UNITED NATIONS MODEL DOUBLE TAX CONVENTION

 

BETWEEN DEVELOPED AND DEVELOPING COUNTRIES

 

 

 

 

 

 

 

 

 

 

 

TITLE OF THE CONVENTION

 

 

 

 

 

Convention between (State A) and (State B) with respect to taxes on income and capital[1]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PREAMBLE OF THE CONVENTION[2]

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Chapter I - SCOPE OF THE CONVENTION

 

 

 

Article 1 - PERSONS COVERED

 

 

 

This Convention shall apply to persons who are residents of one or both of

 

the Contracting States.

 

 

 

Article 2 - TAXES COVERED

 

 

 

1.   This Convention shall apply to taxes on income and on capital imposed on behalf of a Contracting State or of its political subdivisions or local authorities, irrespective of the manner in which they are levied.

 

 

 

2.   There shall be regarded as taxes on income and on capital all taxes imposed on total income, on total capital, or on elements of income or of capital, including taxes on gains from the alienation of movable or immovable property, taxes on the total amounts of wages or salaries paid by enterprises, as well as taxes on capital appreciation.

 

 

 

3. The existing taxes to which the Convention shall apply are in particular:

 

(a)    (in State A): ............................................

 

(b)    (in State B): ............................................

 

 

 

4.   The Convention shall apply also to any identical or substantially similar taxes which are imposed after the date of signature of the Convention in addition to, or in place of, the existing taxes. The competent authorities of the Contracting States shall notify each other of significant changes made to their tax law.

 

 

 

Chapter II - DEFINITIONS

 

 

 

Article 3 - GENERAL DEFINITIONS

 

 

 

1.   For the purposes of this Convention, unless the context otherwise requires:

 

(a)    The term “person” includes an individual, a company and any other body of persons;

 

(b)    The term “company” means any body corporate or any entity that is treated as a body corporate for tax purposes;

 

(c)    The terms “enterprise of a Contracting State” and “enterprise of the other Contracting State” mean respectively an enterprise carried on by a resident of a Contracting State and an enterprise carried on by a resident of the other Contracting State;

 

(d)    The term “international traffic” means any transport by a ship or aircraft operated by an enterprise that has its place of effective management in a Contracting State, except when the ship or aircraft is operated solely between places in the other Contracting State;

 

(e)    The term “competent authority” means:

 

(i)     (In State A): ............................................

 

(ii)    (In State B): ............................................

 

(f)     The term “national” means:

 

(i)     any individual possessing the nationality of a Contracting State

 

(ii)    any legal person, partnership or association deriving its status as such from the laws in force in a Contracting State.

 

 

 

2.   As regards the application of the Convention at any time by a Contracting State, any term not defined therein shall, unless the context otherwise requires, have the meaning that it has at that time under the law of that State for the purposes of the taxes to which the Convention applies, any meaning under the applicable tax laws of that State prevailing over a meaning given to the term under other laws of that State.

 

 

 

Article 4 - RESIDENT

 

 

 

1.   For the purposes of this Convention, the term “resident of a Contracting State” means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of incorporation, place of management or any other criterion of a similar nature, and also includes that State and any political subdivision or local authority thereof. This term, however, does not include any person who is liable to tax in that State in respect only of income from sources in that State or capital situated therein.

 

 

 

2.   Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, then his status shall be determined as follows:

 

(a)    He shall be deemed to be a resident only of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident only of the State with which his personal and economic relations are closer (centre of vital interests);

 

(b)    If the State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either State, he shall be deemed to be a resident only of the State in which he has an habitual abode;

 

(c)    If he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident only of the State of which he is a national;

 

(d)    If he is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.

 

 

 

3.   Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident only of the State in which its place of effective management is situated.

 

 


Article 5 - PERMANENT ESTABLISHMENT

 

 

 

1.   For the purposes of this Convention, the term “permanent establishment” means a fixed place of business through which the business of an enterprise is wholly or partly carried on.

 

 

 

2.   The term “permanent establishment” includes especially:

 

(a)    A place of management;

 

(b)    A branch;

 

(c)    An office;

 

(d)    A factory;

 

(e)    A workshop;

 

(f)     A mine, an oil or gas well, a quarry or any other place of extraction of natural resources.

 

 

 

3.   The term “permanent establishment” also encompasses:

 

(a)    A building site, a construction, assembly or installation project or supervisory activities in connection therewith, but only if such site, project or activities last more than six months;

 

(b)    The furnishing of services, including consultancy services, by an enterprise through employees or other personnel engaged by the enterprise for such purpose, but only if activities of that nature continue (for the same or a connected project) within a Contracting State for a period or periods aggregating more than 183 days in any 12-month period commencing or ending in the fiscal year concerned.

 

 

 

4.   Notwithstanding the preceding provisions of this Article, the term “permanent establishment” shall be deemed not to include:

 

(a)    The use of facilities solely for the purpose of storage or display of goods or merchandise belonging to the enterprise;

 

(b)    The maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage or display;

 

(c)    The maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;

 

(d)    The maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise or of collecting information, for the enterprise;

 

(e)    The maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, any other activity of a preparatory or auxiliary character.

 

(f)     The maintenance of a fixed place of business solely for any combination of activities mentioned in subparagraphs (a) to (e), provided that the overall activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary character.


