Skip to content

CA Final · Direct Tax Laws & International Taxation · Overview of Model Tax Conventions

Ravi, a resident of State X, is employed by a State X company and visits State Y on business. He stays in State Y for 150 days in the relevant 12-month period. His salary is paid and borne by his State X employer, which has no PE in State Y. Under the OECD Model, Article 15(2), how is his remuneration taxed?

Ravi's salary is taxable only in State X. Under OECD Article 15(2), the 183-day exception applies because he stayed 150 days, the employer is not a State Y resident, and no PE in State Y bears the cost. So State Y cannot tax it.

  1. ATaxable in State Y, because he stayed more than 90 days
  2. BTaxable only in State X, because all three conditions of the 183-day exception are satisfiedCorrect
  3. CTaxable in State Y, because the exception applies only if the stay is under 100 days
  4. DTaxable in both States without any relief

Explanation

Article 15(2) exempts the source state if the employee is present for not more than 183 days in any 12-month period, the remuneration is paid by or on behalf of an employer not resident in that state, and it is not borne by a PE there. Ravi stayed 150 days, his employer is resident in X, and no PE exists in Y. All conditions are met so only State X taxes. The 90 or 100 day thresholds are not in the Model.

Did you get it right without looking?

One question tells you little. A timed set on Overview of Model Tax Conventions shows your real accuracy, how long you take and where you lose marks.

Practise Overview of Model Tax ConventionsFree diagnostic mock

More Overview of Model Tax Conventions questions