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STEP 1: applicability of Article 20
First, assess which DTC applies in the given case (ie Arts. 1+2)
In order to apply Art. 20, the following conditions must be met:
1) Income
2) Cross-border situation
3) Resident of a contracting state
4) Student (or business apprentice)
Article 20 applicable12
STEP 2: 5 requirements for a payment to be exempted in the source state
A. The beneficiaries have to qualify as students or business apprentices
Neither the term ‘students’ nor ‘business apprentices’ is defined.
o The terms encompass all individuals undergoing some level of education or training
o It is generally understood that these terms do not cover individuals who have
completed their vocational training3 and now wish to acquire, or to extend, their
knowledge in some specialist field.
-> they will, however, fall under the domestic definition (Art. 3(2)).
B. The beneficiary has to be or have been a resident of the other contracting state
The visitor must have been, either at the same time of arrival in the source state or
immediately before, a resident of the other contracting state
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 (§2).
o Hence, Article 20 also covers situations where the person is no longer a resident of
the first country, but who at the moment of leaving this country was a resident
there.
Article 20 therefore also covers domestic situations as it can restrict a state
in taxing its own resident -> becoming a resident of the source state does
not stop the protection of the Article even if the residence in the state
where the person comes from is lost. What matters is that the person was
the resident of the other contracting state immediately before the visit
Visit = being temporarily present
1
The Article differs from the other substantive articles of the MC since it does not really allocate taxing rights. Rather,
it merely provides an exemption from taxation in the source state. whether there will be residence taxation will
depend on whether the student retained previous fiscal residence and whether that state taxes such income.
2
If the taxpayer has become a resident of the source state by operation of its domestic law, Article 20 restricts his ‘full’
tax liability. Where the source state does not establish residence, Article 20 restricts no more than his ‘limited’ tax
liability.
3
“Training that emphasizes skills and knowledge required for a particular job function (such as typing or data entry) or
a trade (such as carpentry or welding).”
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