Income Tax Conventions Implementation Act, 1999 (S.C. 2000, c. 11)

PART 1
Agreement Signed on June 4, 1998Agreement Between the Government of Canada and the Government of the Kyrgyz Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and on Capital

The Government of Canada and the Government of the Kyrgyz Republic, desiring to conclude an Agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital, have agreed as follows:

I. Scope of the Agreement

Article 1
Personal Scope

This Agreement shall apply to persons who are residents of one or both of the Contracting States.

Article 2
Taxes Covered

• 1 This Agreement shall apply to taxes on income and on capital imposed on behalf of each Contracting State, 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, as well as taxes on capital appreciation.

• 3 The existing taxes to which this Agreement 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 Kyrgyzstan:

    the taxes imposed by the Government of the Kyrgyz Republic in accordance with the laws of the Kyrgyz Republic on the taxation of income and of property (capital), (hereinafter referred to as “Kyrgyz tax”).

• 4 This Agreement shall apply also to any similar taxes and to taxes on capital which are imposed after the date of signature of this Agreement in addition to, or in place of, the existing taxes. The competent authorities of the Contracting States shall notify each other of any significant changes which have been made in their respective taxation laws.

II. Definitions

Article 3
General Definitions

• 1 For the purposes of this Agreement, unless the context otherwise requires:

  • (a) the term Canada used in a geographical sense, means the territory of Canada, including:

    • (i) any area beyond the territorial seas of Canada which, in accordance with international law and the laws of Canada, is an area within which Canada may exercise rights with respect to the seabed and subsoil and their natural resources;

    • (ii) the seas and airspace above every area referred to in clause (i) in respect of any activity carried on in connection with the exploration for or the exploitation of the natural resources referred to therein;

  • (b) the term Kyrgyzstan means the Kyrgyz Republic and, when used in a geographical sense, means the territory upon which the Kyrgyz Republic exercises its sovereign rights and jurisdiction in accordance with international law and in which the taxation legislation of the Kyrgyz Republic is applied;

  • (c) the terms a Contracting State and the other Contracting State mean, as the context requires, Canada or Kyrgyzstan;

  • (d) the term person includes an individual, a company and any other body of persons and, in the case of Canada it also includes a trust;

  • (e) the term company means any corporate entity or any entity which is treated as a corporate entity for tax purposes;

  • (f) 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;

  • (g) the term competent authority means:

    • (i) in the case of Canada, the Minister of National Revenue or his authorized representative;

    • (ii) in the case of Kyrgyzstan, the Ministry of Finance or its plenipotentiary representative;

  • (h) the term national means:

    • (i) any individual possessing the citizenship 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;

  • (i) the term international traffic with reference to an enterprise of a Contracting State means any voyage of a ship or aircraft to transport passengers or property except where the principal purpose of the voyage is to transport passengers or property between places within the other Contracting State.

• 2 As regards the application of this Agreement by a Contracting State at any time, any term not defined therein shall, unless the context otherwise requires, have the meaning which it has at that time under the law of that State concerning the taxes to which this Agreement applies.

Article 4
Resident

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

  • (a) any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management, place of incorporation or any other criterion of a similar nature;

  • (b) the Government of that State or a political or administrative subdivision or local authority thereof or any agency or instrumentality of any such government, subdivision or authority.

  But this term does not include any person who is liable to tax in that State in respect only of income from that State.

• 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 citizen;

  • (d) if he is a citizen 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 company is a resident of both Contracting States, then its status shall be determined as follows:

  • (a) it shall be deemed to be a resident only of the State in which it was incorporated or otherwise constituted;

  • (b) if it was not incorporated or otherwise constituted in either of the States, it shall be deemed to be a resident only of the State in which its place of effective management is situated.

• 4 Where by reason of the provisions of paragraph 1 a person other than an individual or a company is a resident of both Contracting States, the competent authorities of the Contracting States shall by mutual agreement endeavour to settle the question and to determine the mode of application of this Agreement to such person.

Article 5
Permanent Establishment

• 1 For the purposes of this Agreement, 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 relating to the exploration for or the exploitation of natural resources; and

  • (g) an agricultural, pastoral or forestry property.

• 3 A building site or construction or installation project constitutes a permanent establishment only if it lasts for more than twelve months.

• 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, display or delivery 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, display or delivery;

  • (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 6 applies — is acting on behalf of an enterprise and has, and habitually exercises, in a Contracting State an authority to conclude contracts on behalf of the enterprise, that enterprise shall be deemed to have a permanent establishment in that State in respect of any activities which that person undertakes for 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.

• 6 An enterprise shall not be deemed to have a permanent establishment in a Contracting State merely because it carries on business in that 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.

• 7 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.

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 For the purposes of this Agreement, the term immovable property shall have the meaning which it has for the purposes of the relevant taxation 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 and aircraft shall not be regarded as immovable property.

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

• 4 Where the ownership of shares or other corporate rights in a company entitles the owner of such shares or corporate rights to the enjoyment of immovable property held by the company, the income from the direct use, letting, or use in any other form of such right to enjoyment may be taxed in the Contracting State in which the immovable property is situated.

• 5 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 or has carried 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 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 permanent establishment including executive and general administrative expenses, whether incurred in the State in which the permanent establishment is situated or elsewhere.

• 4 Insofar 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 No profits shall be attributed to a permanent establishment by reason of the mere purchase by that permanent establishment of goods or merchandise for the enterprise.

• 6 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.

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

Article 8
Shipping and Air Transport

• 1 Profits derived by an enterprise of a Contracting State from the operation of ships or aircraft in international traffic shall be taxable only in that State.

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

• 3 In this Article,

  • (a) the term profits includes:

    • (i) gross receipts and revenues derived directly from the operation of ships or aircraft in international traffic, and

    • (ii) interest on sums generated directly from the operation of ships or aircraft in international traffic provided that such interest is incidental to the operation;

  • (b) the term operation of ships or aircraft in international traffic by an enterprise, includes:

    • (i) the charter or rental of ships or aircraft,

    • (ii) the rental of containers and related equipment, and

    • (iii) the alienation of ships, aircraft, containers and related equipment,

    by that enterprise provided that such charter, rental or alienation is incidental to the operation by that enterprise of ships or aircraft in international traffic.

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 income which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, has not so accrued, may be included in the income of that enterprise and taxed accordingly.

• 2 Where a Contracting State includes in the income of an enterprise of that State — and taxes accordingly — income on which an enterprise of the other Contracting State has been charged to tax in that other State and the income so included is income 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 tax charged therein on that income. In determining such adjustment, due regard shall be had to the other provisions of this Agreement and the competent authorities of the Contracting States shall if necessary consult each other.

• 3 A Contracting State shall not change the income of an enterprise in the circumstances referred to in paragraph 1 after the expiry of the time limits provided in its national laws and, in any case, after five years from the end of the year in which the income which would be subject to such change would, but for the conditions referred to in paragraph 1, have accrued to that enterprise.

• 4 The provisions of paragraphs 2 and 3 shall not apply in the case of fraud, wilful default or neglect.

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 a resident of the other Contracting State is the beneficial owner of the dividends the tax so charged shall not exceed 15 per cent of the gross amount of the dividends. The provisions of this paragraph shall not affect the taxation of the company on the profits out of which the dividends are paid.

• 3 The term dividends as used in this Article means income from shares, mining shares, founders’ shares or other rights, not being debt-claims, participating in profits, as well as income 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 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.

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 a resident of the other Contracting State is the beneficial owner of the interest the tax so charged shall not exceed 15 per cent of the gross amount of the interest.

• 3 Notwithstanding the provisions of paragraph 2:

  • (a) interest arising in a Contracting State and paid in respect of indebtedness of the government of that State or of a political subdivision or local authority thereof shall, provided that the interest is beneficially owned by a resident of the other Contracting State, be taxable only in that other State;

  • (b) interest arising in Kyrgyzstan and paid to a resident of Canada shall be taxable only in Canada if it is paid in respect of a loan made, guaranteed or insured, or a credit extended, guaranteed or insured by the Export Development Corporation; and

  • (c) interest arising in Canada and paid to a resident of Kyrgyzstan shall be taxable only in Kyrgyzstan if it is paid in respect of a loan made, guaranteed or insured, or a credit extended, guaranteed or insured by any organisation established in Kyrgyzstan after the date of signature of this Agreement and which is of a similar nature as the Canadian Export Development Corporation (the competent authorities of the Contracting States shall by mutual agreement determine whether such organisations are of a similar nature).

• 4 The term interest as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage, and in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures, as well as income which is subjected to the same taxation treatment as income from money lent by the laws of the State in which the income arises. However, the term interest does not include income dealt with in Article 8 or Article 10.

• 5 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 such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

• 6 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.

• 7 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 Agreement.

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 a resident of the other Contracting State is the beneficial owner of the royalties the tax so charged shall not exceed 10 per cent of the gross amount of the royalties.

• 3 Notwithstanding the provisions of paragraph 2, 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:

  • (a) 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

  • (b) where the payer and the beneficial owner of the royalties are not associated persons within the meaning of subparagraphs 1(a) or 1(b) of Article 9, royalties for the use of, or the right to use, application software or 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).

