Article 20 (Students)

Payments which a student or business apprentice who is or was immediately before visiting a Contracting State a resident of the other Contracting State and who is present in the first-mentioned State solely for the purpose of his education or training receives for the purpose of his maintenance, education or training shall not be taxed in that State, provided that such payments arise from sources outside that State.

Switzerland's non-exhaustive list of double taxation treaties based on Article 20 of the OECD Model

 CountryCorresponding to Art. 20 Deviations (this section is under construction)
 AustriaArt. 20 (German/French)
 ChinaArt. 21 (German/French/English) 
 EU  
 FranceArt. 22 (German/French) 
 GermanyArt. 20 (German/French) 
 Great BritainArt. 20 (German/French/English) 
 Hong-KongArt. 20 (German/French/English) 
 IndiaArt. 20 (German/French/English)
Art. 21 (German/French/English)
 
 ItalyArt. 20 (German/French/English) 
 Liechtensteinpending 
 LuxemburgArt. 20 (German/French/English) 
 MaltaArt. 20 (German/French/English) 
 NetherlandsArt. 20 (German/French/English) 
 SpainArt. 20 (German/French) 
 USAArt. 20 (German/French/English)

Regulations - Verordnungstexte - Ordonnances


Swiss Case law - Rechtsprechung - Jurisprudence


Scholars - Lehre - Doctrine


Materialien (Botschaft - parl. Beratung) - Message et débats


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Article 20 and Commentary of the UN Model Double Taxation Convention between Developed and Developing Countries

last edited 15.6.15 and based on the UN Model Double Taxation Convention between Developed and Developing Countries (2011)

Article 20 (Students)
Payments which a student or business trainee or apprentice who is or was immediately before visiting a Contracting State a resident of the other Contracting State and who is present in the first-mentioned State solely for the purpose of his education or training receives for the purpose of his maintenance, education or training shall not be taxed in that State, provided that such payments arise from sources outside that State.


Commentary 2011:
"A. Commentary on the paragraphs of article 20

1. Article 20 of the United Nations Model Convention, as presently worded, reproduces substantially Article 20 of the OECD Model Convention. In 1999, paragraph 2, which contained provisions dealing with grants and scholarships and remuneration from employment not covered by paragraph 1, was deleted.

2. Since Article 20 of the United Nations Model Convention reproduces Article 20 of the OECD Model Convention, the following Commentary on the latter Article is applicable:

1. The rule established in this Article concerns certain payments received by students or business apprentices for the purpose of their maintenance, education or training. All such payments received from sources outside the State in which the student or business apprentice concerned is staying shall be exempted from tax in that State.

2. The word “immediately” was inserted in the 1977 Model Convention in order to make clear that the Article does not cover a person who has once been a resident of a Contracting State but has subsequently moved his residence to a third State before visiting the other Contracting State.

3. The Article covers only payments received for the purpose of the recipient’s maintenance, education or training. It does not, therefore, apply to a payment, or any part thereof, that is remuneration for services rendered by the recipient and which is covered by Article 15 (or by [14 or] Article 7 in the case of independent services). Where the recipient’s training involves work experience, however, there is a need to distinguish between a payment for services and a payment for the recipient’s maintenance, education or training. The fact that the amount paid is similar to that paid to persons who provide similar services and are not students or business apprentices would generally indicate that the payment is a remuneration for services. Also, payments for maintenance, education or training should not exceed the level of expenses that are likely to be incurred to ensure the recipient’s maintenance, education or training.

4. For the purpose of the Article, payments that are made by or on behalf of a resident of a Contracting State or that are borne by a permanent establishment which a person has in that State are not considered to arise from sources outside that State.

3. Article 20 of the 1980 version of the United Nations Model Convention contained a paragraph 2 which read as follows:

(2) in respect of grants, scholarships and remuneration from employment not covered by paragraph 1, a student or business apprentice described in paragraph 1 shall, in addition, be entitled during such education or training to the same exemptions, reliefs or reductions in respect of taxes available to residents of the State which he is visiting.

The question whether paragraph 2 of Article 20 should be deleted from the United Nations Model Convention had engaged the attention of the former Group of Experts for some time. In this connection, it is relevant to reproduce paragraphs 25 to 29 of the Report of the former Group of Experts on International Cooperation in Tax Matters on the Work of its Seventh Meeting held in December 1995 (ST/ESA/250):

25. At its July 1995 meeting, the Steering Committee recommended that the group consider deleting from the Model Convention article 20, paragraph 2, which provided that if a visiting student had income not exempted by paragraph 1 from taxation in the visited country, the student should, in the taxation of non-exempted income, be entitled to the same exemptions, reliefs, and reductions as were allowed to residents of that country.

