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  1. Proclamation giving notice that the annexed November 30, 1995 supplementary agreement, entitled Protocol to the Tax Convention Between the Government of Canada and the Government of the French Republic signed on May 2, 1975 and amended by the Protocol of January 16, 1987, came into force on September 1, 1998 - SI/99-19
    Proclamation giving notice that the annexed November 30, 1995 supplementary agreement, entitled Protocol to the Tax Convention Between the Government of Canada and the Government of the French Republic signed on May 2, 1975 and amended by the Protocol of January 16, 1987, came into force on September 1, 1998

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    The Government of Canada and the Government of the French Republic, desiring to amend the Convention between Canada and France for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital, signed on May 2, 1975 and amended by the Protocol of January 16, 1987 (hereinafter referred to as “the Convention”), have agreed as follows:

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    Paragraphs 3 and 4 of Article 2 of the Convention shall be deleted and replaced by the following:

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

      • (a) in the case of Canada, the taxes imposed by the Government of Canada under the Income Tax Act (hereinafter referred to as Canadian tax );

      • (b) in the case of France, the income tax, the corporation tax, the tax on wages and salaries (regulated by the provisions of the Convention applicable, as the case may be, to business profits or to income from independent personal services), the solidarity tax on net wealth, and any withholding tax, prepayment or advance payment with respect to the aforesaid taxes, (hereinafter referred to as French tax ).

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    • 2 Paragraph 2 of Article 3 of the Convention shall be deleted and replaced by the following:

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

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    Article 4 of the Convention shall be deleted and replaced by the following:

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    • 1 For the purposes of this Convention, the term resident of a Contracting State means:

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      • (c) in the case of France, partnerships or other bodies of persons which have their place of effective management in France, and whose partners, shareholders or other members are personally liable to tax therein in respect of their share of the profits under domestic French law; but, with respect to the benefits granted by Canada under the Convention, such partnerships and bodies of persons shall not be treated as residents of France except insofar as their partners, shareholders or other members are liable to French tax on income in respect of which these benefits are granted;

    • 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:

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    • 2 There shall be added to Article 6 of the Convention a new paragraph 5, written as follows:

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    Article 10 of the Convention shall be deleted and replaced by the following:

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      • (d) The provisions of subparagraph (a) shall not apply if the beneficial owner of the dividends does not, when asked by the French tax administration, justify that he is the owner of the interest giving rise to the payment of the dividends and that the holding of that interest does not have as its main objective, or as one of its main objectives, to allow another person, whether a resident of a Contracting State or not, to take advantage of the provisions of subparagraph (a).

      • (e) The gross amount of the payment from the French Treasury referred to in subparagraph (a) shall be treated as a dividend for the application of this Convention.

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    • 5 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 which is subjected to the taxation treatment of distributions or to same taxation treatment as income from shares by the laws of the Contracting State of which the company making the distribution is a resident.

    • 6 The provisions of paragraphs 1, 2, 3 and 4 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.

    • 7 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 insofar as such dividends are paid to a resident of that other State or insofar 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 undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State.

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    Article 17 of the Convention shall be deleted and replaced by the following:

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    • 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 sportsman, 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 sportsman in his capacity as such accrues not to the entertainer or sportsman 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 sportsman are exercised.

    • 3 The provisions of paragraphs 1 and 2 shall not apply to income in respect of activities exercised by a resident of a Contracting State as an entertainer or a sportsman in the other Contracting State if the visit to that other State is principally supported, directly or indirectly, by public funds of the first-mentioned State, its provinces in the case of Canada, its local authorities, or their agencies or instrumentalities thereof. In such case, the income shall be taxable only in the first-mentioned State.”

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    Paragraph 2 of Article 18 of the Convention shall be deleted and replaced by the following:

    • “2 War pensions and allowances (including pensions and allowances paid to war veterans or paid as a consequence of damages or injuries suffered as a consequence of a war) arising in a Contracting State and paid to a resident of the other Contracting State shall, notwithstanding the provisions of Article 23, be exempt from tax in that other State to the extent that they would be exempt from tax if received by a resident of the first-mentioned State.”

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    • 1 There shall be added to paragraph 1 of Article 23 of the Convention three new subparagraphs, written as follows:

      • “(c) In determining the amount of tax payable in Canada for a taxation year by an individual who died in that year and, at the time was a resident of Canada, the amount of any inheritance tax payable in France, after deduction of the credit provided for in paragraph 2(c)(ii), in respect of property situated in France which forms part of the estate of that person shall be allowed as a deduction from the amount of any tax otherwise payable in Canada, taking into account the deduction that is provided for under subparagraph (a) for tax payable in France, on income, profits or gains of the individual arising in France in that year.

    • 2 Paragraphs 2 and 3 of Article 23 of the Convention shall be deleted and replaced by the following:

      • “2 In the case of France, double taxation shall be avoided as follows:

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        • (c) Notwithstanding any other provision of the Convention:

          • (i) where a deceased person was at the time of his death a resident of France, France shall apply the inheritance tax to all of the property taxable in accordance with its domestic legislation and shall allow as a deduction from that tax an amount equal to the Canadian tax paid on the gains which, at the time of death and under the provisions of the Convention, were taxable in Canada; such deduction shall not, however, exceed that share of the French inheritance tax, as computed before the deduction is given, attributable to the property in respect of which the deduction shall be allowed;

          • (ii) where a deceased person was at the time of his death a resident of Canada, France shall apply the inheritance tax to all of the property taxable in accordance with its domestic legislation and shall allow as a deduction from that tax an amount equal to the Canadian tax paid on the gains which, at the time of death and under the provisions of paragraph 4 of Article 13, were taxable only in Canada, and that are not referred to in paragraph 5 of the same Article; such deduction shall not, however, exceed the lessor of the two following shares:

            • (aa) the share of the inheritance tax, as calculated before the deduction is given, attributable to the property from the alienation of which are derived the gains referred to above and in respect of which the deduction shall be allowed; and

            • (bb) the share of the Canadian tax attributable to such property, as calculated before the deduction provided for in paragraph 1(c).