• 4 The term royalties as used in this Article means payments of any kind received as a consideration for:

  • (a) the use of, or the right to use, any copyright of literary, artistic or scientific work, including software, patent, design or model, plan, secret formula or process, trade mark or other like property or right;

  • (b) the use of, or the right to use, industrial, commercial or scientific equipment;

  • (c) the supply of scientific, technical, industrial or commercial knowledge or information;

  • (d) the supply of any assistance that is ancillary and subsidiary to, and is furnished as a means of enabling the application or enjoyment of, any such property or right as is mentioned in subparagraph (a), any such equipment as is mentioned in subparagraph (b) or any such knowledge or information as is mentioned in subparagraph (c);

  • (e) the use of, or the right to use:

    • (i) motion picture films; or

    • (ii) films or videotapes or other means of reproduction for use in connection with television; or

    • (iii) tapes for use in connection with radio broadcasting; or

  • (f) total or partial forbearance in respect of the use or supply of any property or right referred to in this paragraph.

• 5 The provisions of paragraphs 1, 2 and 3 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 such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

• 6 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 obligation 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.

• 7 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 Agreement.

Article 13
Capital Gains

• 1 Gains derived by a resident of a Contracting State from the alienation of immovable property 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 a fixed base may be taxed in that other State.

• 3 Gains derived by an enterprise of a Contracting State from the alienation of ships or aircraft operated in international traffic or movable property pertaining to the operation of such ships or aircraft, shall be taxable only in that State.

• 4 Gains derived by a resident of a Contracting State from the alienation of:

  • (a) shares (other than shares listed on an approved stock exchange in the other Contracting State) forming part of a substantial interest in the capital stock of a company which is a resident of that other State the value of which shares is derived principally from immovable property situated in that other State; or

  • (b) a substantial interest in a partnership or trust, established under the law in the other Contracting State, the value of which is derived principally from immovable property situated in that other State,

  may be taxed in that other State. For the purposes of this paragraph, the term immovable property includes the shares of a company referred to in subparagraph (a) or an interest in a partnership or trust referred to in subparagraph (b) but does not include any property, other than rental property, in which the business of the company, partnership or trust is carried on.

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

• 6 The provisions of paragraph 5 shall not affect the right of a Contracting State to levy, according to its law, a tax on gains from the alienation of any property derived by an individual who is a resident of the other Contracting State and has been a resident of the first-mentioned State at any time during the six years immediately preceding the alienation of the property.

Article 14
Independent Personal Services

• 1 Income derived by an individual who is a resident of a Contracting State in respect of professional or similar services of an independent character shall be taxable only in that State unless he has a fixed base regularly available to him in the other Contracting State for the purpose of performing the services. If he has or had such a fixed base, the income may be taxed in the other State but only so much of it as is attributable to that fixed base.

• 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 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 calendar 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 in respect of an employment exercised aboard a ship or aircraft operated in international traffic by an enterprise of a Contracting State, shall be taxable only in that State unless the remuneration is derived by a resident of the other Contracting State.

Article 16
Directors’ Fees

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 or a similar organ of a company which is a resident of the other Contracting State, may be taxed in that other State.

Article 17
Artistes and Sportsmen

• 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 paragraph 2 shall not apply if it is established that neither the entertainer or the sportsman nor persons related thereto, participate directly or indirectly in the profits of the person referred to in that paragraph.

• 4 The provisions of paragraphs 1 and 2 shall not apply to income derived from activities performed in a Contracting State by a resident of the other Contracting State in the context of a visit in the first-mentioned State of a non-profit organization of the other State in the case of Canada or a public organization of the other State in the case of Kyrgyzstan, provided the visit is substantially supported by public funds.

Article 18
Pensions and Annuities

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

• 2 Pensions arising in a Contracting State and paid to a resident of the other Contracting State may also be taxed in the State in which they arise and according to the law of that State. However, in the case of periodic pension payments other than social security benefits, the tax so charged shall not exceed the lesser of:

  • (a) 15 per cent of the gross amount of the payment; and

  • (b) the rate determined by reference to the amount of tax that the recipient of the payment would otherwise be required to pay for the year on the total amount of the periodic pension payments received by him in the year, if he were resident in the Contracting State in which the payment arises.

• 3 Annuities arising in a Contracting State and paid to a resident of the other Contracting State may also be taxed in the State in which they arise and according to the law of that State; but the tax so charged shall not exceed 15 per cent of the portion thereof that is subject to tax in that State. However, this limitation does not apply to lump-sum payments arising on the surrender, cancellation, redemption, sale or other alienation of an annuity, or to payments of any kind under an annuity contract the cost of which was deductible, in whole or in part, in computing the income of any person who acquired the contract.

• 4 Notwithstanding anything in this Agreement:

  • (a) war pensions and similar allowances arising in a Contracting State and paid to a resident of the other Contracting State shall 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; and

  • (b) alimony and other similar payments arising in a Contracting State and paid to a resident of the other Contracting State who is subject to tax therein in respect thereof, shall be taxable only in that other State.

• 5 For the purposes of this Article, the term annuity means a stated sum payable periodically at stated times during life or during a specified or ascertainable period of time under an obligation to make the payments in return for adequate and full consideration in money or money’s worth.

Article 19
Government Service

• 1

  • (a) Salaries, wages and similar remuneration, other than a pension, paid by a Contracting State or a political or administrative 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 or similar remuneration shall be taxable only in the other Contracting State if the services are rendered in that 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 The provisions of paragraph 1 shall not apply to remuneration in respect of services rendered in connection with a business carried on by a Contracting State or a political or administrative subdivision or a local authority thereof.

Article 20
Students

Payments which a student 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 receives for the purpose of his maintenance or education shall not be taxed in that State, provided that such payments arise from sources outside that State.

Article 21
Other Income

• 1 Subject to the provisions of paragraph 2, items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Agreement shall be taxable only in that State.

• 2 However, if such income is derived by a resident of a Contracting State from sources in the other Contracting State, such income may also be taxed in the State in which it arises, and according to the law of that State. Where such income is income from a trust, other than a trust to which contributions were deductible, the tax so charged shall, provided that the income is taxable in the Contracting State in which the beneficial owner is a resident, not exceed 15 per cent of the gross amount of the income.

IV. Taxation of Capital

Article 22
Capital

• 1 Capital represented by immovable property 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 by an enterprise of a Contracting State in international traffic and by movable property pertaining to the operation of such ships and aircraft, shall be taxable only in that State.

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

V. Methods for Prevention of Double Taxation

Article 23
Elimination of Double Taxation

• 1 In the case of Canada, double taxation shall be avoided as follows:

  • (a) subject to the existing provisions of the law of Canada regarding the deduction from tax payable in Canada of tax paid in a territory outside Canada and to any subsequent modification of those provisions — which shall not affect the general principle hereof — and unless a greater deduction or relief is provided under the laws of Canada, tax payable in Kyrgyzstan on profits, income or gains arising in Kyrgyzstan shall be deducted from any Canadian tax payable in respect of such profits, income or gains;

  • (b) subject to the existing provisions of the law of Canada regarding the taxation of income from a foreign affiliate and to any subsequent modification of those provisions — which shall not affect the general principle hereof — for the purpose of computing Canadian tax, a company which is a resident of Canada shall be allowed to deduct in computing its taxable income any dividend received by it out of the exempt surplus of a foreign affiliate which is a resident of Kyrgyzstan;

  • (c) where in accordance with any provision of this Agreement income or capital derived by a resident of Canada is exempt from tax in Canada, Canada may nevertheless, in calculating the amount of tax on other income or capital, take into account the exempted income or capital.

• 2 In the case of Kyrgyzstan, double taxation shall be avoided as follows: where a resident of Kyrgyzstan derives income or owns capital which, in accordance with the provisions of this Agreement, may be taxed in Canada, Kyrgyzstan shall, subject to the existing provisions of the law of Kyrgyzstan, allow:

  • (a) as a deduction from the tax on the income of that resident, an amount equal to the income tax paid in Canada;

  • (b) as a deduction from the tax on the capital of that resident, an amount equal to the capital tax paid in Canada.

  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 Canada.

  Where in accordance with any provision of the Agreement income derived or capital owned by a resident of Kyrgyzstan is exempt from tax in Kyrgyzstan, Kyrgyzstan 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.

• 3 For the purposes of this Article, profits, income or gains of a resident of a Contracting State which are taxed in the other Contracting State in accordance with this Agreement shall be deemed to arise from sources in that other State.

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 are or may be subjected.

• 2 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.

• 3 Nothing in this Article shall 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 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, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of a third State, are or may be subjected.

• 5 In this Article, the term taxation means taxes which are the subject of this Agreement.

Article 25
Mutual Agreement Procedure

• 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 Agreement, he may, irrespective of the remedies provided by the domestic law of those States, address to the competent authority of the Contracting State of which he is a resident an application in writing stating the grounds for claiming the revision of such taxation. To be admissible, the said application must be submitted within two years from the first notification of the action which gives rise to taxation not in accordance with this Agreement.

• 2 The competent authority referred to in paragraph 1 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 not in accordance with this Agreement.

• 3 A Contracting State shall not, after the expiry of the time limits provided in its national laws and, in any case, after five years from the end of the taxable period in which the income concerned has accrued, increase the tax base of a resident of either of the Contracting States by including therein items of income which have also been charged to tax in the other Contracting State. This paragraph shall not apply in the case of fraud, wilful default or neglect.

• 4 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 this Agreement.

• 5 The competent authorities of the Contracting States may consult together for the elimination of double taxation in cases not provided for in this Agreement and may communicate with each other directly for the purpose of applying this Agreement.