 

 

5.   Notwithstanding the provisions of paragraphs 1 and 2, where a person—other than an agent of an independent status to whom paragraph 7 applies—is acting in a Contracting State on behalf of an enterprise of the other Contracting State, that enterprise shall be deemed to have a permanent establishment in the first-mentioned Contracting State in respect of any activities which that person undertakes for the enterprise, if such a person:

 

(a)    Has and habitually exercises in that State an authority to conclude contracts in the name of the enterprise, unless the activities of such person are limited to those mentioned in paragraph 4 which, if exercised through a fixed place of business, would not make this fixed place of business a permanent establishment under the provisions of that paragraph; or

 

(b)    Has no such authority, but habitually maintains in the first-mentioned State a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the enterprise.

 

 

 

6.   Notwithstanding the preceding provisions of this Article, an insurance enterprise of a Contracting State shall, except in regard to re-insurance, be deemed to have a permanent establishment in the other Contracting State if it collects premiums in the territory of that other State or insures risks situated therein through a person other than an agent of an independent status to whom paragraph 7 applies.

 

 

 

7.   An enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that other State through a broker, general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business. However, when the activities of such an agent are devoted wholly or almost wholly on behalf of that enterprise, and conditions are made or imposed between that enterprise and the agent in their commercial and financial relations which differ from those which would have been made between independent enterprises, he will not be considered an agent of an independent status within the meaning of this paragraph.

 

 

 

8.   The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State, or which carries on business in that other State (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment of the other


Chapter III - TAXATION OF INCOME

 

 

 

Article 6 - INCOME FROM IMMOVABLE PROPERTY

 

 

 

1.   Income derived by a resident of a Contracting State from immovable property (including income from agriculture or forestry) situated in the other Contracting State may be taxed in that other State.

 

 

 

2.   The term “immovable property” shall have the meaning which it has under the law of the Contracting State in which the property in question is situated. The term shall in any case include property accessory to immovable property, livestock and equipment used in agriculture and forestry, rights to which the provisions of general law respecting landed property apply, usufruct of immovable property and rights to variable or fixed payments as consideration for the working of, or the right to work, mineral deposits, sources and other natural resources; ships, boats and aircraft shall not be regarded as immovable property.

 

 

 

3.   The provisions of paragraph 1 shall also apply to income derived from the direct use, letting or use in any other form of immovable property.

 

 

 

4.   The provisions of paragraphs 1 and 3 shall also apply to the income from immovable property of an enterprise and to income from immovable property used for the performance of independent personal services.

 

 

 

Article 7 - BUSINESS PROFITS

 

 

 

1.   The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to (a) that permanent establishment; (b) sales in that other State of goods or merchandise of the same or similar kind as those sold through that permanent establishment or (c) other business activities carried on in that other State of the same or similar kind as those effected through that permanent establishment.

 

 

 

2.   Subject to the provisions of paragraph 3, where an enterprise of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment the profits which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a permanent establishment.

 

 

 

3.   In the determination of the profits of a permanent establishment, there shall be allowed as deductions expenses which are incurred for the purposes of the business of the permanent establishment including executive and general administrative expenses so incurred, whether in the State in which the permanent establishment is situated or elsewhere. However, no such deduction shall be allowed in respect of amounts, if any, paid (otherwise than towards reimbursement of actual expenses) by the permanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of patents or other rights, or by way of commission, for specific services performed or for management, or, except in the case of a banking enterprise, by way of interest on moneys lent to the permanent establishment. Likewise, no account shall be taken, in the determination of the profits of a permanent establishment, for amounts charged (otherwise than towards reimbursement of actual expenses), by the permanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of patents or other rights, or by way of commission for specific services performed or for management, or, except in the case of a banking enterprise, by way of interest on moneys lent to the head office of the enterprise or any of its other offices.

 

 

 

4.   In so far as it has been customary in a Contracting State to determine the profits to be attributed to a permanent establishment on the basis of an apportionment of the total profits of the enterprise to its various parts, nothing in paragraph 2 shall preclude that Contracting State from determining the profits to be taxed by such an apportionment as may be customary; the method of apportionment adopted shall, however, be such that the result shall be in accordance with the principles contained in this Article.

 

 

 

5.   For the purposes of the preceding paragraphs, the profits to be attributed to the permanent establishment shall be determined by the same method year by year unless there is good and sufficient reason to the contrary.

 

 

 

6.   Where profits include items of income which are dealt with separately in other Articles of this Convention, then the provisions of those Articles shall not be affected by the provisions of this Article.

 

 

 

(NOTE: The question of whether profits should be attributed to a permanent establishment by reason of the mere purchase by that permanent establishment of goods and merchandise for the enterprise was not resolved. It should therefore be settled in bilateral negotiations.)

 

 


Article 8 - SHIPPING, INLAND WATERWAYS TRANSPORT AND AIR TRANSPORT

 

 

 

Article 8 (alternative A)

 

 

 

1.   Profits from the operation of ships or aircraft in international traffic shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.

 

 

 

2.   Profits from the operation of boats engaged in inland waterways transport shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.

 

 

 

3.   If the place of effective management of a shipping enterprise or of an inland waterways transport enterprise is aboard a ship or a boat, then it shall be deemed to be situated in the Contracting State in which the home harbour of the ship or boat is situated, or, if there is no such home harbour, in the Contracting State of which the operator of the ship or boat is a resident.

