© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
C12. Other income (Article 21)
ARTICLE 21: OTHER INCOME
(1) Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Convention shall be taxable only in that State.
(2) The provisions of paragraph 1 shall not apply to income, other than income from immovable property as defined in paragraph 2 of Article 6, if the recipient of such income, being a resident of a Contracting State, carries on business in the other Contracting State through a permanent establishment situated therein and the right or property in respect of which the income is paid is effectively connected with such permanent establishment. In such case the provisions of Article 7 shall apply
- "Subject to tax" requires actual taxation
"[119] The OECD Commentary on Article 21 of both the MTC and the OECD Draft Model make it clear that the purpose of including the additional condition of being "subject to tax" is to "avoid non-taxation".
[120] In our view avoiding non-taxation, requires there to be actual and effective taxation. It is not sufficient that the SIPP Withdrawals would be taken into account under Portuguese tax law to determine the rate of PIT that applied to any other income of Mr Masters. To conclude otherwise would in our view defeat the purpose of including this condition in Article 20.
[121] If it was necessary for us to consider the application of Article 20 to the facts of this case therefore, we would find that because the SIPP Withdrawals were not actually taxed in Portugal, the UK would not be prevented from taxing them by the application of Article 20." (Masters v. HMRC [2025] UKFTT 967 (TC), Judge Snelders - in respect of the previous UK/Portugal treaty)
Subject to tax requirement
Some treaties refer, in Article 21, to "Items of income of a resident of a Contracting State who is subject to tax there in respect thereof being income of a class or from sources not expressly mentioned in the foregoing Articles of this Convention". E.g. the previous UK/Portugal double tax treaty.