Residence-based taxation preserved: states may tax residents and citizens despite the treaty, with limited protected treaty benefits.

The Convention applies to residents of one or both Contracting States and does not restrict existing domestic or intergovernmental exclusions, exemptions, deductions, credits or allowances. Contracting States may continue to tax their residents and, by reason of citizenship, their citizens as if the Convention were not in effect, with a limited exception for former citizens whose loss of citizenship was principally to avoid tax. Preserved treaty benefits include rules on associated enterprises, certain pension and family payments, relief from double taxation, non-discrimination and the mutual agreement procedure, plus specified personal exemptions for certain categories of individuals.

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