 

 

 

4.   The provisions of paragraph 1 shall also apply to profits from the participation in a pool, a joint business or an international operating agency.

 

 

 

Article 8 (alternative B)

 

 

 

1.   Profits from the operation of aircraft in international traffic shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.

 

 

 

2.   Profits from the operation of ships in international traffic shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated unless the shipping activities arising from such operation in the other Contracting State are more than casual. If such activities are more than casual, such profits may be taxed in that other State. The profits to be taxed in that other State shall be determined on the basis of an appropriate allocation of the overall net profits derived by the enterprise from its shipping operations. The tax computed in accordance with such allocation shall then be reduced by ___ per cent. (The percentage is to be established through bilateral negotiations.)

 

 

 

3.   Profits from the operation of boats engaged in inland waterways transport shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.

 

 

 

4.   If the place of effective management of a shipping enterprise or of an inland waterways transport enterprise is aboard a ship or boat, then it shall be deemed to be situated in the Contracting State in which the home harbour of the ship or boat is situated, or if there is no such home harbour, in the Contracting State of which the operator of the ship or boat is a resident.

 

 

 

5.   The provisions of paragraphs 1 and 2 shall also apply to profits from the participation in a pool, a joint business or an international operating agency.

 

 

 

Article 9 - ASSOCIATED ENTERPRISES

 

 

 

1.   Where:

 

(a)             an enterprise of a Contracting State participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting State, or

 

(b) the same persons participate directly or indirectly in the management, control or capital of an enterprise of a Contracting State and an enterprise of the other Contracting State, and in either case conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly.

 

 

 

2.   Where a Contracting State includes in the profits of an enterprise of that State—and taxes accordingly—profits on which an enterprise of the other Contracting State has been charged to tax in that other State and the profits so included are profits which would have accrued to the enterprise of the first-mentioned State if the conditions made between the two enterprises had been those which would have been made between independent enterprises, then that other State shall make an appropriate adjustment to the amount of the tax charged therein on those profits. In determining such adjustment, due regard shall be had to the other provisions of the Convention and the competent authorities of the Contracting States shall, if necessary, consult each other.

 

 

 

3.   The provisions of paragraph 2 shall not apply where judicial, administrative or other legal proceedings have resulted in a final ruling that by actions giving rise to an adjustment of profits under paragraph 1, one of the enterprises concerned is liable to penalty with respect to fraud, gross negligence or wilful default.

 

 

 

Article 10 - DIVIDENDS

 

 

 

1.   Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State.

 

 

 

2.   However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but if the beneficial owner of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed:

 

(a)             ___ per cent (the percentage is to be established through bilateral negotiations) of the gross amount of the dividends if the beneficial owner is a company (other than a partnership) which holds directly at least 10 per cent of the capital of the company paying the dividends;

 

(b) ___ per cent (the percentage is to be established through bilateral negotiations) of the gross amount of the dividends in all other cases.

 

 

 

The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of these limitations.

 

 

 

This paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.

 

 

 

3.   The term “dividends” as used in this Article means income from shares, “jouissance” shares or “jouissance” rights, mining shares, founders’ shares or other rights, not being debt claims, participating in profits, as well  as income from other corporate rights which is subjected to the same taxation treatment as income from shares by the laws of the State of which the company making the distribution is a resident.

 

 

 

4.   The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

 

 

 

5.   Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company, except in so far as such dividends are paid to a resident of that other State or in so far as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other State, nor subject the company’s undistributed profits to a tax on the company’s undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State.

 

 

 

Article 11 - INTEREST

 

 

 

1.   Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

 

 

 

2.   However, such interest may also be taxed in the Contracting State in which it arises and according to the laws of that State, but if the beneficial owner of the interest is a resident of the other Contracting State, the tax so charged shall not exceed ___ per cent (the percentage is to be established through bilateral negotiations) of the gross amount of the interest. The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of this limitation.

 

 

 

3.   The term “interest” as used in this Article means income from debt claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor’s profits, and in particular income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures. Penalty charges for late payment shall not be regarded as interest for the purpose of this Article.

 

 

 

4.   The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the debt claim in respect of which the interest is paid is effectively connected with (a) such permanent establishment or fixed base, or with (b) business activities referred to in (c) of paragraph 1 of Article 7. In such cases the provisions of Article 7 or Article 14, as the case may be, shall apply.

 

 

 

5.   Interest shall be deemed to arise in a Contracting State when the payer is a resident of that State. Where, however, the person paying the interest, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment or fixed base, then such interest shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.

 

 

 

6.   Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the interest, having regard to the debt claim for which it is paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Convention.

 

 

 

Article 12 - ROYALTIES

 

 

 

1.   Royalties arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

 

 

 

2.   However, such royalties may also be taxed in the Contracting State in which they arise and according to the laws of that State, but if the beneficial  owner of the royalties is a resident of the other Contracting State, the tax so charged shall not exceed ___ per cent (the percentage is to be established through bilateral negotiations) of the gross amount of the royalties. The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of this limitation.

 

 

 

3.   The term “royalties” as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films, or films or tapes used for radio or television broadcasting, any patent, trademark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial or scientific equipment or for information concerning industrial, commercial or scientific experience.