26. A participant argued that the provision should be retained because it allowed visiting students to be taxed in the same way as resident students. Another participant responded that such parity was sometimes elusive because the resident student was taxable on all income, whereas a visiting student was taxable only on income from sources in the visited country.

27. A proponent of deleting the provision noted that article 24, paragraph 4 (second sentence), stated that a country is not required to allow non-residents any personal allowances or other reliefs ‘on account of civil status or family responsibilities’ which might be allowed to residents; article 20, paragraph 2, it was argued, contradicted the provision of article 24.

28. A participant noted that, as an alternative to article 14, paragraph 1(c), a treaty might provide for exemption in the host State, for the normal duration of studies, of remuneration not exceeding a certain annual amount, but only to the extent that the remuneration was also not exempted in the other State. [Paragraph 1(c) of Article 14 was deleted in 1999.]

29. After discussion, it was concluded that a majority of the Group, but not a consensus, favoured deletion of article 20, paragraph 2.

4. The matter was considered again at the ninth meeting of the former Group of Experts, in May 1999, and the Group agreed to delete paragraph 2 of Article 20. Article 20 thus conforms to Article 20 of the OECD Model Convention, with the addition of the word “trainee”.

5. Although, as worded, paragraph 2 covers grants and scholarships that have their source in the country visited as well as income from an employment in the country visited, the Commentaries to the 1980 Model made it clear that the paragraph was mainly concerned with income from employment. The wording was intended to put visiting students etc. on exactly the same basis as students who were residents for tax purposes of the State where they were studying, but not to treat visiting students more favourably than tax-resident students.

6. Experience with the application of paragraph 2 in practice has shown that, as presently worded, it can give rise to difficult problems of administration. For example, if the visiting student is subject to tax in the State visited only on income from sources in that country, and not on his worldwide income, should the visitor be entitled to the full allowances which a resident who is taxed on his worldwide income is allowed? Similarly, should a married student, whose spouse does not come to the country with the student, be entitled to the married person’s allowance? These issues cannot be settled from a strict reading of the text of paragraph 2 as it stands.

7. A particular question raised by the inclusion of paragraph 2 is the tax residence status of a visiting student or business apprentice under the normal rules of residence in article 4. A student who is following a full-time course of studies may become a tax resident of the host State: in which case, he will become liable to tax there in respect of his worldwide income, and be entitled to all the personal reliefs, without the need of any special provision in Article 20.

8. Moreover, as the Commentary to the 1980 version went on to show, there are a number of further ways in which the countries may wish to consider expanding Article 20 in the course of negotiations in order to cover particular problems which may arise in special bilateral situations. Examples are given, without suggesting any particular form of words to give effect to their intentions. The 1980 Commentaries said:

[…] some countries in bilateral negotiations might wish to expand the article by adding a paragraph permitting a further exemption (beyond that generally applicable as a personal exemption or similar allowance under the internal law of the Contracting State) of employment income under certain conditions. Some countries may, for example, wish to extend the exemption to remuneration received for services performed in the country where the student or business apprentice is present, but to limit the exemption to a specified amount of remuneration. In fixing the amount, countries may take into account the fact that students or business apprentices may incur additional costs because they are away from their home country. It may also be appropriate, in cases where the exemption is extended, to place a time limit on such exemption in the cases of business apprentices, and also perhaps in the cases of students, a longer period presumably being allowed in the latter situation.

9. In the light of the practical difficulties of applying paragraph 2, and the fact that there are a number of other issues affecting students and business apprentices that may need to be addressed in bilateral negotiations, the former Group of Experts decided that, rather than attempt a comprehensive rewording, it was preferable to omit paragraph 2 from the Convention. Countries wishing to broaden the scope of Article 20 to cover sources of income arising in the country visited should aim to draft a suitable provision as tightly as possible to meet their specific circumstances.

Article for teachers

10. During the course of discussions in the Seventh Meeting of the former Group of Experts, several participants argued for the addition to the Convention of an article dealing with visiting teachers. Currently, under the Convention visiting teachers are subject to Article 14, if the teaching services are performed in an independent capacity; Article 15, if the services are dependent; or Article 19, if the remuneration is paid by a Contracting State. Many treaties have an additional article or paragraph dealing specifically with teachers and, sometimes, researchers, which typically exempted them from taxation in the source country if their stay did not exceed a prescribed length. It was noted that Articles 14 and 15 commonly did not exempt a visiting teacher’s compensation from taxation at source because they generally allowed source taxation of service performers who were present in the host country for more than 183 days, and many teaching assignments exceeded that period of time.

