occurred in the U.S. (including domestic flights that traversed U.S. airspace). Sickness and vacation pay, which should be viewed as part of his remuneration, should be apportioned on the same basis.

Prescott v. The Queen, 96 DTC 1372 (TCC)

Remuneration of $2,474 that the taxpayer (a U.S. resident) earned from employment at Simon Fraser University was exempt under paragraph 2 of Article XV of the Canada-U.S. Convention notwithstanding that the taxpayer also earned employment of $56,939 from a Vancouver law firm, given that the Article referred to "an" employment rather than to all employment in Canada.

Administrative Policy

7 September 2016 External T.I. 2014-0559751E5 - Subsection 115(3)

comparison of Treaty and domestic method for pilot income on annual basis

S. 115(3) allocates 100%, 50% or 0% of the employment income of a non-resident pilot from a flight to Canada based on whether both, one out of two, or none of the touchpoints were in Canada. CRA, of course recognizes, that a Treaty resident can instead rely on the methodology under Art. 15 of the Treaty if that produces a more favourable result. However, CRA considers that the test of which method is more favourable should be done on a year-by-year basis, i.e., “a non-resident pilot must use either subsection 115(3) of the Act or the treaty methodology to allocate income from all of the flights occurring in a particular taxation year.”

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 115 - Subsection 115(3) comparison of the Treaty method for allocating non-resident pilot income to the domestic (s. 115(3)) method should be done on an annual basis 147

20 July 2015 Internal T.I. 2012-0457671I7 - Treaty triangulation - Article 15

treaty-exemption for remuneration of NR employee employed in deemed offshore drilling PE of employer resident in 2nd treaty county

Mr. X, who is an employee of BCo, is a resident of State X for treaty purposes. BCo, which is a resident of State B for treaty purposes, carries on business in Canada through a permanent establishment (“PE”) as defined in the Offshore Activities article in the Canada-State B treaty and does not have a PE in Canada under Art. 5 of either the Canada-State B treaty or the Canada State-X treaty. The Canada-State X treaty also contains an Offshore Activities article. CRA was asked to clarify 2009-0319951I7, respecting where BCo employed Mr. X (among others) to render services in BCo’s PE in Canada, and concluded that CRA looks to the Canada-State X treaty for the definition of PE, in order to determine whether Mr. X was taxable in Canada on remuneration paid to him by BCo. CRA stated:

In applying Article 15 of the Canada-State X treaty, we are determining whether the remuneration paid to Mr. X can be taxed in Canada. Paragraph 1 of Article 15 says that remuneration derived by a resident of State X may be taxed only in State X unless the employment is exercised in Canada. Mr. X is the resident of State X, and we are applying the treaty to Mr. X, not to BCo. ...

In addition, paragraph 2 of Article 15 seems to contemplate that employers can be resident in a third country. ...

…[O]n a purposive reading, one would expect that Canada (i.e. where the PE is located) should be able to tax Mr. X’s remuneration for employment exercised through the PE since BCo is allowed a deduction from the profits taxable in Canada attributable to the PE for the remuneration. However, we doubt that, when applying subparagraph 2(c) of Article 15 of the Canada-State X treaty, it was intended that Canada or State X should look for a definition in a treaty between Canada and a third country to find out if the remuneration can be taxed in Canada.

20 March 2015 External T.I. 2014-0534301E5 - Canadian Withholding Tax on Retiring Allowance

retiring allowance paid to French individual for loss of non-resident employment

A lump sum payment in compensation for a loss of employment at a French subsidiary is made by Canco to a non-resident of Canada who had been seconded to the subsidiary. CRA found that although s. 212(1)(j.1) would apply to this payment, it would be exempt under Art. 15 of Canada-France Convention, as not being in respect of employment exercised in Canada, or Art. 21 as not being derived from sources in Canada.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 115 - Subsection 115(2) - Paragraph 115(2)(e) - Subparagraph 115(2)(e)(i) retiring allowance paid to non-resident for loss of non-resident employment 54
Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) - Paragraph 212(1)(j.1) retiring allowance paid to non-resident for loss of non-resident employment 145
Tax Topics - Treaties - Income Tax Conventions - Article 22 retiring allowance paid to French individual for loss of non-resident employment 71

10 February 2015 External T.I. 2013-0484501E5 - Treaties Article XV

$10,000 safe harbour for Canadian employment income of U.S. resident applied on calendar year basis even where he was a part-year resident

Part-way through a year an individual ceased to be Canadian-resident and became a U.S. resident but derived employment income from the exercise of his employment in Canada with the same employer throughout that year, of which the portion earned while he was non-resident did not exceed Cdn.$10,000.