Article 26
Exchange of Information

• 1 The competent authorities of the Contracting States shall exchange such information as is necessary for carrying out the provisions of this Agreement or of the domestic laws in the Contracting States concerning taxation insofar as such taxation is not contrary to this Agreement. 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 taxes. 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 Nothing in paragraph 1 shall be construed so as to impose on a Contracting State the obligation:

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

• 3 If information is requested by a Contracting State in accordance with this Article, the other Contracting State shall endeavour to obtain the information to which the request relates in the same way as if its own taxation were involved notwithstanding the fact that the other State does not, at that time, need such information. If specifically requested by the competent authority of a Contracting State, the competent authority of the other Contracting State shall endeavour to provide information under this Article in the form requested, such as depositions of witnesses and copies of unedited original documents (including books, papers, statements, records, accounts or writings), to the same extent such depositions and documents can be obtained under the laws and administrative practices of that other State with respect to its own taxes.

Article 27
Members of Diplomatic Missions and Consular Posts

• 1 Nothing in this Agreement 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.

• 2 Notwithstanding Article 4, an individual who is a member of a diplomatic mission, consular post or permanent mission of a Contracting State which is situated in the other Contracting State or in a third State shall be deemed for the purposes of this Agreement to be a resident of the sending State if he is liable in the sending State to the same obligations in relation to tax on his total income as are residents of that sending State.

• 3 This Agreement shall not apply to international organizations, to organs or officials thereof and to persons who are members of a diplomatic mission, consular post or permanent mission of a third State or group of States, being present in a Contracting State and who are not liable in either Contracting State to the same obligations in relation to tax on their total income as are residents thereof.

Article 28
Miscellaneous Rules

• 1 The provisions of this Agreement shall not be construed to restrict in any manner any exemption, allowance, credit or other deduction accorded:

  • (a) by the laws of a Contracting State in the determination of the tax imposed by that State; or

  • (b) by any other agreement entered into by a Contracting State.

• 2 Nothing in this Agreement shall be construed as preventing Canada from imposing a tax on amounts included in the income of a resident of Canada with respect to a partnership, trust, or controlled foreign affiliate, in which he has an interest.

• 3 This Agreement shall not apply to any company, trust or partnership that is a resident of a Contracting State and is beneficially owned or controlled directly or indirectly by one or more persons who are not residents of that State, if the amount of the tax imposed on the income or capital of the company, trust or partnership by that State is substantially lower than the amount that would be imposed by that State if all of the shares of the capital stock of the company or all of the interests in the trust or partnership, as the case may be, were beneficially owned by one or more individuals who were residents of that State.

• 4 With respect to paragraph 3 of Article XXII of the General Agreement on Trade in Services (GATS), the Contracting States agree that, notwithstanding that paragraph, any dispute between them as to whether a measure relating to a tax to which any provision of this Agreement applies falls within the scope of this Agreement may be brought before the Council for Trade in Services, as provided by that paragraph, only with the consent of both Contracting States.

VII. Final Provisions

Article 29
Entry into Force

Each of the Contracting States shall take all measures necessary to give this Agreement the force of law within its jurisdiction and each shall notify the other of the completion of such measures. This Agreement shall enter into force on the date on which the later notification is made and shall thereupon have effect:

• (a) in respect of tax withheld at the source on amounts paid or credited to non-residents on or after the first day of the second month next following the date on which this Agreement enters into force; and

• (b) in respect of other taxes for taxation years beginning on or after the first day of the second month next following the date on which this Agreement enters into force.

Article 30
Termination

This Agreement shall continue in effect indefinitely but either Contracting State may, on or before June 30 of any calendar year after the year of the exchange of instruments of ratification, give to the other Contracting State a notice of termination in writing through diplomatic channels; in such event, this Agreement shall cease to have effect:

• (a) in respect of tax withheld at the source on amounts paid or credited to non-residents on or after the first day of January of the next following calendar year; and

• (b) in respect of other taxes for taxation years beginning on or after the first day of January of the next following calendar year;

IN WITNESS WHEREOF the undersigned, duly authorized to that effect, have signed this Agreement.

DONE in duplicate at Ottawa, this 4^th day of June 1998, in the English, French and Russian languages, each version being equally authentic.

PART 2
Protocol Signed on June 4, 1998Protocol

At the moment of signing the Agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital, this day concluded between the Government of Canada and the Government of the Kyrgyz Republic, the undersigned have agreed that the following provisions shall form an integral part of the Agreement.

• 1 With reference to Article 7, paragraph 3.

  It is understood that nothing contained therein shall require a Contracting State to allow the deduction of any expenditure which, by reason of its nature, is not generally allowed as a deduction under the taxation law of that State.

• 2 With reference to Article 8.

  Notwithstanding the provisions of paragraph 1 of that Article and of Article 7, profits derived by an enterprise of Kyrgyzstan from a voyage of a ship or aircraft where the principal purpose of the voyage is to transport passengers or property between places in Canada may be taxed in Canada.

• 3 Nothing in the Agreement shall be construed as preventing Canada from imposing on the earnings of a company attributable to a permanent establishment in Canada, a tax in addition to the tax which would be chargeable on the earnings of a company which is a resident of Canada, provided that any additional tax so imposed shall not exceed 15 per cent of the amount of such earnings which have not been subjected to such additional tax in previous taxation years. For the purpose of this provision, the term earnings means the profits, including any gains, attributable to a permanent establishment in Canada in a year and previous years after deducting therefrom all taxes, other than the additional tax referred to herein, imposed on such profits by Canada.

• 4 In the event that pursuant to an Agreement or Convention concluded after the date of signature of this Agreement, Kyrgyzstan agrees to a rate of tax on inter-company dividends or on interest that is lower than 15 per cent, then such lower rate (but not in any event a rate below 5 per cent in the case of inter-company dividends or 10 per cent in the case of interest) shall apply for the purpose of paragraph 2 of Article 10 and paragraph 3 of this Protocol with respect to dividends received by a company that is the beneficial owner of the dividends and that controls directly or indirectly at least 10 per cent of the voting power in the company paying the dividends or that holds at least 25 per cent of the capital of the company paying the dividends, or of paragraph 2 of Article 11 with respect to interest, as the case may be.

IN WITNESS WHEREOF the undersigned, duly authorized to that effect, have signed this Protocol.

DONE in duplicate at Ottawa, this 4^th day of June 1998, in the English, French and Russian languages, each version being equally authentic.

PART 1
Convention Signed on December 29, 1998Convention Between the Government of Canada and the Government of the Republic of Lebanon for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income

The Government of Canada and the Government of the Republic of Lebanon, desiring to conclude a Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, have agreed as follows:

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 imposed on behalf of each Contracting State, irrespective of the manner in which they are levied.

• 2 There shall be regarded as taxes on income all taxes imposed on total income or on elements of income, including taxes on gains from the alienation of movable or immovable property, as well as taxes on capital appreciation.

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

  • (a) in the case of Canada:

    the income taxes imposed by the Government of Canada under the Income Tax Act, (hereinafter referred to as “Canadian tax”);

  • (b) in the case of Lebanon:

    • (i) the tax on the profits of industrial, commercial and non-commercial professions;

    • (ii) the tax on salaries, wages and pensions;

    • (iii) the tax on income derived from movable capital;

    • (iv) the tax on income from built property;

    (hereinafter referred to as “Lebanese tax”).

• 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 any significant changes which have been made in their respective taxation laws.

II. Definitions

Article 3
General Definitions

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

  • (a) the term Canada, used in a geographical sense, means the territory of Canada, including:

    • (i) any area beyond the territorial sea of Canada which, in accordance with international law and the laws of Canada, is an area within which Canada may exercise rights with respect to the seabed and subsoil and their natural resources;

    • (ii) the sea and airspace above every area referred to in clause (i) in respect of any activity carried on in connection with the exploration for or the exploitation of the natural resources referred to therein;

  • (b) the term Lebanon means the territory of the Lebanese Republic including its territorial sea as well as the exclusive economic zone over which Lebanon exercises sovereignty, sovereign rights and jurisdiction in accordance with its internal law and with international law, concerning the exploration and the exploitation of the natural, biological, and mineral resources existing in the sea waters, seabed and subsoil of these waters;

  • (c) the terms a Contracting State and the other Contracting State mean, as the context requires, Canada or Lebanon;

  • (d) the term person includes an individual, a trust, a company, a partnership and any other body of persons;

  • (e) the term company means any body corporate or any entity which is treated as a body corporate for tax purposes;

  • (f) 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;

  • (g) the term competent authority means:

    • (i) in the case of Canada, the Minister of National Revenue or the Minister’s authorized representative;

    • (ii) in the case of Lebanon, the Minister of Finance or the Minister’s authorized representative;

  • (h) 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; and

  • (i) the term international traffic means any transport by a ship or aircraft operated by an enterprise of a Contracting State except when the transport is effected solely between places in the other 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.

Article 4
Resident

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

  • (a) any person who, under the laws of that State, is liable to tax therein by reason of the person’s domicile, residence, place of management or any other criterion of a similar nature; 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; and

  • (b) the Government of that State or a political subdivision or local authority thereof or any agency or instrumentality of any such government, subdivision or authority.

