Directors’ Fees | Article 16 | OECD Model Tax Convention

Article 16

The taxation on pay-out received by the members of the board of the company is mentioned under Article 16 of the OECD model tax convention. As the members of the board might provide services in multiple locations, identifying the taxing jurisdiction will be a difficult job. To simplify, the provisions of Article 16 give the right to taxation on the director’s remuneration to the State where the company is resident.

Director is a member of the board overseeing the operations, affairs, and welfare of the company. He often has other functions with the company as an employee, advisor, or consultant. Remuneration provided to the director for giving the services in another capacity will not be covered under Article 16.


Miss Meesha, the resident of State B, is a member of the board of Jocy Inc in State A. She spends 45 days of the financial year in State A. She is also the employee of Jocy Inc, working in State C. She receives Director Fees of 100000$ and 500000$ as salary. Assuming State A and State B have adopted OECD Model Tax, what will be taxable under Article 16?

Only Directors fees of 100000$ will be taxable under Article 16 in State A.

For the services provided to the company, a director receives the fees and other compensations. It includes the benefits in kind (e.g., stock options, free or subsidized accommodation and vehicle, health insurance, and club memberships) received by the person in his capacity as a member of the board of the company.

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