        • (d) It is understood that the term amount of French tax corresponding to such income used in subparagraph (a) means:

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          This interpretation applies by analogy to the term that amount of the French tax which is attributable to such capital used in subparagraph (b) as well as to the terms share of the French inheritance tax, as calculated before the deduction is given, attributable to the property in respect of which the deduction shall be allowed and share of the Canadian tax attributable to such property used in subparagraph (c).

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    • 2 There shall be added to Article 25 of the Convention a new paragraph 5, written as follows:

      • “5 If any question, difficulty or doubt arising as to the interpretation or application of the Convention cannot be resolved or dealt with by the competent authorities as a result of the application of the provisions of paragraphs 1, 2 or 3, these questions, difficulties or doubts may, if the competent authorities agree, be submitted to an arbitration commission. The decisions of the commission shall have the force of law. The composition of the commission and the arbitration procedures shall be determined, after consultation between the competent authorities, through an exchange of diplomatic notes between the Contracting States. The provisions of this paragraph shall take effect from the date agreed to in the exchange of diplomatic notes.”

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    Article 26 of the Convention shall be deleted and replaced by the following:

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    • 1 The competent authorities of the Contracting States shall exchange such information as is necessary for carrying out the provisions of this Convention or of the domestic laws of the Contracting States concerning taxes covered by the Convention insofar as the taxation thereunder is not contrary to the Convention. The exchange of information is not restricted by Article 1. Any information received by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) involved in the assessment or collection of, the enforcement in respect of, or the determination of appeals in relation to, the taxes covered by the Convention. 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.

    • 2 In no case shall the provisions of paragraph 1 be construed so as to impose on a Contracting State the obligation:

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    • 3 Paragraph 5 of Article 29 of the Convention shall be deleted and replaced by the following:

      • “5 Contributions in a year in respect of services rendered in that year paid by, or on behalf of, an individual who is a resident of one of the Contracting States or who is temporarily present in that State, to a pension plan that is recognized for tax purposes in the other Contracting State shall, during a period not exceeding in the aggregate sixty months, be treated in the same way for tax purposes in the first-mentioned State as a contribution paid to a pension plan that is recognized for tax purposes in the first-mentioned State, provided that:

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    • 4 There shall be added to Article 29 of the Convention a new paragraph 7, written as follows:

      • “7

        • (a) A mutual fund in securities constituted and established in a Contracting State, not subject to tax in that State, and which receives dividends paid by a company which is a resident of the other Contracting State or interest arising in that other State, may claim as a whole the benefit of the reductions or exemptions of taxes provided for under the Convention for the fraction of the income which corresponds to the rights held in that organisation by residents of the first-mentioned State and which is taxable in the hands of those residents.

    • 5 There shall be added to Article 29 of the Convention a new paragraph 8, written as follows:

      • “8 Where an enterprise of a Contracting State that is exempt from tax in that State on the profits of its permanent establishments which are not situated in that State derives income from the other Contracting State, and that income is attributable to a permanent establishment which that enterprise has in a third jurisdiction, the tax benefits that would otherwise apply under the other provisions of the Convention will not apply to any item of income on which the combined tax in the first-mentioned State and in the third jurisdiction is less than 60 per cent of the tax that would be imposed in the first-mentioned State if the income were earned or received in that State by the enterprise and were not attributable to the permanent establishment in the third jurisdiction. Any dividends, interest, or royalties to which the provisions of this paragraph apply shall be subject to tax in the other State at a rate not exceeding 15 per cent of the gross amount thereof. Any other income to which the provisions of this paragraph apply shall be subject to tax under the provisions of the domestic law of the other State, notwithstanding any other provision of the Convention. The preceding provisions of this paragraph shall not apply:

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        • (b) if, when France is the first-mentioned State, France taxes the profits of such permanent establishment according to the provisions of Articles 209B or 209 quinquies of the French “Code général des impôts”, as they may be amended without changing the general principle hereof; or

        • (c) when France is the first-mentioned State, to income taxed by Canada according to section 91 of the Income Tax Act, as it may be amended without changing the general principle hereof.”

    • 6 There shall be added to Article 29 of the Convention a new paragraph 9, written as follows:

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    • 3 Notwithstanding the provisions of paragraph 2:

      • (a) the provisions of subparagraph (a) of paragraph 2 of Article 10 of the Convention, as modified by the Protocol, shall apply in respect of Canadian tax withheld at source to amounts paid on or after the day on which the Protocol enters into force, except that the ”5 per cent” percentage shall be replaced by:

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      • (b) the provisions of paragraph 8 of Article 10 of the Convention, as modified by the Protocol, shall apply in respect of other Canadian taxes for taxable periods beginning on or after the day on which the Protocol enters into force, except that the ”5 per cent” percentage is replaced by the following percentages for taxable periods beginning on or after that date and ending in the course of the following years:

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    • 4 Notwithstanding the provisions of paragraph 2, the provisions of paragraph 9 of Article 29 of the Convention, as modified by the Protocol, shall apply for taxation years not prescribed on the date of entry into force of the Protocol.

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    • 1 This Protocol shall remain in force as long as the Convention remains in force.

    • 2 The competent authorities of the Contracting States shall be empowered, after the entry into force of the Protocol, to publish the text of the Convention as amended by the Protocol of January 16, 1987 and by this Protocol.

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