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

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

  • (b) if the State in which the individual’s centre of vital interests cannot be determined, or if there is not a permanent home available to the individual in either State, the individual shall be deemed to be a resident only of the State in which the individual has an habitual abode;

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

  • (d) if the individual 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, the competent authorities of the Contracting States shall by mutual agreement endeavour to settle the question and to determine the mode of application of the Convention to such person. In the absence of such agreement, such person shall not be entitled to claim any relief or exemption from tax provided by the Convention.

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 farm or a plantation; and

  • (g) a mine, an oil or gas well, a quarry or any other place relating to the exploration for or the exploitation of natural resources.

• 3 The term permanent establishment shall also include:

  • (a) a building site, a construction, installation or assembly project or supervisory activities in connection therewith, but only if such site, project or activity continues for a period of more than nine months within any twelve month period; and

  • (b) the furnishing of services, including consultancy services, by an enterprise of a Contracting State through employees or other personnel engaged for such purposes in the other Contracting State, provided that such activities continue for the same project or a connected project for a period or periods aggregating more than nine months within any twelve month period.

• 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, display or delivery 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, display or delivery;

  • (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 sale of goods or merchandise belonging to the enterprise displayed in the frame of an occasional temporary fair or exhibition after the closing of the said fair or exhibition;

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

  • (f) 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; and

  • (g) the maintenance of a fixed place of business solely for any combination of activities mentioned in subparagraphs (a) to (f) 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 on behalf of an enterprise and has, and habitually exercises, in a Contracting State an authority to conclude contracts on behalf of the enterprise, that enterprise shall be deemed to have a permanent establishment in that State in respect of any activities which that person undertakes for 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.

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

• 7 An enterprise shall not be deemed to have a permanent establishment in a Contracting State merely because it carries on business in that 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.

• 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.

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 For the purposes of this Convention, the term immovable property shall have the meaning which it has for the purposes of the relevant tax 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 and aircraft shall not be regarded as immovable property.

• 3 The provisions of paragraph 1 shall apply to income derived from the direct use, letting, or use in any other form of immovable property and to income from the alienation of such 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 or has carried 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 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 and with all other persons.

• 3 In determining the profits of a permanent establishment, there shall be allowed those deductible expenses which are incurred for the purposes of the permanent establishment, including executive and general administrative expenses, whether incurred in the State in which the permanent establishment is situated or elsewhere as are in accordance with the provisions of and subject to the limitations of the taxation laws of that State.

• 4 Insofar 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 No profits shall be attributed to a permanent establishment by reason of the mere purchase by that permanent establishment of goods or merchandise for the enterprise.

• 6 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.

• 7 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.

Article 8
Shipping and Air Transport

• 1 Profits derived by an enterprise of a Contracting State from the operation of ships or aircraft in international traffic shall be taxable only in that State.

• 2 Notwithstanding the provisions of paragraph 1 and of Article 7, profits derived by an enterprise of a Contracting State from a voyage of a ship or aircraft where the principal purpose of the voyage is to transport passengers or property between places in the other Contracting State may be taxed in that other State.

• 3 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, if the time limits for making an adjustment provided in the national laws of that other State have not expired, make an appropriate adjustment to the amount of tax charged therein on those profits. In determining such adjustment, due regard shall be had to the other provisions of this Convention and the competent authorities of the Contracting States shall if necessary consult each other.

• 3 The provisions of paragraph 2 shall not apply in the case of fraud, wilful default or neglect.

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) except in the case of dividends paid by a non-resident-owned investment corporation that is a resident of Canada, 5 per cent of the gross amount of the dividends if the beneficial owner is a company that controls directly or indirectly at least 10 per cent of the voting power in the company paying the dividends;

  • (b) 15 per cent of the gross amount of the dividends in all other cases.

  The provisions of 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 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 paragraph 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 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.

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 10 per cent of the gross amount of the interest.

• 3 Notwithstanding the provisions of paragraph 2, interest arising in a Contracting State and paid in respect of indebtedness of the government of that State or of a political subdivision or local authority thereof shall, provided that the interest is beneficially owned by a resident of the other Contracting State, be taxable only in that other State.

• 4 The term interest as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage, and in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures, as well as income which is subjected to the same taxation treatment as income from money lent by the laws of the State in which the income arises. However, the term interest does not include income dealt with in Article 10. Penalty charges for late payment shall not be regarded as interest for the purpose of this Article.

• 5 The provisions of paragraph 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 such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

• 6 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 the payer 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.

• 7 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.

• 8 The provisions of this Article shall not apply if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the debt-claim in respect of which the interest is paid to take advantage of this Article by means of that creation or assignment.

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:

  • (a) 5 per cent of the gross amount of the royalties if they are

    • (i) copyright royalties and other like payments in respect of the production or reproduction of any literary, dramatic, musical or other 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

    • (ii) where the payer and the beneficial owner of the royalties are not related persons, royalties for the use of, or the right to use, computer software or 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); and

  • (b) 10 per cent of the gross amount of the royalties in all other cases.

• 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, patent, trade mark, design or model, plan, secret formula or process or other intangible property, or for the use of, or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience, and includes payments of any kind in respect of motion picture films and works on film, videotape or other means of reproduction for use in connection with television.

• 4 The provisions of paragraph 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 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 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 the payer 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 obligation 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.

• 7 The provisions of this Article shall not apply if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the right in respect of which the royalties are paid to take advantage of this Article by means of that creation or assignment.

Article 13
Capital Gains

• 1 Gains derived by a resident of a Contracting State from the alienation of immovable property 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 a fixed base may be taxed in that other State.

• 3 Gains derived by an enterprise of a Contracting State from the alienation of ships or aircraft operated in international traffic or movable property pertaining to the operation of such ships or aircraft, shall be taxable only in that State.

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

Article 14
Independent Personal Services

• 1 Income derived by an individual who is a resident of a Contracting State in respect of professional or similar services of an independent character shall be taxable only in that State. However, in the following circumstances such income may be taxed in the other Contracting State, that is to say:

  • (a) if the individual has or had such a fixed base regularly available for the purposes of performing the services; 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 the individual is present in the other Contracting State for a period or periods amounting to or exceeding in the aggregate 183 days in any twelve month period commencing or ending in the calendar year concerned; in that case, only so much of the income as is derived from the individual’s activities performed during the period in which the individual was present in the 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 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 calendar year concerned,

  • (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 in respect of an employment exercised aboard a ship or aircraft operated in international traffic by an enterprise of a Contracting State, shall be taxable only in that State unless the remuneration is derived by a resident of the other Contracting State.

Article 16
Directors’ Fees

Directors’ fees and other similar payments derived by a resident of a Contracting State in that resident’s capacity as a member of the board of directors or a similar organ 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 that resident’s 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 that individual’s capacity as such accrues not to the entertainer or sportsperson personally 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.

• 3 The provisions of paragraph 2 shall not apply if it is established that neither the entertainer or the sportsperson nor persons related thereto, participate directly or indirectly in the profits of the person referred to in that paragraph.

• 4 The provisions of paragraphs 1 and 2 shall not apply to income derived from activities performed in a Contracting State by a resident of the other Contracting State in the context of a visit in the first-mentioned State of a non-profit organization of the other State, provided the visit is substantially supported by public funds.

Article 18
Pensions

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

• 2 Pensions arising in a Contracting State and paid to a resident of the other Contracting State may also be taxed in the State in which they arise and according to the law of that State. However, in the case of periodic pension payments, other than payments under the social security legislation in a Contracting State, the tax so charged shall not exceed 15 per cent of the gross amount of the payment.

• 3 Notwithstanding anything in this Convention:

  • (a) 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 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; and

  • (b) benefits under the social security legislation in a Contracting State paid to a resident of the other Contracting State shall be taxable only in the first-mentioned State; and

  • (c) alimony and other similar payments arising in a Contracting State and paid to a resident of the other Contracting State who is subject to tax therein in respect thereof, shall be taxable only in that other State, but the amount taxable in that other State shall not exceed the amount that would be taxable in the first-mentioned State if the recipient were a resident thereof; and

  • (d) pensions paid by, or out of funds created by, Lebanon or a political subdivision or a local authority thereof to an individual in respect of services rendered to Lebanon or a subdivision or authority thereof shall be taxable only in Lebanon.

Article 19
Government Service

• 1

  • (a) Salaries, wages and other similar remuneration, other than a pension, 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 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 The provisions of paragraph 1 shall not apply to salaries, wages 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, Apprentices and Trainees

Payments which a student, apprentice or business trainee 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 that individual’s education or training receives for the purpose of that individual’s 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 Subject to the provisions of paragraph 2, 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 However, if such income is derived by a resident of a Contracting State from sources in the other Contracting State, such income may also be taxed in the State in which it arises and according to the law of that State.

• 3 The provisions of paragraph 1 shall not apply to income, other than income from immovable property, if the recipient of the 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.

IV. Methods for Elimination of Double Taxation

Article 22
Elimination of Double Taxation

• 1 In the case of Canada, double taxation shall be avoided as follows:

  • (a) subject to the existing provisions of the law of Canada regarding the deduction from tax payable in Canada of tax paid in a territory outside Canada and to any subsequent modification of those provisions — which shall not affect the general principle hereof — and unless a greater deduction or relief is provided under the laws of Canada, tax payable in Lebanon on profits, income or gains arising in Lebanon shall be deducted from any Canadian tax payable in respect of such profits, income or gains; and

  • (b) where in accordance with any provision of the Convention income derived by a resident of Canada is exempt from tax in Canada, Canada may nevertheless, in calculating the amount of tax on other income, take into account the exempted income.