Would the safe harbour rule in Art. XV, s. 2(a) of the Canada-U.S. Treaty be applied on a calendar year basis or only respecting the second (non-resident) portion of the year? CRA stated:

[T]he Technical Explanation to the 2007 Protocol states that subparagraph 2(a) provides a safe harbour rule that is applied on a calendar year basis … .

Therefore…provided that the individual was determined to be a resident of the United States for purposes of the Treaty…the safe harbour rule in subparagraph 2(a) of Article XV would not exempt any of the individual's Canadian-source employment income from taxation in Canada as the total amount of the individual's income from that employment exercised in Canada in the calendar year exceeded [Cdn.]$10,000… .

16 June 2014 External T.I. 2013-0515431E5 - International traffic and airline enterprise

U.K company's provision of crew to Canadian airline/Reg. 102 withholding or waiver notwithstanding Treaty exemption

During peak season, Canco, which transports passengers to destinations inside and outside Canada, is supplied planes and non-resident pilots and crew by an arm's length U.K. resident ("Forco") to transport Canco's passengers. Forco is a U.K. resident under the Canada- U.K. Convention as well as being effectively managed and controlled there, and does not have a permanent establishment in Canada. The pilots and crew are employed by Forco and are not present in Canada for more than 183 days in any 12 month period.

After finding that "Forco could be viewed as earning income in Canada from the operation of an aircraft in international traffic…notwithstanding that the tickets held by the passengers on its flights represent contracts for services between the passengers and Canco," CRA further found that as the term "international traffic" is not defined by the Canada-U.K. Convention, pursuant to Art. 3, para. 2, it has the meaning provided in s. 248(1), and that provided the principal purpose of the voyage is to transport passengers on such a flight, the employment duties of Forco's crew members are exercised aboard an aircraft operated in international traffic, so that the U.K. is given the right under Art. 15, para. 3 to tax them on their remuneration from employment exercised on such flights.

Notwithstanding that the employees may be exempt from Canadian tax under Art. 15, para. 2, the withholding obligation under s. 153(1)(a) and Reg. 102 "extends to non-residents of Canada employing non-residents for services performed in Canada, and therefore to Forco's crew members in such circumstances." However, here all of the conditions provided in Art. 15, para. 2 appear to be met so that Forco's crew members will generally be entitled to obtain a waiver under Reg. 102 (Form R102-J).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 115 - Subsection 115(1) - Paragraph 115(1)(a) - Subparagraph 115(1)(a)(i) application of Sutcliffe/Price allocation approach were s. 115(3) not applicable 140
Tax Topics - Income Tax Act - Section 115 - Subsection 115(4) non-resident's provision of crew and aircraft to Canadian airline 140
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - International Traffic non-resident's provision of crew and aircraft to Canadian airline 103
Tax Topics - Income Tax Act - Section 81 - Subsection 81(1) - Paragraph 81(1)(c) non-resident's provision of crew and aircraft to Canadian airline 103
Tax Topics - Income Tax Regulations - Regulation 102 - Subsection 102(1) Reg. 102 withholding or waiver notwithstanding Treaty exemption 162

26 February 2014 External T.I. 2013-0487961E5 - Excluded Right or Interest

apportionment of stock option benefits based on situs of employment during vesting period

A senior employee of Canco, who is entitled to receive "free shares" from treasury as determined by management, with a vesting period of 4 to 6 years from the grant of the rights. The individual departs from Canada (but remains an employee of Canco) before the end of the vesting period for a portion of the rights.