 

 

 

4.   The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties arise, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the royalties are paid is effectively connected with (a) such permanent establishment or fixed base, or with (b) business activities referred to in (c) of paragraph 1 of Article 7. In such cases the provisions of Article 7 or Article 14, as the case may be, shall apply.

 

 

 

5.   Royalties shall be deemed to arise in a Contracting State when the payer is a resident of that State. Where, however, the person paying the royalties, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the liability to pay the royalties was incurred, and such royalties are borne by such permanent establishment or fixed base, then such royalties shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.

 

 

 

6.   Where by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the royalties, having regard to the use, right or information for which they are paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Convention.

 

 

 

Article 13 - CAPITAL GAINS

 

 

 

1.   Gains derived by a resident of a Contracting State from the alienation of immovable property referred to in Article 6 and situated in the other Contracting State may be taxed in that other State.

 

 

 

2.   Gains from the alienation of movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or of movable property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, including such gains from the alienation of such a permanent establishment (alone or with the whole enterprise) or of such fixed base, may be taxed in that other State.

 

 

 

3.   Gains from the alienation of ships or aircraft operated in international traffic, boats engaged in inland waterways transport or movable property pertaining to the operation of such ships, aircraft or boats, shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.

 

 

 

4.   Gains from the alienation of shares of the capital stock of a company, or of an interest in a partnership, trust or estate, the property of which consists directly or indirectly principally of immovable property situated in a Contracting State may be taxed in that State. In particular:

 

(a) Nothing contained in this paragraph shall apply to a company, partnership, trust or estate, other than a company, partnership, trust or estate engaged in the business of management of immovable properties, the property of which consists directly or indirectly principally of immovable property used by such company, partnership, trust or estate in its business activities.

 

(b) For the purposes of this paragraph, “principally” in relation to ownership of immovable property means the value of such immovable property exceeding 50 per cent of the aggregate value of all assets owned by the company, partnership, trust or estate.

 

 

 

5.   Gains, other than those to which paragraph 4 applies, derived by a resident of a Contracting State from the alienation of shares of a company which is a resident of the other Contracting State, may be taxed in that other State if the alienator, at any time during the 12-month period preceding such alienation, held directly or indirectly at least ___ per cent (the percentage is to be established through bilateral negotiations) of the capital of that company.

 

 

 

6.   Gains from the alienation of any property other than that referred to in paragraphs 1, 2, 3, 4 and 5 shall be taxable only in the Contracting State of which the alienator is a resident.

 

 

 

Article 14 - INDEPENDENT PERSONAL SERVICES

 

 

 

1.   Income derived by a resident of a Contracting State in respect of professional services or other activities of an independent character shall be taxable only in that State except in the following circumstances, when such income may also be taxed in the other Contracting State:

 

(a) If he has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities; in that case, only so much of the income as is attributable to that fixed base may be taxed in that other Contracting State; or

 

(b) If his stay in the other Contracting State is for a period or periods amounting to or exceeding in the aggregate 183 days in any twelvemonth period commencing or ending in the fiscal year concerned; in that case, only so much of the income as is derived from his activities performed in that other State may be taxed in that other State.

 

 

 

2.   The term “professional services” includes especially independent scientific, literary, artistic, educational or teaching activities as well as the independent activities of physicians, lawyers, engineers, architects, dentists and accountants.

 

 

 

Article 15 - DEPENDENT PERSONAL SERVICES

 

 

 

1.   Subject to the provisions of Articles 16, 18 and 19, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.

 

 

 

2.   Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if:

 

(a)             The recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in any twelve-month period commencing or ending in the fiscal year concerned; and

 

(b) The remuneration is paid by, or on behalf of, an employer who is not a resident of the other State; and

 

(c) The remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State.

 

 

 

3.   Notwithstanding the preceding provisions of this Article, remuneration derived in respect of an employment exercised aboard a ship or aircraft operated in international traffic, or aboard a boat engaged in inland waterways transport, may be taxed in the Contracting State in which the place of effective management of the enterprise is situated.

 

 

 

Article 16 - DIRECTORS’ FEES AND REMUNERATION OF TOP-LEVEL MANAGERIAL OFFICIALS

 

 

 

1.   Directors’ fees and other similar payments derived by a resident of a Contracting State in his capacity as a member of the Board of Directors of a company which is a resident of the other Contracting State may be taxed in that other State.

 

 

 

2.   Salaries, wages and other similar remuneration derived by a resident of a Contracting State in his capacity as an official in a top-level managerial position of a company which is a resident of the other Contracting State may be taxed in that other State.

 

 

 

Article 17 - ARTISTES AND SPORTSPERSONS

 

 

 

1.   Notwithstanding the provisions of Articles 14 and 15, income derived by a resident of a Contracting State as an entertainer, such as a theatre, motion picture, radio or television artiste, or a musician, or as a sportsperson, from his personal activities as such exercised in the other Contracting State, may be taxed in that other State.

 

 

 

2.   Where income in respect of personal activities exercised by an entertainer or a sportsperson in his capacity as such accrues not to the entertainer or sportsperson himself but to another person, that income may, notwithstanding the provisions of Articles 7, 14 and 15, be taxed in the Contracting State in which the activities of the entertainer or sportsperson are exercised.

 

 

 

Article 18 - PENSIONS AND SOCIAL SECURITY PAYMENTS

 

 

 

Article 18 (alternative A)

 

 

 

1.   Subject to the provisions of paragraph 2 of Article 19, pensions and other similar remuneration paid to a resident of a Contracting State in consideration of past employment shall be taxable only in that State.