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

  • (a) where a resident of Lebanon derives income or items of income referred to in Articles 10, 11 or 12, or profits or gains which under the law of Canada and in accordance with this Convention may be taxed in Canada, Lebanon shall allow as a credit against its tax on the income, items of income, profits or gains an amount equal to the tax paid in Canada;

  • (b) the amount of the credit, however, shall not exceed the amount of Lebanese tax on that income, items of income, profits or gains computed in accordance with the taxation laws and regulations of Lebanon.

• 3 For the purposes of this Article, profits, income or gains of a resident of a Contracting State which may be taxed in the other Contracting State in accordance with this Convention shall be deemed to arise from sources in that other State.

V. Special Provisions

Article 23
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.

• 4 Nothing in this Article shall 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.

• 5 Except where the provisions of Article 9, paragraph 7 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 purposes 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.

• 6 The provisions of paragraph 5 shall not affect the operation of any provision of the taxation laws of a Contracting State:

  • (a) relating to the deductibility of interest and which is in force on the date of signature of this Convention (including any subsequent modification of such provisions that does not change the general nature thereof); or

  • (b) adopted after such date by a Contracting State and which is designed to ensure that a person who is not a resident of that State does not enjoy, under the laws of that State, a tax treatment that is more favourable than that enjoyed by residents of that State.

• 7 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 more burdensome than the taxation and connected requirements to which other similar enterprises which are residents of the first-mentioned State, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of a third State, are or may be subjected.

Article 24
Mutual Agreement Procedure

• 1 Where a person considers that the actions of one or both of the Contracting States result or will result for that person in taxation not in accordance with the provisions of this Convention, that person may, irrespective of the remedies provided by the domestic law of those States, address to the competent authority of the Contracting State of which that person is a resident an application in writing stating the grounds for claiming the revision of such taxation. To be admissible, the said application must be submitted within two years from the first notification of the action resulting in taxation not in accordance with the provisions of the Convention.

• 2 The competent authority referred to in paragraph 1 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 not in accordance with the Convention.

• 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.

• 4 The competent authorities of the Contracting States may consult together for the elimination of double taxation in cases not provided for in the Convention and may communicate with each other directly for the purpose of applying the Convention.

Article 25
Exchange of Information

• 1 The competent authorities of the Contracting States shall exchange such information as is relevant for carrying out the provisions of this Convention or of the domestic laws in the Contracting States concerning taxes covered by the Convention insofar as the taxation thereunder is not contrary to the Convention, especially in order to prevent fraud or evasion in respect of such taxes. 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:

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

• 3 If information is requested by a Contracting State in accordance with this Article, the other Contracting State shall endeavour to obtain the information to which the request relates in the same way as if its own taxation were involved notwithstanding the fact that the other State does not, at that time, need such information.

Article 26
Members of Diplomatic Missions and Consular Posts

• 1 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.

• 2 Notwithstanding the provisions of Article 4, an individual who is a member of a diplomatic mission, consular post or permanent mission of a Contracting State which is situated in the other Contracting State or in a third State shall be deemed for the purposes of the Convention to be a resident of the sending State if that individual is liable in the sending State to the same obligations in relation to tax on total income as are residents of that sending State.

• 3 The Convention shall not apply to international organizations, to organs or officials thereof and to persons who are members of a diplomatic mission, consular post or permanent mission of a third State or group of States, being present in a Contracting State and who are not liable in either Contracting State to the same obligations in relation to tax on their total income as are residents thereof.

Article 27
Miscellaneous Rules

• 1 The provisions of this Convention shall not be construed to restrict in any manner any exemption, allowance, credit or other deduction accorded:

  • (a) by the laws of a Contracting State in the determination of the tax imposed by that State; or

  • (b) by any other agreement entered into by a Contracting State.

• 2 Nothing in the Convention shall be construed as preventing a Contracting State from imposing a tax on amounts included in the income of a resident of that State with respect to a partnership, trust, or controlled foreign affiliate, in which that resident has an interest.

• 3 The provisions of Articles 6 to 22 of the Convention shall not apply to any entity enjoying income tax benefits under Lebanese Decree-Laws No. 45 and No. 46 of June 24, 1983, or under any other law providing similar income tax benefits, or which does not subject an entity to tax under the ordinarily rules of Lebanon income tax law. Such provisions shall also not apply either to income derived by a resident of Canada from such entities nor to shares or other rights in the capital of such entities owned by such person.

• 4 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 25 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:

  • (a) if the income derived from the other State is in connection with or incidental to the active conduct of a trade or business carried on by the permanent establishment in the third jurisdiction (other than the business of making or managing investments unless these activities are banking or insurance activities carried on by a bank or insurance company);

  • (b) when Lebanon 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.

VI. Final Provisions

Article 28
Entry into Force

Each of the Contracting States shall notify the other through the diplomatic channel the completion of the procedures required by law for the bringing into force of this Convention. The Convention shall enter into force on the 30th day after the date of the later of these notifications and its provision shall thereupon have effect:

• (a) in the case of Canada

  • (i) in respect of tax withheld at the source on amounts paid or credited to non-residents on or after the first day of January in the calendar year next following that in which the Convention enters into force, and

  • (ii) in respect of other taxes, for taxation years beginning on or after the first day of January in the calendar year next following that in which the Convention enters into force; and

• (b) in the case of Lebanon

  • (i) in respect of taxes withheld at the source to the income derived on or after the first day of January in the calendar year next following the year in which the Convention enters into force, and

  • (ii) in respect of other taxes on profit or income derived on or after the first day of January in the calendar year next following the year in which the Convention enters into force.

Article 29
Termination

This Convention shall continue in effect indefinitely but either Contracting State may, on or before June 30 of any calendar year beginning after the expiration of a period of five years from the year of the entry into force of the Convention, give to the other Contracting State a notice of termination in writing through the diplomatic channel; in such event, the Convention shall cease to have effect:

• (a) in the case of Canada

  • (i) in respect of tax withheld at the source on amounts paid or credited to non-residents on or after the first day of January in the calendar year next following the year in which the notice is given, and

  • (ii) in respect of other taxes, for taxation years beginning on or after the first day of January in the calendar year next following the year in which the notice is given; and

• (b) in the case of Lebanon

  • (i) in respect of taxes withheld at the source to the income derived on or after the first day of January in the calendar year next following the year in which the notice is given, and

  • (ii) in respect of other taxes on profit or income derived on or after the first day of January in the calendar year next following the year in which the notice is given.

IN WITNESS WHEREOF the undersigned, duly authorized to that effect, have signed this Convention.

DONE in duplicate at Beirut, this 29th day of December 1998, in the English, French and Arabic languages, each version being equally authentic.

PART 2
Protocol Signed on December 29, 1998Protocol

At the moment of signing the Convention this day concluded between Canada and Lebanon for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, the undersigned have agreed upon the following provisions which shall be an integral part of the Convention.

• 1 It is understood that the term taxes imposed on total income includes taxes levied on salaries and other similar remuneration.

• 2 Nothing in the Convention shall be construed as preventing

  • (a) Canada from imposing on the alienation of immovable property situated in Canada by a company carrying on a trade in immovable property or on the earnings of a company attributable to a permanent establishment in Canada, a tax in addition to the tax which would be chargeable on the earnings of a company which is a national of Canada, provided that any additional tax so imposed shall not exceed 5 per cent of the amount of such earnings which have not been subjected to such additional tax in previous taxation years. For the purpose of this provision, the term earnings means the earnings attributable to the alienation of such immovable property situated in Canada as may be taxed by Canada under the provisions of Article 6 or of paragraph 1 of Article 13, and the profits, including any gains, attributable to a permanent establishment in Canada in a year and previous years after deducting therefrom all taxes, other than the additional tax referred to herein, imposed on such profits in Canada; and

  • (b) Lebanon from imposing a tax on a company’s undistributed profits according to Decree-Law No. 144 dated June 12, 1959.

• 3 The provisions of paragraph 4 of Article 13 shall not prevent Canada from taxing gains derived by a resident of Lebanon from the alienation of

  • (a) shares (other than shares listed on an approved stock exchange in Canada) forming part of a substantial interest in the capital stock of a company the value of which shares is derived principally from immovable property situated in Canada; or

  • (b) a substantial interest in a partnership or trust, the value of which is derived principally from immovable property situated in Canada.

  For the purposes of this paragraph, the term immovable property includes the shares of a company referred to in subparagraph (a) or an interest in a partnership or trust referred to in subparagraph (b) but does not include any property, other than rental property, in which the business of the company, partnership or trust is carried on.

• 4 The provisions of paragraph 4 of Article 13 shall not affect the right of Canada to levy, according to its law, a tax on gains from the alienation of any property derived by an individual who is a resident of Lebanon if the gains accrued while the individual was a resident of Canada.

• 5 In the event that Lebanon enacts legislation the effect of which is to subject any entity covered by paragraph 3 of Article 27 of the Convention to the ordinary rules of Lebanon income tax law, it is understood that such entity would benefit from the provisions of Articles 6 to 22 of the Convention.