After finding that there would be no deemed disposition of such a right on emigration by virtue of s. 128.1(4)(b)(iii), CRA went on to state, respecting which country has primary taxing rights as the country of source when the shares are issued:

CRA has taken the position that for stock options exercised after 2012, the principles set out in paragraphs 12 to 12.15 to the Commentary on Article 15 of the OECD Model Convention will be applied to allocate a stock option benefit for purposes of the Act, unless an income tax treaty specifically applies to produce a different outcome. ... [G]enerally the OECD commentary suggests that a stock option benefit is apportioned to each source country based on the number of days during the vesting period where employment is exercised in that country over the total number of working days in the vesting period that is related to that particular stock option.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 128.1 - Subsection 128.1(10) - excluded right or interest - (c) unvested rights to free shares 135

3 February 2014 External T.I. 2012-0464541E5 - Article 15 of the Canada-Germany Income Tax Treaty

183-day test

One of the components of the safe-harbour rule in Art. 15(2)(a) of the Canada-Germany Treaty is that the employee is present in Canada for a period or periods not exceeding in the aggregate 183 days in any 12 month period commencing or ending in the fiscal year. Accordingly, the safe harbor was not satisfied where

the individual was present in Canada for periods exceeding in the aggregate 183 days during the twelve month period from August 1, 20X1 to July 31, 20X2; a twelve month period that commenced in 20X1 and ended in 20X2.

6 July 2012 Internal T.I. 2012-0440741I7 - stock option benefit derived by US resident

U.S. subs qualifies as payer of (therefore exempt) stock option benefit/domestic v. Treaty method

USCo, which is a qualifying person for purposes of the Canada-US Income Tax Convention and is a wholly-owned subsidiary of a Canadian public company, employed a US-resident individual who performed employment duties for USCo in Canada for 55, 100 and 75 days in 2009, 2010 and 2011, respectively. The number of days worked in the U.S. in 2009 and 2010 were 260 and 200 days, respectively. On January 1, 2009, the US employee was granted stock options by Canco in consideration for his duties of employment performed for USCo and, following the exercise of the options on December 31, 2010, USCo paid Canco a sum equal to the in-the-money value of the options at the time of such exercise ($20,000).

Before considering the effect of the exemption in para. 2 of Article XV of the Canada-US Convention, CRA noted that under the methodology in Annex B to the Fifth Protocol, the stock benefit realized in 2010 would be apportioned to Canada based on the relative number of working days in Canada over the two-year period between the grant and exercise of the options. However, as this allocation approach provides for a higher allocation to Canada than under the domestic allocation method (which would apply only the lower Canadian working day proportion for the year of grant, i.e., for 2009) "the domestic rule prevails as the Treaty cannot give Canada the right to tax an amount that it cannot tax under its domestic tax law."

Turning now to the para. 2 exemption, the 183 day test was satisfied, and on these facts, CRA would also consider that the para. 2(b) test in Art. XV was satisfied, so that the US employee's remuneration was exempt:

That condition [in para. 2(b)] is whether the remuneration received by the US Employee is paid by or on behalf of a "person" who is a resident of the other Contracting State, as opposed to an "employer". Whether the word "person" or "employer" is used, Canada, in determining whether this condition is met, will refer to principles developed under Canadian jurisprudence and the Quebec Civil Code to determine who, in fact, is exercising the functions of employer. As noted below, we consider that the stock option benefit was paid to US Employee by USCo. Since the facts presented state that the true and only employer of the US Employee is USCo and not Canco, the remaining condition in subparagraph 2(b)of Article XV of the Treaty is also satisfied.

23 January 2012 External T.I. 2011-0418281E5 - Employment income - treaty exemption

US sub is true employer

Where US Co (not having a permanent establishment in Canada) provides the services of a US-resident employee for less than 183 days to its Canadian affiliate (Canco), the position taken in technical interpretation 2011-0403551E5 that the employee's remuneration is exempt under Art.XV, para. 2 of the Canada-US Convention is not changed if there is no profit element in the reimbursement charge made by US Co to Canco nor would it change if there is no formal service contract - provided that the true and only employer of the employee both in substance and in form is US Co. However, these additional factors may suggest that US Co is not in a position to exercise the functions of an employer and is not being rewarded to do so.