 

 

 

2.   Notwithstanding the provisions of paragraph 1, pensions paid and other payments made under a public scheme which is part of the social security system of a Contracting State or a political subdivision or a local authority thereof shall be taxable only in that State.

 

 

 

Article 18 (alternative B)

 

 

 

1.   Subject to the provisions of paragraph 2 of Article 19, pensions and other similar remuneration paid to a resident of a Contracting State in consideration of past employment may be taxed in that State.

 

 

 

2.   However, such pensions and other similar remuneration may also be taxed in the other Contracting State if the payment is made by a resident of that other State or a permanent establishment situated therein.

 

 

 

3.   Notwithstanding the provisions of paragraphs 1 and 2, pensions paid and other payments made under a public scheme which is part of the social security system of a Contracting State or a political subdivision or a local authority thereof shall be taxable only in that State.


Article 19 - GOVERNMENT SERVICE

 

 

 

1.

 

(a)             Salaries, wages and other similar remuneration paid by a Contracting State or a political subdivision or a local authority thereof to an individual in respect of services rendered to that State or subdivision or authority shall be taxable only in that State.

 

(b) However, such salaries, wages and other similar remuneration shall be taxable only in the other Contracting State if the services are rendered in that other State and the individual is a resident of that State who:

 

(i)     is a national of that State; or

 

(ii)    did not become a resident of that State solely for the purpose of rendering the services.

 

 

 

2.

 

(a) Notwithstanding the provisions of paragraph 1, pensions and other similar remuneration paid by, or out of funds created by, a Contracting State or a political subdivision or a local authority thereof to an individual in respect of services rendered to that State or subdivision or authority shall be taxable only in that State.

 

(b) However, such pensions and other similar remuneration shall be taxable only in the other Contracting State if the individual is a resident of, and a national of, that other State.

 

 

 

3.   The provisions of Articles 15, 16, 17 and 18 shall apply to salaries, wages, pensions, and other similar remuneration in respect of services rendered in connection with a business carried on by a Contracting State or a political subdivision or a local authority thereof.

 

 

 

Article 20 - STUDENTS

 

 

 

Payments which a student or business trainee or apprentice who is or was immediately before visiting a Contracting State a resident of the other Contracting State and who is present in the first-mentioned State solely for the purpose of his education or training receives for the purpose of his maintenance, education or training shall not be taxed in that State, provided that such payments arise from sources outside that State.

 

 

 

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, or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the income is paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

 

 

 

3.   Notwithstanding the provisions of paragraphs 1 and 2, items of income of a resident of a Contracting State not dealt with in the foregoing Articles of this Convention and arising in the other Contracting State may also be taxed in that other State.

 

 

 

Chapter IV- TAXATION OF CAPITAL

 

 

 

Article 22 - CAPITAL

 

 

 

1.   Capital represented by immovable property referred to in Article 6, owned by a resident of a Contracting State and situated in the other Contracting State, may be taxed in that other State.

 

 

 

2.   Capital represented by movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or by movable property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services may be taxed in that other State.

 

 

 

3.   Capital represented by ships and aircraft operated in international traffic and by boats engaged in inland waterways transport, and by movable property pertaining to the operation of such ships, aircraft and boats, shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.

 

 

 

[4. All other elements of capital of a resident of a Contracting State shall be taxable only in that State.]

 

 

 

(The question of the taxation of all other elements of capital of a resident of a Contracting State is left to bilateral negotiations. Should the negotiating parties decide to include in the Convention an article on the taxation of capital, they will have to determine whether to use the wording of paragraph 4 as shown or wording that leaves taxation to the State in which the capital is located.)

 

 

 

Article 23 A - EXEMPTION METHOD

 

 

 

1.   Where a resident of a Contracting State derives income or owns capital which, in accordance with the provisions of this Convention, may be taxed in the other Contracting State, the first-mentioned State shall, subject to the provisions of paragraphs 2 and 3, exempt such income or capital from tax.

 

 

 

2.   Where a resident of a Contracting State derives items of income which, in accordance with the provisions of Articles 10, 11 and 12, may be taxed in the other Contracting State, the first-mentioned State shall allow as a deduction from the tax on the income of that resident an amount equal to the tax paid in that other State. Such deduction shall not, however, exceed that part of the tax, as computed before the deduction is given, which is attributable to such items of income derived from that other State.

 

 

 

3.   Where in accordance with any provision of this Convention income derived or capital owned by a resident of a Contracting State is exempt from tax in that State, such State may nevertheless, in calculating the amount of tax on the remaining income or capital of such resident, take into account the exempted income or capital.

 

 

 

Article 23 B - CREDIT METHOD

 

 

 

1.   Where a resident of a Contracting State derives income or owns capital which, in accordance with the provisions of this Convention, may be taxed in the other Contracting State, the first-mentioned State shall allow as a deduction from the tax on the income of that resident an amount equal to the income tax paid in that other State; and as a deduction from the tax on the capital of that resident, an amount equal to the capital tax paid in that other State. Such deduction in either case shall not, however, exceed that part of the income tax or capital tax, as computed before the deduction is given, which is attributable, as the case may be, to the income or the capital which may be taxed in that other State.