• 6 In the event that Lebanon becomes a member of the General Agreement on Trade in Services, the following provisions shall take effect from the date Lebanon becomes such a member:

  “For the purposes of paragraph 3 of Article XXII (Consultation) of the General Agreement on Trade in Services, the Contracting States agree that, notwithstanding that paragraph, any dispute between them as to whether a measure falls within the scope of this Convention may be brought before the Council for Trade in Services, as provided by that paragraph, only with the consent of both Contracting States. Any doubt as to the interpretation of this paragraph shall be resolved under paragraph 3 of Article 24 or, failing agreement under that procedure, pursuant to any other procedure agreed to by both Contracting States.”

IN WITNESS WHEREOF the undersigned, duly authorized to that effect, have signed this Protocol.

DONE in duplicate at Beirut, this 29th day of December 1998, in the English, French and Arabic languages, each version being equally authentic.

PART 1
Convention Signed on February 28, 1999Convention Between the Government of Canada and the Government of the People’s Democratic Republic of Algeria for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and on Capital

The Government of Canada and the Government of the People’s Democratic Republic of Algeria, desiring to conclude a Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital, have agreed as follows:

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 each Contracting State, 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 the case of Canada:

    the taxes on income and on capital imposed by the Government of Canada (hereinafter referred to as “Canadian tax”);

  • (b) in the case of Algeria:

    • (i) the tax on total income;

    • (ii) the tax on profits of companies;

    • (iii) the tax on professional activities;

    • (iv) the lump-sum tax;

    • (v) the tax on capital;

    • (vi) the royalty and the tax on the net profits derived from the prospecting, research, exploitation and transportation by pipeline of hydrocarbons;

    (hereinafter referred to as “Algerian tax”).

• 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 any significant changes which have been made in their respective taxation laws.

Article 3
General Definitions

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

  • (a) the terms a Contracting State and the other Contracting State mean, as the context requires, Canada or Algeria;

  • (b) the term Canada, used in a geographical sense, means the territory of Canada, including

    • (i) any area beyond the territorial sea of Canada which, in accordance with international law and the laws of Canada, is an area within which Canada may exercise rights with respect to the seabed and subsoil and their natural resources, and

    • (ii) the sea and airspace above every area referred to in clause (i) in respect of any activity carried on in connection with the exploration for or the exploitation of the natural resources referred to therein;

  • (c) the term Algeria means the People’s Democratic Republic of Algeria and, used in a geographical sense, the term means the territory of the People’s Democratic Republic of Algeria including the territorial sea and any area beyond the territorial sea, the areas over which the People’s Democratic Republic of Algeria, in accordance with international law and the laws of Algeria, exercises its jurisdiction or sovereign rights with respect to the exploration and exploitation of natural resources of the seabed and subsoil and the overlying water;

  • (d) the term person includes an individual, a company and any other body of persons;

  • (e) the term company means any body corporate or any entity which is treated as a body corporate for tax purposes;

  • (f) 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;

  • (g) the term international traffic means any transport of a ship or aircraft operated by an enterprise which has its place of effective management in a Contracting State, except where the ship or aircraft is operated solely between places in the other Contracting State;

  • (h) the term competent authority means:

    • (i) in the case of Canada, the Minister of National Revenue or the Minister’s authorized representative;

    • (ii) in the case of Algeria, the Minister in charge of Finance or the Minister’s authorized representative;

  • (i) the term tax means Canadian tax or Algerian tax, as the context requires;

  • (j) 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 by a Contracting State, any term not defined therein shall, unless the context otherwise requires, have the meaning that it has under the law of that State for the purposes of the taxes to which the Convention applies.

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 the person’s domicile, residence, place of management or any other criterion of a similar nature.

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

  • (a) the individual shall be deemed to be a resident only of the State in which the individual has a permanent home available and if the individual has a permanent home available in both Contracting States, the individual shall be deemed to be a resident only of the Contracting State with which the individual’s personal and economic relations are closer (centre of vital interests);

  • (b) if the Contracting State in which the individual’s centre of vital interests cannot be determined, or if there is not a permanent home available to the individual in either Contracting State, the individual shall be deemed to be a resident only of the Contracting State in which the individual has an habitual abode;

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

  • (d) if the Contracting State of which the individual is a resident can not be determined under the preceding criteria, 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, the competent authorities of the Contracting States shall by mutual agreement endeavour to settle the question and to determine the mode of application of the Convention to such person. In the absence of such agreement, the person shall be deemed not to be a resident of either Contracting States for the purpose of obtaining benefits provided under the Convention.

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 sales outlet;

  • (g) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources;

  • (h) a building site or construction or installation project or supervisory activities in connection therewith but only if the site, project or activity continues for a period of more than three months;

  • (i) the furnishing of services, including consultancy services, by an enterprise through employees or other personnel hired by the enterprise for that purpose, but only if activities of that nature continue (for the same or a connected project) within the country for a period or periods aggregating more than three months within any twelve month period.

• 3 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.

• 4 Notwithstanding the provisions of paragraphs 1 and 2, where a person (other than an agent of an independent status to whom paragraph 5 applies) is acting on behalf of an enterprise and has, and habitually exercises, in a Contracting State an authority to conclude contracts in the name of the enterprise, that enterprise shall be deemed to have a permanent establishment in that State in respect of any activities which that person undertakes for the enterprise unless the activities of such person are limited to those mentioned in paragraph 3 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.

• 5 An enterprise shall not be deemed to have a permanent establishment in a Contracting State merely because it carries on business in that State through a broker, general commission agent or any other agent of an independent status, or merely because it maintains in that State a stock of goods or merchandise with an agent of an independent status from which deliveries are made by that agent, provided that such persons are acting in the ordinary course of their business.

• 6 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.

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 and aircraft shall not be regarded as immovable property.

• 3 The provisions of paragraph 1 shall 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 or has carried 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 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 effectively incurred for the purposes of the permanent establishment including executive and general administrative expenses, whether incurred 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 to 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 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.

  Likewise, no account shall be taken, in the determination of the profits of the 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 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 No profits shall be attributed to a permanent establishment by reason of the mere purchase by that permanent establishment of goods or merchandise for the enterprise.

• 5 Insofar 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.

• 6 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.

• 7 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.

Article 8
Shipping and Air Transport

• 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 Notwithstanding the provisions of paragraph 1 and of Article 7, profits from the operation of a ship or aircraft used principally to transport passengers or property between places in a Contracting State may be taxed in that State.

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

• 4 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.

• 5 For the purposes of this Article, the term operation of ships or aircraft in international traffic by a person, includes:

  • (a) the charter or rental of ships or aircraft,

  • (b) the rental of containers and related equipment, and

  • (c) the alienation of ships, aircraft, containers and related equipment

  by that person if such charter, rental or alienation is incidental to the operation by that person of ships or aircraft in international traffic.

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 that differ from those that would be made between independent enterprises, then any profits that would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, has 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 that would have accrued to the enterprise of the first-mentioned State if the conditions made between the two enterprises had been those that would have been made between independent enterprises, then that other State shall make an appropriate adjustment to the amount of tax charged therein on those profits. In determining such adjustment, due regard shall be had to the other provisions of this Convention and the competent authorities of the Contracting States shall if necessary consult each other.

• 3 A Contracting State shall not change the profits of an enterprise in the circumstances referred to in paragraph 1 after the expiry of the time limits provided in its national laws and, in any case, after five years from the end of the year in which the profits that would be subject to such change would have accrued to that enterprise.

• 4 The provisions of paragraphs 2 and 3 shall not apply in the case of fraud, wilful default or neglect.

Article 10
Dividends

• 1 Dividends paid by a company that 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 recipient is the beneficial owner of the dividends, the tax so charged shall not exceed 15 per cent of the gross amount of the dividends.

  The provisions of 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 shares or 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 that 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.

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 recipient is the beneficial owner of the interest, the tax so charged shall not exceed 15 per cent of the gross amount of the interest.

• 3 Notwithstanding the provisions of paragraph 2, interest arising in a Contracting State shall be exempt from tax in that State if:

  • (a) the payer of the interest is the Government of that Contracting State or a political subdivision or local authority thereof; or

  • (b) the interest is paid to the Government of the other Contracting State or a political subdivision or local authority or to any institution or organization (including a financial institution) wholly owned by that Contracting State or subdivision or authority thereof; or

  • (c) the interest is paid to other institutions or organizations (including financial institutions) in respect of a loan made within the framework of an agreement concluded between the Governments of the Contracting States.

• 4 The term interest as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage, and in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures, as well as income which is subjected to the same taxation treatment as income from money lent by the laws of the State in which the income arises. However, the term interest does not include income dealt with in Article 10.

• 5 The provisions of paragraphs 1, 2 and 3 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 such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

• 6 Interest shall be deemed to arise in a Contracting State when the payer is that State itself, a political subdivision, a local authority or a resident of that State. Where, however, the person paying the interest, whether the payer 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.

• 7 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 that 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 recipient is the beneficial owner of the royalties, the tax so charged shall not exceed 15 per cent of the gross amount of the royalties.

• 3 Notwithstanding the provisions of paragraph 2, royalties for the use of, or the right to use, computer software or any patent (but not including any such information provided in connection with a rental or franchise agreement), 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.

• 4 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 motion picture films and works on film, videotape or other means of reproduction for use in connection with television or radio broadcasting, any patent, trade mark, 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.

• 5 The provisions of paragraphs 1, 2 and 3 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 such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

• 6 Royalties shall be deemed to arise in a Contracting State when the payer is that State itself, a political subdivision, a local authority or a resident of that State. Where, however, the person paying the royalties, whether the payer 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 obligation 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.