17 June 2011 External T.I. 2011-0403541E5 - "employer"/ "person"

Respecting Art. XV(2)(b) of the Canada-US Convention:

[T]he intention is to determine who, in fact, is exercising the functions of employer. In making this determination, the CRA generally will refer to principles developed under Canadian jurisprudence and the Quebec Civil Code.

25 January 2010 Internal T.I. 2009-0319951I7 - Article 15 & definition of permanent establishment

PE to be determined under treaty of residence of employee rather than employer

ACo is a British company that performed seismic surveys offshore Canada. BCo is a Norwegian company that provided a crew to Aco under a service agreement to work in Canada during the period. BCo had a permanent establishment in Canada pursuant to Art. 21 - Offshore Activities of the Canada-Norway Tax Convention. The employees of BCo working in Canada were resident in various countries (Australia, France, Netherlands, Brazil, Egypt, U.K., Norway, U.S., Sweden and Denmark) and were present in Canada for less than 183 days. BCo had a PE in Canada under the terms of some but not all of the treaties between Canada and the countries where the employees were resident.

Which treaty determines whether the employer has a permanent establishment? CRA responded:

[I]n applying subparagraph 2(c) of the "Income From Employment" article of Canada's income tax treaties, we will look to the treaty between Canada and the country where the employee is resident to determine if the employer has a PE in Canada.

When asked how the treaty with the different countries of residence of the employees should be applied, CRA discussed the treaties with Sweden, Australia, France, Egypt (with a 90 days presence test), and the U.S. (all of which did not have an offshore activities article) and those with Norway, the Netherlands, Denmark and the U.K. (which did). Respecting the Norwegian and Netherlands treaties, CRA stated:

Paragraph 1 of Article 21 of the Canada-Norway Treaty - Offshore Activities states that Article 21 applies notwithstanding any other provision of the treaty. …

Subparagraph 5(a) of Article 21 states that…remuneration derived by an employee who is resident in Norway in respect of employment connected with the exploration or exploitation of the seabed and subsoil and their natural resources situated in Canada may be taxed in Canada, but only if the employment exceeds 30 days in any 12-month period. Therefore, if the employment exceeds 30 days, remuneration paid by BCo to employees who are resident in Norway may be taxed in Canada.

… Paragraph 3 of Article 23 [of the Netherlands Treaty] provides…that "an enterprise of one of the States" will be deemed to be carrying on business in Canada through a permanent establishment if the enterprise carries on Offshore Activities in Canada for more than 30 days in any 12 month period. Since BCo is not an "enterprise of one of the States" (i.e. either Canada or the Netherlands), paragraph 3 of Article 23 does not apply. Therefore BCo does not have a PE in Canada for purposes of the Canada-Netherlands Treaty.

IC-6R2 para. 95 "Required Withholding from Amounts Paid to Non-Resident Persons Performing Services in Canada"

CRA has adopted the OECD position that the words "borne by" mean that the expenses allowable as a deduction in computing taxable income.

20 March 2002 External T.I. 2002-012653 -

A U.S. resident employee of a Canadian corporation was paid salary of $7,000 by it and granted stock options in respect of which he ultimately realized a benefit of $543,500. Although his remuneration for the year in which he exercised his employment in Canada thus exceeded $10,000, the stock option benefit was not "borne" by the Canadian employer because it was non-deductible by virtue of s. 7(3), and he exercised his employment for under 183 days in the year. However, the $7,000 of salary was not exempt remuneration.

3 September 1997 Memorandum 971433

The benefit realized by a resident of the U.S. on the exercise of an employee stock option was not taxable in Canada because he was not present in Canada for more than 183 days in the year and the stock option benefit received by him was not deductible by the employer in computing its income.

17 February 1995 940054 (C.T.O. "Residence & Source Deductions (HAA7576-1)" (See also 22 March 1995 T.I. 950463))

"Where a U.S. resident who is not a factual or deemed resident of Canada exercises his employment in Canada, his employer ... is required to withhold source deductions in respect of the employment under subsection 153(1) of the Act even if the remuneration received by such an individual is exempt from Canadian taxation by virtue of paragraph 2 of Article XV of the Convention. However, pursuant to paragraph 2 of Article XVII of the Convention, the individual may apply to the competent authority of Canada for a waiver from, or reduction of, the withholding tax otherwise exigible. Such an application, however, would not be applicable to Canada Pension Plan ("CPP") and Unemployment Insurance ("UI") contributions ... ."