 

 

 

2.   Where, in accordance with any provision of this Convention, income derived or capital owned by a resident of a Contracting State is exempt from tax in that State, such State may nevertheless, in calculating the amount of tax on the remaining income or capital of such resident, take into account the exempted income or capital.

 

 

 

Chapter VI - SPECIAL PROVISIONS

 

 

 

Article 24 - NON-DISCRIMINATION

 

 

 

1.   Nationals of a Contracting State shall not be subjected in the other

 

Contracting State to any taxation or any requirement connected therewith

 

which is other or more burdensome than the taxation and connected requirements

 

to which nationals of that other State in the same circumstances, in

 

particular with respect to residence, are or may be subjected. This provision

 

shall, notwithstanding the provisions of Article 1, also apply to persons who

 

are not residents of one or both of the Contracting States.

 

 

 

2.   Stateless persons who are residents of a Contracting State shall not

 

be subjected in either Contracting State to any taxation or any requirement

 

connected therewith which is other or more burdensome than the taxation

 

and connected requirements to which nationals of the State concerned in the

 

same circumstances, in particular with respect to residence, are or may be

 

subjected.

 

 

 

3.   The taxation on a permanent establishment which an enterprise

 

of a Contracting State has in the other Contracting State shall not be less

 

favourably levied in that other State than the taxation levied on enterprises

 

of that other State carrying on the same activities. This provision shall not be

 

construed as obliging a Contracting State to grant to residents of the other

 

Contracting State any personal allowances, reliefs and reductions for taxation

 

purposes on account of civil status or family responsibilities which it

 

grants to its own residents.

 

 

 

4.   Except where the provisions of paragraph 1 of Article 9, paragraph 6

 

of Article 11, or paragraph 6 of Article 12 apply, interest, royalties and other

 

disbursements paid by an enterprise of a Contracting State to a resident of

 

the other Contracting State shall, for the purpose of determining the taxable

 

profits of such enterprise, be deductible under the same conditions as if they

 

had been paid to a resident of the first-mentioned State. Similarly, any debts

 

of an enterprise of a Contracting State to a resident of the other Contracting

 

State shall, for the purpose of determining the taxable capital of such enterprise,

 

be deductible under the same conditions as if they had been contracted

 

to a resident of the first-mentioned State.

 

 

 

5.   Enterprises of a Contracting State, the capital of which is wholly or

 

partly owned or controlled, directly or indirectly, by one or more residents

 

of the other Contracting State, shall not be subjected in the first-mentioned

 

State to any taxation or any requirement connected therewith which is other

 

or more burdensome than the taxation and connected requirements to which

 

other similar enterprises of the first-mentioned State are or may be subjected.

 

 

 

6.   The provisions of this Article shall, notwithstanding the provisions of

 

Article 2, apply to taxes of every kind and description.

 

 

 

Article 25 - MUTUAL AGREEMENT PROCEDURE

 

 

 

Article 25 (alternative A)

 

 

 

1.   Where a person considers that the actions of one or both of the

 

Contracting States result or will result for him in taxation not in accordance

 

with the provisions of this Convention, he may, irrespective of the remedies

 

provided by the domestic law of those States, present his case to the competent

 

authority of the Contracting State of which he is a resident or, if his case

 

comes under paragraph 1 of Article 24, to that of the Contracting State of

 

which he is a national. The case must be presented within three years from

 

the first notification of the action resulting in taxation not in accordance

 

with the provisions of the Convention.

 

 

 

2.   The competent authority shall endeavour, if the objection appears to

 

it to be justified and if it is not itself able to arrive at a satisfactory solution,

 

to resolve the case by mutual agreement with the competent authority of the

 

other Contracting State, with a view to the avoidance of taxation which is

 

not in accordance with this Convention. Any agreement reached shall be

 

implemented notwithstanding any time limits in the domestic law of the

 

Contracting States.

 

 

 

3.   The competent authorities of the Contracting States shall endeavour

 

to resolve by mutual agreement any difficulties or doubts arising as to

 

the interpretation or application of the Convention. They may also consult

 

together for the elimination of double taxation in cases not provided for in

 

the Convention.

 

 

 

4.   The competent authorities of the Contracting States may communicate

 

with each other directly, including through a joint commission

 

consisting of themselves or their representatives, for the purpose of reaching

 

an agreement in the sense of the preceding paragraphs. The competent

 

authorities, through consultations, may develop appropriate bilateral procedures,

 

conditions, methods and techniques for the implementation of the

 

mutual agreement procedure provided for in this Article.

 

 

 

Article 25 (alternative B)

 

 

 

1.   Where a person considers that the actions of one or both of the

 

Contracting States result or will result for him in taxation not in accordance

 

with the provisions of this Convention, he may, irrespective of the remedies

 

provided by the domestic law of those States, present his case to the competent

 

authority of the Contracting State of which he is a resident or, if his case

 

comes under paragraph 1 of Article 24, to that of the Contracting State of

 

which he is a national. The case must be presented within three years from

 

the first notification of the action resulting in taxation not in accordance

 

with the provisions of the Convention.

 

 

 

2.   The competent authority shall endeavour, if the objection appears to

 

it to be justified and if it is not itself able to arrive at a satisfactory solution,

 

to resolve the case by mutual agreement with the competent authority of the

 

other Contracting State, with a view to the avoidance of taxation which is

 

not in accordance with this Convention. Any agreement reached shall be

 

implemented notwithstanding any time limits in the domestic law of the

 

Contracting States.