• 7 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 that 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 that 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 a fixed base, may be taxed in that other State.

• 3 Gains from the alienation of ships or aircraft operated in international traffic or from movable property pertaining to the operation of such ships or aircraft 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 any property, other than that referred to in paragraphs 1, 2 and 3, shall be taxable only in the Contracting State of which the alienator is a resident.

Article 14
Independent Personal Services

• 1 Income derived by an individual who is 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 that:

  • (a) if the individual has or had a fixed base regularly available in the other Contracting State; in such case, only so much of the income as is attributable to that fixed base may be taxed in the other Contracting State; or

  • (b) if the individual’s stay in the other Contracting State is for a period or periods amounting to or exceeding in the aggregate 183 days in any twelve month period commencing or ending in the fiscal year concerned; in such case, only so much of the income as is attributable to the activities exercised in the other Contracting 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 calendar 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 that 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 may be taxed in the Contracting State in which the place of effective management of the enterprise is situated.

Article 16
Directors’ Fees

Directors’ fees and other similar payments derived by a resident of a Contracting State in that resident’s 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.

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 that resident’s 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 that individual’s capacity as such accrues not to the entertainer or sportsperson personally 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.

• 3 The provisions of paragraphs 1 and 2 shall not apply to income derived from activities exercised in a Contracting State where such activities are wholly or substantially supported by public funds of the other Contracting State or a political subdivision or local authority thereof. In such case, the income derived from such activities shall be taxable only in that other Contracting State.

Article 18
Pensions and Annuities

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

• 2 Pensions arising in a Contracting State and paid to a resident of the other Contracting State may also be taxed in the State in which they arise and according to the law of that State but, in the case of periodic pension payments, the tax so charged shall not exceed the lesser of:

  • (a) 15 per cent of the gross amount of such periodic pension payments paid to the recipient in the calendar year concerned in excess of twelve thousand Canadian dollars or its equivalent in Algerian dinars; and

  • (b) the rate determined by reference to the amount of tax that the recipient of the payment would otherwise be required to pay for the year on the total amount of the periodic pension payments received by the individual in the year, if the individual were resident in the Contracting State in which the payment arises.

  The competent authorities of the Contracting States may, if necessary, agree to modify the above-mentioned amount as a result of monetary or economic developments. For the purposes of this paragraph, the term “pensions” does not include payments under the social security legislation in a Contracting State.

• 3 Annuities arising in a Contracting State and paid to a resident of the other Contracting State may also be taxed in the State in which they arise and according to the law of that State, but the tax so charged shall not exceed 15 per cent of the portion thereof that is subject to tax in that State. However, this limitation does not apply to lump-sum payments arising on the surrender, cancellation, redemption, sale or other alienation of an annuity, or to payments of any kind under an annuity contract the cost of which was deductible, in whole or in part, in computing the income of any person who acquired the contract.

• 4 Notwithstanding anything in this Convention:

  • (a) 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 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; and

  • (b) alimony and other similar payments arising in a Contracting State and paid to a resident of the other Contracting State who is subject to tax therein in respect thereof shall be taxable only in that other State.

Article 19
Government Service

• 1

  • (a) Salaries, wages and other similar remuneration, other than a pension, 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 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 The provisions of Articles 15 and 16 shall apply to salaries, wages 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

• 1 Payments which a student, apprentice or business trainee 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 that individual’s education or training receives for the purpose of that individual’s maintenance, education or training shall not be taxed in that State, if such payments arise from sources outside that State.

• 2 As regards bursaries and remuneration from employment to which paragraph 1 does not apply, a student or business trainee within the meaning of paragraph 1 may, for the period of the individual’s education or training, claim exemptions, allowances or deductions from tax that are available to residents of the State the individual is visiting.

Article 21
Other Income

• 1 Subject to the provisions of paragraph 2, 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 paragraph 1, items of income of a resident of a Contracting State which are not dealt with in the foregoing Articles of the Convention and which arise in the other Contracting State may also be taxed in that other State.

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 that 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 movable property pertaining to the operation of such ships or aircraft, shall be taxable only in the 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.

Article 23
Elimination of Double Taxation

• 1 In the case of Canada, double taxation shall be avoided as follows:

  • (a) subject to the existing provisions of the law of Canada regarding the deduction from tax payable in Canada of tax paid in a territory outside Canada and to any subsequent modification of those provisions – which shall not affect the general principle hereof – and unless a greater deduction or relief is provided under the laws of Canada, tax payable in Algeria on profits, income or gains arising in Algeria shall be deducted from any Canadian tax payable in respect of such profits, income or gains;

  • (b) where, in accordance with any provision of the Convention, income derived or capital owned by a resident of Canada is exempt from tax in Canada, Canada may nevertheless, in calculating the amount of tax on other income or capital, take into account the exempted income or capital.

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

  • (a) where a resident of Algeria derives income or owns capital which, in accordance with the provisions of this Convention, may be taxed in Canada, Algeria shall deduct:

    • (i) from the tax on the income of that resident, an amount equal to the income tax paid in Canada;

    • (ii) from the tax on capital of that resident, an amount equal to the capital tax paid in Canada;

  • (b) 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 Canada.

• 3 For the purposes of subparagraph (a) of paragraph 1, tax payable in Algeria by a company that is a resident of Canada in respect of profits attributable to a trade or business carried on by it in Algeria shall include any amount which would have been payable thereon as Algerian tax for any year but for an exemption from, or reduction of, tax granted for that year or any part thereof under the provisions of Decree Law no 93-12 of October 5, 1993, relating to the promotion of investment so far as they were in force on, and have not been modified since, the date of signature of this Convention, or have been modified only in minor respects so as not to affect their general character. The provisions of this paragraph shall apply for the first five years for which the Convention is effective, but the competent authorities of the Contracting States may consult with each other to determine whether this period shall be extended.

• 4 For the purposes of this Article, profits, income or gains of a resident of a Contracting State that may be taxed in the other Contracting State in accordance with this Convention shall be deemed to arise from sources in that other State.

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 that 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.

• 2 The taxation on a permanent establishment that 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.

• 3 Nothing in this Article shall 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 that it grants to its own residents.

• 4 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 that is other or more burdensome than the taxation and connected requirements to which other similar enterprises that are residents of the first-mentioned State, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of a third State, are or may be subjected.

Article 25
Mutual Agreement Procedure

• 1 Where a person considers that the actions of one or both of the Contracting States result or will result for that person in taxation not in accordance with the provisions of this Convention, that person may, irrespective of the remedies provided by the domestic law of those States, address to the competent authority of the Contracting State of which that person is a resident an application in writing stating the grounds for claiming the revision of such taxation. To be admissible, the said application must be submitted within two 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 not in accordance with the Convention.

• 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 for the purpose of reaching an agreement in the sense of the preceding paragraphs. When it seems advisable in order to reach an agreement to have an oral exchange of opinions, such exchange may take place through a Commission consisting of representatives of the competent authorities of the Contracting States.

Article 26
Exchange of Information

• 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 in 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 or prosecution in respect of, or the determination of appeals in relation to, taxes. 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:

  • (a) to carry out administrative measures at variance with the laws and the administrative practice of that or of the other Contracting State;

  • (b) to supply information that is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State; or

  • (c) to supply information that 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).

• 3 If information is requested by a Contracting State in accordance with this Article, the other Contracting State shall endeavour to obtain the information to which the request relates in the same way as if its own taxation were involved, even though the other State does not, at that time, need such information.

Article 27
Diplomatic Agents and Consular Officers

Nothing in this Convention shall affect the fiscal privileges of diplomatic agents or consular officers under the general rules of international law or under the provisions of special agreements.

Article 28
Entry into Force

• 1 This Convention shall be ratified and the instruments of ratification shall be exchanged 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 Canada:

    • (i) in respect of tax withheld at the source on amounts paid or credited to non-residents, on or after the first day of January in the calendar year following that in which the Convention enters into force; and

    • (ii) in respect of other Canadian tax for taxation years, beginning on or after the first day of January in the calendar year in which the Convention enters into force;

  • (b) in Algeria:

    • (i) to taxes withheld at the source on income credited or payable on or after the first day of January in the calendar year following that in which the Convention enters into force; and

    • (ii) to other taxes for taxable periods beginning on or after the first day of January in the calendar year in which the Convention enters into force.

Article 29
Termination

This Convention shall continue in effect as long as it has not been terminated by a Contracting State. Either Contracting State may, through diplomatic channels, terminate the Convention by giving a six-month notice before the end of any calendar year beginning after the fifth year from the date of entry into force of the Convention.

In such event, the Convention shall cease to have effect

• (a) in Canada:

  • (i) in respect of tax withheld at the source on amounts paid or credited to non-residents, on or after the first day of January of the calendar year next following that of the termination; and

  • (ii) in respect of other Canadian tax for taxation years, beginning on or after the first day of January of the calendar year next following that of the termination;

• (b) in Algeria:

  • (i) to taxes withheld at the source on income credited or payable at the latest on December 31 of the year of the termination; and

  • (ii) to other taxes for taxable periods ending on or before December 31 of the same year.

IN WITNESS WHEREOF the undersigned, duly authorized to that effect, have signed this Convention.

DONE in duplicate at Algiers, this 28th day of February 1999, in the English, French and Arabic languages, each version being equally authentic.