2 December 1993 T.I. 933330 (C.T.O. "Non-Resident Exercise Stock Option (4093-U5-100-15)"

Stock option benefits arising to an individual in respect of his Canadian employment after he ceased to be employed and while a resident of the U.S. would be subject to tax under s. 115(1)(a)(i) of the Act, without Article XV.1 of the Canada-U.S. Convention denying Canada the right to tax the income deemed to arise on the exercise of the option to him.

For purposes of applying Article XV.2 of the Canada-U.S. Convention, the calendar year refers to the year in which the employment was exercised and not to the year in which the stock option was exercised. Accordingly, where the stock option benefit relates to a calendar year in which the taxpayer was resident in Canada for a period or periods exceeding 183 days and the taxpayer's remuneration from such employment, including the value of the stock option benefit, exceeded Cdn. $10,000, the Convention would not grant any relief from Canadian taxation. The converse applies where the remuneration for services provided in a calendar year, including the value of the benefit from exercising the stock option, is less than Cdn. $10,000, or in that year the taxpayer was not resident in Canada for 183 days (assuming that the stock option benefit is borne by the U.S. parent rather than the Canadian employer).

2 December 1993 Memorandum 9333306

Where a U.S. resident exercises employee stock options issued to him by a U.S. public company while he was employed in Canada by a Canadian subsidiary, the resulting benefit will not be considered to be borne by the Canadian subsidiary for purposes of the Canada-U.S. Convention irrespective whether the U.S. company charges the Canadian company in respect of the stock option benefit. The 183-day test in para. 2(b) relates to the year in which the employment is exercised rather than the year in which the stock options are exercised.

2 December 1993 Memorandum 933330 (C.T.O. "Non-Resident Exercise Stock Option (4093-U5-100-15)")

A detailed example showing how a stock option benefit ultimately realized by a U.S.-resident individual is allocated among his years of employment in Canada, and the exemption in paragraph 2 of Article 15 of the Canada-U.S. Convention is then applied on a year-by-year basis. Accordingly, the individual is exempt where in a year he was present in Canada for less than 183 days, or the total remuneration for that year, including the portion of the stock option benefit allocated to that year, is less than Cdn. $10,000.

26 November 1992 T.I. 912281 (September 1993 Access Letter, p. 405, ¶C5-213)

An employee stock option will be taxable under Paragraph 2 of Article XV of the Canada-U.S. Convention if, in the year the employment was exercised (as opposed to the year the stock option was exercised) the individual was resident for more than 183 days in Canada and his remuneration, including the value of the stock option, exceeded $10,000.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 7 - Subsection 7(4) 31

85 C.R. - Q.55

the phrase "borne by an employer in Article XV(2)(b) of the 1980 U.S. Convention means borne by the employer of the particular individual. Where a visiting U.S. employee of the U.S. parent receives direction and control from the management of the Canadian subsidiary, then that subsidiary is his employer.

Articles

Kasper Dziurdź, "Article 15 of the OECD Model: The 183 Day Rule and the Meaning of 'Borne by a Permanent Establishment'", OECD, Bulletin for International Taxation, March 2013, p. 122

After reviewing the history of Article 15(2) of the OECD Model Convention, commencing with the Germany-Sweden Income Tax and Capital Treaty (1928), they stated (at p. 124):

The object and purpose of the 183-day rule is, therefore, to facilitate the international movement of personnel and the operations of enterprises engaged in international trade. If income in respect of an employment exercised in the source state is taxable only in the residence state, presumably under the source state's domestic law, there is no obligation on the employee to declare income and to pay tax or on the employer to withhold tax. Accordingly, the 183-day rule avoids an excessive administrative burden for employees and employers.…

Turning (at p. 126) to the "borne by" test:

If, under article 15(2)(c), consideration is given to the part of the enterprise in which the relevant employer functions are primarily exercised, and not where the remuneration is, for whatever reason, deductible, the object and purpose of the 183-day rule will be better realized. If an employer provides products or services to customers from many different states and, therefore, an employee is active in all those states for a short period of time, the 183-day rule prevents taxation in all such states. Accordingly, this prevents an excessive administrative burden from arising and facilitates the international movement of personnel and the operations of enterprises engaged in international trade. Even if the employee's remuneration is deductible in all those states as part of a fee for goods delivered or services provided, article 15(2)(b) does not prevent the application of the 183-day rule. If an enterprise is structured along functional lines, the employer's head office provides products or services to PEs in many different states and, therefore, an employee is active in all those states for a short period of time, the 183-day rule should still prevent taxation in all such states so as to facilitate the international movement of personnel and the operations of enterprises engaged in international trade.…

Susan Wooles, "Cross-border Employees: a Doubly Taxing Matter", Taxation of Executive Compensation and Retirement, Vol. 22, No. 4, November 2010, p. 1343

Includes discussion as to whether a US subsidiary is a contructive employer of a seconded Canadian employee; and whether employee loan-outs give rise to a services permanent establishment.

Luc de Broe, "Interpretation of Article 15(2)(b) of the OECD Model Convention: 'Remuneration paid by, or on Behalf of, an employer who is not a resident of the other state'", Bureau of International Fiscal Documentation, Vol. 54, No. 10, October 2000, p. 503.

Bradley A. Sakich, "Inbound Personal Services", 1996 Conference Report, c. 44 at 44:8-10

Discussion of meaning of "borne by" and of decision in C.I.R. v. JFP Energy Inc. (1990), 14 TRNZ 617 (C.A.).

Dewling, "U.S. Residents Rendering Temporary Services in Canada May Be Subject to Canadian Tax on Remuneration Received from U.S. Employer", Taxation of Executive Compensation and Retirement, November 1990, p. 355.

OECD

OECD Discussion Draft, Working Party 1 "OECD Model Tax Convention: Tax Treatment of Termination Payments," 25 June 2013: Recommended additions to the Commentary on Article 15 include the following:

  • 2.5 Vacation pay/sick days. "Absent facts and circumstances showing otherwise, a payment received after termination of employment as compensation for holidays and sick days related to previous years that were unused during these years should be considered to have been a benefit for which the employee was entitled for the last year of employment."
  • 2.6 Notice-period remuneration. The Remuneration received by an employee during a notice period should be considered to be derived from the State where it is reasonable to assume that the employee would have worked during the period of notice.
  • 2.7 Severance payments. A severance payment (i.e., a payment which an employer is required to make to an employee whose employment has been terminated) should be considered to be remuneration covered by Article 15 which is derived from the State where the employment was exercised when the employment was terminated (and when, therefore, the obligation to make the payment arose).
  • 2.8 Damages. The tax treaty treatment of damages received by an employee will depend on what the damage award seeks to compensate. For instance, damages granted because an insufficient period of notice was given or because a required severance payment was not made should be treated like the remuneration that these damages replace. Punitive damages or damages for discriminatory treatment or injury to reputation would typically fall under Article 21 (Other Income).
  • 2.9 Non-competes. A non-competition payment (a payment received by a previous employee in consideration for an obligation not to work for a competitor of his ex-employer) would not, in most circumstances, constitute remuneration derived from employment activities performed before the termination of the employment, and it will usually be taxable only in the State where the recipient resides during the period covered by the payment.
  • 2.13 Benefits. Post-termination medical or life insurance coverage or other benefits, such as the services of an employment consultant generally should be considered to be remuneration covered by Article 15 which is derived from the State where the employment was exercised when the employment was terminated.
  • 2.14 Disability payments. The treatment of compensation payments for loss of future earnings following injury or disability suffered during the course of employment depends on the legal context in which they are made: payments under a social security system fall under Articles 18, 19 or 21; pension payments are covered by Article 18; damages from the employer for work-related sickness or injury would typically fall under Article 21; a payment made pursuant to the terms of the employment contract should be dealt with in the same way as a severance payments; a short-term disability payment made in the course of employment should be treated in the same way as the payment of sick days during the course of employment (generally, Article 15).

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