 

 

 

3.   The competent authorities of the Contracting States shall endeavour

 

to resolve by mutual agreement any difficulties or doubts arising as to

 

the interpretation or application of the Convention. They may also consult

 

together for the elimination of double taxation in cases not provided for in

 

the Convention.

 

 

 

4.   The competent authorities of the Contracting States may communicate

 

with each other directly, including through a joint commission consisting

 

of themselves or their representatives, for the purpose of reaching an

 

agreement in the sense of the preceding paragraphs. The competent authorities,

 

through consultations, may develop appropriate bilateral procedures,

 

conditions, methods and techniques for the implementation of the mutual

 

agreement procedure provided for in this Article.

 

 

 

5.   Where,

 

(a) under paragraph 1, a person has presented a case to the competent

 

authority of a Contracting State on the basis that the actions of one or

 

both of the Contracting States have resulted for that person in taxation

 

not in accordance with the provisions of this Convention, and

 

(b) the competent authorities are unable to reach an agreement to

 

resolve that case pursuant to paragraph 2 within three years from

 

the presentation of the case to the competent authority of the other

 

Contracting State,

 

any unresolved issues arising from the case shall be submitted to arbitration

 

if either competent authority so requests. The person who has presented

 

the case shall be notified of the request. These unresolved issues shall not,

 

however, be submitted to arbitration if a decision on these issues has already

 

been rendered by a court or administrative tribunal of either State. The arbitration decision shall be binding on both States and shall be implemented

 

notwithstanding any time limits in the domestic laws of these States unless

 

both competent authorities agree on a different solution within six months

 

after the decision has been communicated to them or unless a person directly

 

affected by the case does not accept the mutual agreement that implements

 

the arbitration decision. The competent authorities of the Contracting States

 

shall by mutual agreement settle the mode of application of this paragraph.

 

 

 

Article 26 - EXCHANGE OF INFORMATION

 

 

 

1.   The competent authorities of the Contracting States shall exchange

 

such information as is foreseeably relevant for carrying out the provisions

 

of this Convention or to the administration or enforcement of the domestic

 

laws of the Contracting States concerning taxes of every kind and description

 

imposed on behalf of the Contracting States, or of their political subdivisions

 

or local authorities, insofar as the taxation thereunder is not contrary

 

to the Convention. In particular, information shall be exchanged that would

 

be helpful to a Contracting State in preventing avoidance or evasion of such

 

taxes. The exchange of information is not restricted by Articles 1 and 2.

 

 

 

2.   Any information received under paragraph 1 by a Contracting State

 

shall be treated as secret in the same manner as information obtained under

 

the domestic laws of that State and it shall be disclosed only to persons or

 

authorities (including courts and administrative bodies) concerned with

 

the assessment or collection of, the enforcement or prosecution in respect

 

of, or the determination of appeals in relation to, the taxes referred to in

 

paragraph 1, or the oversight of the above. Such persons or authorities shall

 

use the information only for such purposes. They may disclose the information

 

in public court proceedings or in judicial decisions.

 

 

 

3.   In no case shall the provisions of paragraphs 1 and 2 be construed so

 

as to impose on a Contracting State the obligation:

 

(a) To carry out administrative measures at variance with the laws and

 

administrative practice of that or of the other Contracting State;

 

(b) To supply information which is not obtainable under the laws or

 

in the normal course of the administration of that or of the other

 

Contracting State;

 

(c) To supply information which would disclose any trade, business,

 

industrial, commercial or professional secret or trade process, or

 

information, the disclosure of which would be contrary to public

 

policy (ordre public).

 

 

 

4.   If information is requested by a Contracting State in accordance with

 

this Article, the other Contracting State shall use its information gathering

 

measures to obtain the requested information, even though that other State

 

may not need such information for its own tax purposes. The obligation contained

 

in the preceding sentence is subject to the limitations of paragraph 3

 

but in no case shall such limitations be construed to permit a Contracting

 

State to decline to supply information solely because it has no domestic interest

 

in such information.

 

 

 

5.   In no case shall the provisions of paragraph 3 be construed to permit

 

a Contracting State to decline to supply information solely because the

 

information is held by a bank, other financial institution, nominee or person

 

acting in an agency or a fiduciary capacity or because it relates to ownership

 

interests in a person.

 

 

 

6.   The competent authorities shall, through consultation, develop

 

appropriate methods and techniques concerning the matters in respect of

 

which exchanges of information under paragraph 1 shall be made

 

 


Article 27 - ASSISTANCE IN THE COLLECTION OF TAXES[3]

 

 

 

1.   The Contracting States shall lend assistance to each other in the collection

 

of revenue claims. This assistance is not restricted by Articles 1 and 2.

 

The competent authorities of the Contracting States may by mutual agreement

 

settle the mode of application of this Article.

 

 

 

2.   The term “revenue claim” as used in this Article means an amount

 

owed in respect of taxes of every kind and description imposed on behalf of

 

the Contracting States, or of their political subdivisions or local authorities,

 

insofar as the taxation thereunder is not contrary to this Convention or any

 

other instrument to which the Contracting States are parties, as well as interest,

 

administrative penalties and costs of collection or conservancy related to

 

such amount.

