Tax Treaty Case Law around the Globe 2016

S. 237Chapter 20 Luxembourg: Application of Article 16 to a “Collège des Commissaires”

Werner Haslehner

20.1. Introduction

Article 16 of the OECD Model, dealing with “Director’s fees”, is a very particular, short and somewhat controversial provision that gives the state of source of director’s fees the unrestricted right to tax such fees. The purpose of its inclusion in tax treaties is not entirely clear: the OECD Commentary offers as explanation that “it might sometimes be difficult to ascertain where the services [of a member of a board of directors] are performed.” This fails to justify the distinction to other functions performed by the same persons: Is it really more difficult to ascertain the place of service of supervisory activities than the place of consulting services rendered to a company? In addition, inconsistencies between the English, French and (unofficial) German versions of the OECD Model are a source of uncertainty as to the meaning of the provision: Does it cover only remuneration for supervisory activities or also for executive activity? The same problem exists for concrete tax treaties concluded in more than one official language and is exacerbated by the diverse meani...