International Tax

Article 19 | Taxation of Remuneration in respect of Government Service


We have extensively dealt with taxation of income of people undertaking different ventures or employment or multiple other sources of income. Often the question arises, will the countries forgo tax on the income of the government employee if he works in other countries?

Members of the OECD chose to honor international courtesy and mutual respect by not taxing the income of the non-residents who are under other government’s services. Article 19 is created in conformity to international courtesy and the provisions of the Vienna Conventions on Diplomatic and Consular relations.

What is ‘government service’ for Article 19?

The employee of the State, political subdivisions, and the local authority are considered to be under the Government service for Article 19. It includes employment in constituent states, regions, provinces, departments, cantons, districts, arrondissements, Kreise, municipalities, etc. )

Right to taxation on income from government service?

Article 19(1)(a) gives the exclusive right to tax the income from government service to the State paying salary. Similarly, Article 19(2) provides the power to tax the pension received by the employee working under the government service to the State paying the pension.

An exception for this principle is provided under Article 19(1)(b), whereby the State receiving the salary has right to tax the income paid to the certain categories of personnel in foreign diplomatic missions and consular posts, who are permanent residents or nationals of the State receiving payment. In the case of pensioners, the receiving State has the right to tax pension, when the recipient is its national and resident.

Note: Article 19(2) has the expression ‘out of funds created by’ in subparagraph, to cover the situation where the pension is not paid directly by the State but out of separate funds created by the Government body. Hence it includes the payments received from the privately administered funds established by the Government body.

Issues on taxation of pension:

IssueTax Suggestion
When the pensions are paid from combined private and government servicesPension received for government services will be taxable under Article 19(2).
When the pensions are paid from combined private and government servicesPension received for government services will be taxable under Article 19(2).
When the civil servant, who rendered service to the State, now joins the private sector and has transferred the right to a pension from the public to a private schemeThe payments would be taxable under Article 18, as the technical requirements of Article 19(2)(a) will not be satisfied
When the person joins government service leaving a private and joins the public pension scheme.The taxation depends upon the State’s policy. Few States allow the entire income to be taxable under Article 19, and few States seek to tax the income under Article 18 and Article 19 proportionately.
Issues on taxation of pension of persons employed in Government service

By Taxbeech

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