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

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

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• 1 Paragraph 3 of Article 12 of the Convention shall be deleted and replaced by the following:

  • “3 Notwithstanding the provisions of paragraph 2:

    • (a) royalties arising in a Contracting State and paid to a resident of the other Contracting State who is the beneficial owner of the royalties, shall be taxable only in that other State if they are:

      • (i) copyright royalties and other like payments in respect of the production or reproduction of any literary, dramatic, musical or artistic work (but not including royalties in respect of motion picture films nor royalties in respect of works on film or videotape or other means of reproduction for use in connection with television broadcasting), or

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      • (iii) royalties for the use of, or the right to use, any patent or for information concerning industrial, commercial or scientific experience (but not including any such information provided in connection with a rental or franchise agreement);

• 2 The words “Committee of the Bureau of Film Festivals established under Order-in-Council P.C. 1968-400 dated February 29, 1968” in subparagraph (b) of paragraph 4 of Article 12 of the Convention shall be replaced by the words “Canadian Committee of selection that the Bureau of Film Festivals is authorized to convene under Order-in-Council P.C. 1975-2883 dated December 11, 1975.”

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• 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:

    • (a) income arising in Canada and taxable or taxable only in Canada in accordance with the provisions of the Convention shall be taken into account in calculating the French tax when the recipient is a resident of France and the income is not exempt from the corporation tax under French law. In such case, the Canadian tax shall not be deductible from such income, but the recipient shall be entitled to a tax credit deductible from the French tax. This tax credit is equal:

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      • (ii) for income referred to in Articles 10, 11 and 12, in paragraphs 1 and 5 of Article 13, in paragraph 3 of Article 15, in Article 16, in paragraphs 1 and 2 of Article 17, in paragraph 3 of Article 18 and in Article 21, to the amount of tax paid in Canada in accordance with the provisions of those Articles; however, it may not exceed the amount of French tax corresponding to such income. It is understood that the term amount of tax paid in Canada means the amount of Canadian tax effectively and finally paid in respect of such income, in accordance with the Convention, by the resident of France receiving such income.

    • (b) A resident of France who owns taxable capital in Canada in accordance with the provisions of paragraphs 1, 2, 3 or 4 of Article 22 may also be taxed in France in respect of such capital. The French tax is calculated subject to a deduction of a tax credit equal to the amount of Canadian tax on such capital. This tax credit shall not exceed that amount of the French tax which is attributable to such capital.

    • (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:

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

  • “9 Subject to reciprocity, the exemptions from tax and other tax benefits provided for by French laws for the benefit of the French State, its local authorities or their agencies or instrumentalities whose activities are not the carrying on of a trade or business, shall apply in the same conditions respectively to:

    • (a) the Canadian State, its provinces, or organisations whose activities are not the carrying on of a trade or business, created within the framework of an agreement concluded or approved by the Contracting States;

    • (b) Canadian local authorities;

    • (c) agencies or instrumentalities of the Canadian State, its provinces or its local authorities, whose activities are identical or substantially similar to those of the French instrumentalities considered.

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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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