11. There was considerable controversy among participants about the need to provide an independent article in the United Nations Model Convention dealing exclusively with visiting teachers. But substantially, all participants agreed that an article on teachers, if included in the Convention, should not have the effect of exempting a teacher from tax both in the home country and the country visited. One member suggested a compromise on the issue: that the Convention should not be amended to include a provision on visiting teachers but that an addition should be made in the Commentary, noting that many treaties contained such articles and providing advice for bilateral negotiations on the subject. There was general consensus for this suggestion.

12. Accordingly, the former Group of Experts appointed a drafting committee to formulate language for inclusion in the Commentary on the Convention. After being discussed and amended, the following inclusion was adopted by the Group in 1999:

No special Model Convention provision has been made regarding remuneration derived by visiting professors and other teachers. In the absence of a special provision, articles 14, 15, 19 or 23 of the Model Convention, depending on the circumstances, would apply. Many bilateral conventions, however, contain rules of some kind or other concerning such persons, the main purpose of which is to facilitate cultural relations and the exchange of knowledge by providing for a limited tax exemption in the host country for visiting teachers. Sometimes, tax exemption is already provided under domestic taxation laws, which many consider to be the preferred way of solving double taxation problems of visiting teachers.

Notwithstanding the applicability of articles 14, 15, 19 and 23 to prevent double taxation, some countries may wish to include an article on teachers. The variety of domestic tax rules in different countries, on the one hand, or the absence of such rules, on the other, constitute an impediment to a specific provision on teachers in the Model Convention. If, however, in bilateral negotiations, the Contracting States choose to include a provision relating to visiting teachers, the following issues should be considered in preparing such a provision:

(a) The purpose of a tax treaty generally is to avoid double taxation, and double exemption of teachers is not desirable;

(b) It is advisable to limit benefits for visits of a maximum duration (normally two years), and the time limit should be subject to expansion in individual cases by mutual agreement between competent authorities of the Contracting States. It should be determined whether income from the visits exceeding the time limit should be taxable as of the beginning of the visit or merely from the date beyond the expiration of the time limit;

(c) Whether the benefits should be limited to teaching services performed at certain institutions “recognized” by the Contracting States in which the services are performed;

(d) Whether, in the case of visiting professors and other teachers who also do research, to limit benefits remuneration for research performed in the public (vs. private) interest;

(e) Whether an individual may be entitled to the benefits of the article more than once."


Commentary on Article 20 of the OECD Model Tax Convention

Extract from 2014 Commentary:
"1. The rule established in this Article concerns certain payments received by students or business apprentices for the purpose of their maintenance, education or training. All such payments received from sources outside the State in which the student or business apprentice concerned is staying shall be exempted from tax in that State.

2. The word “immediately” was inserted in the 1977 Model Convention in order to make clear that the Article does not cover a person who has once been a resident of a Contracting State but has subsequently moved his residence to a third State before visiting the other Contracting State.

3. The Article covers only payments received for the purpose of the recipient’s maintenance, education or training. It does not, therefore, apply to a payment, or any part thereof, that is remuneration for services rendered by the recipient and which is covered by Article 15 (or by Article 7 in the case of independent services). Where the recipient’s training involves work experience, however, there is a need to distinguish between a payment for services and a payment for the recipient’s maintenance, education or training. The fact that the amount paid is similar to that paid to persons who provide similar services and are not students or business apprentices would generally indicate that the payment is a remuneration for services. Also, payments for maintenance, education or training should not exceed the level of expenses that are likely to be incurred to ensure the recipient’s maintenance, education or training.

4. The Article only applies to payments arising from sources outside the State where the student or business apprentice is present solely for the purposes of education or training. Payments arising from sources within that State are covered by other Articles of the Convention: for instance, if, during his presence in the first-mentioned State, the student or business apprentice remains a resident of the other State according to Article 4, payments such as grants or scholarships that are not covered by other provisions of the Convention (such as Article 15) will be taxable only in his State of residence under paragraph 1 of Article 21. For the purpose of the Article, payments that are made by or on behalf of a resident of a Contracting State or that are borne by a permanent establishment which a person has in that State are not considered to arise from sources outside that State.


Reservation on the Article 

5. Estonia reserves the right to amend the Article to refer to any apprentice or trainee."




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