 

 

 

3.   When a revenue claim of a Contracting State is enforceable under the

 

laws of that State and is owed by a person who, at that time, cannot, under

 

the laws of that State, prevent its collection, that revenue claim shall, at the

 

request of the competent authority of that State, be accepted for purposes of

 

collection by the competent authority of the other Contracting State. That

 

revenue claim shall be collected by that other State in accordance with the

 

provisions of its laws applicable to the enforcement and collection of its own

 

taxes as if the revenue claim were a revenue claim of that other State.

 

 

 

4.   When a revenue claim of a Contracting State is a claim in respect of

 

which that State may, under its law, take measures of conservancy with a view

 

to ensure its collection, that revenue claim shall, at the request of the competent

 

authority of that State, be accepted for purposes of taking measures of

 

conservancy by the competent authority of the other Contracting State. That

 

other State shall take measures of conservancy in respect of that revenue

 

claim in accordance with the provisions of its laws as if the revenue claim

 

were a revenue claim of that other State even if, at the time when such measures

 

are applied, the revenue claim is not enforceable in the first-mentioned

 

State or is owed by a person who has a right to prevent its collection.

 

 

 

5.   Notwithstanding the provisions of paragraphs 3 and 4, a revenue

 

claim accepted by a Contracting State for purposes of paragraph 3 or 4 shall

 

not, in that State, be subject to the time limits or accorded any priority applicable

 

to a revenue claim under the laws of that State by reason of its nature

 

as such. In addition, a revenue claim accepted by a Contracting State for the

 

purposes of paragraph 3 or 4 shall not, in that State, have any priority applicable

 

to that revenue claim under the laws of the other Contracting State.

 

 

 

6.   Proceedings with respect to the existence, validity or the amount of a

 

revenue claim of a Contracting State shall not be brought before the courts or

 

administrative bodies of the other Contracting State.

 

 

 

7.   Where, at any time after a request has been made by a Contracting

 

State under paragraph 3 or 4 and before the other Contracting State has collected

 

and remitted the relevant revenue claim to the first-mentioned State,

 

the relevant revenue claim ceases to be:

 

(a) in the case of a request under paragraph 3, a revenue claim of the firstmentioned

 

State that is enforceable under the laws of that State and

 

is owed by a person who, at that time, cannot, under the laws of that

 

State, prevent its collection, or

 

(b) in the case of a request under paragraph 4, a revenue claim of the firstmentioned State in respect of which that State may, under its laws,

 

take measures of conservancy with a view to ensure its collection,

 

the competent authority of the first-mentioned State shall promptly

 

notify the competent authority of the other State of that fact and, at

 

the option of the other State, the first-mentioned State shall either

 

suspend or withdraw its request.

 

 

 

8.   In no case shall the provisions of this Article be construed so as to

 

impose on a Contracting State the obligation:

 

(a) to carry out administrative measures at variance with the laws and

 

administrative practice of that or of the other Contracting State;

 

(b) to carry out measures which would be contrary to public policy (ordre

 

public);

 

(c)             o provide assistance if the other Contracting State has not pursued

 

all reasonable measures of collection or conservancy, as the case may

 

be, available under its laws or administrative practice;

 

(d) to provide assistance in those cases where the administrative burden

 

for that State is clearly disproportionate to the benefit to be derived by

 

the other Contracting State.

 

 

 

Article 28 - MEMBERS OF DIPLOMATIC MISSIONSAND CONSULAR POSTS

 

 

 

Nothing in this Convention shall affect the fiscal privileges of members of

 

diplomatic missions or consular posts under the general rules of international

 

law or under the provisions of special agreements.

 

 


Chapter VII - FINAL PROVISIONS

 

 

 

Article 29 - ENTRY INTO FORCE

 

 

 

1.   This Convention shall be ratified and the instruments of ratification

 

shall be exchanged at ______________________ as soon as possible.

 

 

 

2.   The Convention shall enter into force upon the exchange of instruments

 

of ratification and its provisions shall have effect:

 

(a) (In State A): ............................................

 

(b) (In State B): .............................................

 

 

 

Article 30 – TERMINATION

 

 

 

This Convention shall remain in force until terminated by a Contracting

 

State. Either Contracting State may terminate the Convention, through diplomatic

 

channels, by giving notice of termination at least six months before

 

the end of any calendar year after the year ____. In such event, the Convention

 

shall cease to have effect:

 

(a) (In State A): ............................................

 

(b) (In State B): ............................................

 

 

 

TERMINAL CLAUSE

 

 

 

(NOTE: The provisions relating to the entry into force and termination and

 

the terminal clause concerning the signing of the Convention shall be drafted

 

in accordance with the constitutional procedure of both Contracting States.)

 

 

 



[1]     States wishing to do so may follow the widespread practice of including in the title a reference to either the avoidance of double taxation or to both the avoidance of double taxation and the prevention of fiscal evasion.

 

[2]     The Preamble of the Convention shall be drafted in accordance with the constitutional procedures of the Contracting States.

 

[3]       In some countries, national law, policy or administrative considerations may not allow or justify the type of assistance envisaged under this Article or may require that this type of assistance be restricted, e.g. to countries that have similar tax systems or tax administrations or as to the taxes covered. For that reason, the Article should only be included in the Convention where each State concludes that, based on the factors described in paragraph 1 of the Commentary on the Article, they can agree to provide assistance in the collection of taxes levied by the other State

 

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