PART 2
Protocol Signed on February 28, 1999Protocol

At the moment of signing the Convention between the Government of Canada and the Government of the People’s Democratic Republic of Algeria for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital the undersigned, duly authorized, have agreed on the following provisions which shall be an integral part of the Convention.

• 1 With reference to paragraph 1 of Article 2

  It is understood that, in the case of Algeria, the Convention shall also apply to taxes on income and on capital imposed on behalf of its political subdivisions or local authorities.

• 2 With respect to paragraph 1 (d) of Article 3

  It is understood that the term person also includes, in the case of Canada, a trust and an estate.

• 3 With reference to paragraph 1 of Article 4

  It is understood that the term resident of a Contracting State also includes any agency or instrumentality of a Contracting State, its political subdivisions or its local authorities.

• 4 With reference to paragraph 1 of Article 6

  It is understood that the provisions of paragraph 1 of Article 6 shall also apply to income from the alienation of property referred to therein.

• 5 Notwithstanding the provisions of paragraph 2 of Article 11, interest arising in Algeria and paid to a resident of Canada shall be taxable only in Canada if it is paid in respect of a loan guaranteed or insured, or a credit guaranteed or insured by the Export Development Corporation.

• 6 Notwithstanding the provisions of paragraph 4 of Article 13, gains derived by a resident of Algeria from the alienation of:

  • (a) shares (other than shares listed on an approved stock exchange in Canada) of the capital stock of a company the value of which shares is derived principally from immovable property situated in Canada; or

  • (b) an interest in a partnership, trust or estate, the value of which is derived principally from immovable property situated in Canada,

  may be taxed in Canada. For the purposes of this paragraph, the term immovable property includes the shares of a company referred to in subparagraph (a) or an interest in a partnership, trust or estate referred to in subparagraph (b).

• 7 Where an individual who ceases to be a resident of a Contracting State, and immediately thereafter becomes a resident of the other Contracting State, is treated for the purposes of taxation in the first-mentioned State as having alienated a property and is taxed in that State by reason thereof, the individual may elect to be treated for the purposes of taxation in the other State as if the individual had, immediately before becoming a resident of that State, sold and repurchased the property for an amount equal to its fair market value at that time.

• 8 Notwithstanding any provision of the Convention,

  • (a) a company that is a resident of Algeria and that has a permanent establishment in Canada shall, in accordance with the provisions of Canadian law, remain subject to the additional tax on companies other than Canadian companies, but the rate of such tax shall not exceed 15 per cent;

  • (b) a company that is a resident of Canada and that has a permanent establishment in Algeria shall remain subject to the withholding tax in accordance with the provisions of Algerian law, but the rate of such tax shall not exceed 15 per cent.

• 9 The provisions of the Convention shall not be construed to restrict in any manner any exemption, allowance, credit or other deduction accorded

  • (a) by the laws of a Contracting State in the determination of the tax imposed by that State; or

  • (b) by any other agreement entered into by a Contracting State.

• 10 Nothing in the Convention shall be construed as preventing Canada from imposing a tax on amounts included in the income of a resident of Canada with respect to a partnership, trust, or controlled foreign affiliate, in which that resident has an interest.

• 11 The Convention shall not apply to any company, trust or partnership that is a resident of a Contracting State and is beneficially owned or controlled, directly or indirectly, by one or more persons who are not residents of that State, if the amount of the tax imposed on the income or capital of the company, trust or partnership by that State is substantially lower than the amount that would be imposed by that State if all of the shares of the capital stock of the company or all of the interests in the trust or partnership, as the case may be, were beneficially owned by one or more individuals who were residents of that State.

• 12 The Contracting States agree that any dispute between them as to whether a measure falls within the scope of this Convention may be brought before the Council for Trade in Services, as provided by paragraph 3 of Article XXII (Consultation) of the General Agreement on Trade in Services, only with the consent of both Contracting States. Any doubt as to the interpretation of this paragraph shall be resolved under paragraph 3 of Article 25 or, failing agreement, pursuant to any other procedure agreed to by both Contracting States.

IN WITNESS WHEREOF the undersigned, duly authorized to that effect, have signed this Protocol.

DONE in duplicate at Algiers, this 28th day of February 1999, in the English, French and Arabic languages, each version being equally authentic.

PART 1
Convention Signed on March 3, 1999Convention Between the Government of Canada and the Government of the Republic of Bulgaria for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and on Capital

The Government of Canada and the Government of the Republic of Bulgaria, hereinafter referred to as “Contracting States”, desiring to further develop and facilitate their mutual economic relationship and desiring to conclude a Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital, have agreed as follows:

I. Scope of the Convention

Article 1
Personal Scope

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 each Contracting State, 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, as well as taxes on capital appreciation.

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

  • (a) in the case of Canada:

    the income and capital taxes imposed by the Government of Canada under the Income Tax Act, (hereinafter referred to as “Canadian tax”);

  • (b) in the case of the Republic of Bulgaria:

    • (i) individual income tax,

    • (ii) corporate income tax, and

    • (iii) real property tax,

    (hereinafter referred to as “Bulgarian tax”).

• 4 The Convention shall apply also to any substantially similar taxes and to taxes on capital which are imposed after the date of signature of the Convention in addition to, or in place of, the existing taxes as well as to any other tax as may be specified and agreed in letters exchanged between the competent authorities of the Contracting States. The competent authorities of the Contracting States shall notify each other of any significant changes which have been made in their respective taxation laws.

II. Definitions

Article 3
General Definitions

• 1 In this Convention, unless the context otherwise requires:

  • (a) the terms:

    • (i) Canada, used in a geographical sense, means the territory of Canada, including any area beyond the territorial seas of Canada which, in accordance with international law and the laws of Canada, is an area within which Canada may exercise rights with respect to the seabed and subsoil and their natural resources,

    • (ii) Bulgaria means the Republic of Bulgaria and, when used in a geographical sense, means the territory and the territorial sea over which it exercises its State sovereignty, as well as the continental shelf and the exclusive economic zone over which it exercises sovereign rights or jurisdiction in conformity with international law;

  • (b) the terms a Contracting State and the other Contracting State mean, as the context requires, Canada or Bulgaria;

  • (c) the term person includes an individual and:

    • (i) in the case of Canada, a trust, a company and any other body of persons,

    • (ii) in the case of Bulgaria, any legal person, including a company and any other body of persons;

  • (d) the term company means any body corporate or any entity which is treated as a body corporate for tax purposes;

  • (e) the term competent authority means:

    • (i) in the case of Canada, the Minister of National Revenue or the Minister’s authorized representative,

    • (ii) in the case of Bulgaria, the Minister of Finance or his authorized representative;

  • (f) the term national means:

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

    • (ii) any legal person or body of persons deriving its status from the laws in force in a Contracting State;

  • (g) the term tax means Canadian tax or Bulgarian tax, as the context requires;

  • (h) the term international traffic means any transport by a ship or aircraft operated by a resident of a Contracting State, except where the ship or aircraft is operated solely between places in the other Contracting State.

• 2 As regards the application of the Convention by a Contracting State at any time, any term not defined therein shall, unless the context otherwise requires, have the meaning which it has at that time under the laws of that State concerning the taxes to which the Convention applies.

Article 4
Resident

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

  • (a) any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management, place of incorporation or any other criterion of a similar nature; but this term 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;

  • (b) the Government of that Contracting State or of a political subdivision or local authority or any legal entity owned by that State, subdivision or authority; and

  • (c) in the case of Bulgaria, any individual who, under the laws of Bulgaria, is liable to tax therein by reason of his nationality and whose personal and economic relations are closer to Bulgaria than to any third State.

• 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 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, 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 company is a resident of both Contracting States, then it shall be deemed to be a resident only of the State under the laws of which it has been created.

• 4 Where by reason of the provisions of paragraph 1 a person other than an individual or a company is a resident of both Contracting States, the competent authorities of the Contracting States shall by mutual agreement endeavour to settle the question and to determine the mode of application of the Convention to such person.

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 a resident of a Contracting State 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; and

  • (g) a building site or construction or installation project which exists for more than six months.

• 3 Notwithstanding the preceding provisions of this Article, the term permanent establishment in respect of a resident of a Contracting State shall be deemed not to include:

  • (a) the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the resident;

  • (b) the maintenance of a stock of goods or merchandise belonging to the resident solely for the purpose of storage, display or delivery;

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

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

  • (e) the maintenance of a fixed place of business solely for the purpose of carrying on, for the resident, 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.

• 4 Notwithstanding the provisions of paragraphs 1 and 2, where a person — other than an agent of an independent status to whom paragraph 5 applies — is acting on behalf of a resident of a Contracting State and has, and habitually exercises in the other Contracting State an authority to conclude contracts in the name of the resident, that resident shall be deemed to have a permanent establishment in that other State in respect of any activities which that person undertakes for the resident unless the activities of such person are limited to those mentioned in paragraph 3 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.

• 5 A resident 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.

• 6 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.

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 For the purposes of this Convention, 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 and aircraft shall not be regarded as immovable property.

• 3 The provisions of paragraph 1 shall 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 used in carrying on a business or in the performance of independent professional services.

Article 7
Business Profits

• 1 The business profits of a resident of a Contracting State shall be taxable only in that State unless the resident carries on business in the other Contracting State through a permanent establishment situated therein. If the resident carries on business as aforesaid, the business profits of the resident may be taxed in the other State but only so much of them as is attributable to that permanent establishment.

• 2 Subject to the provisions of paragraph 3, where a resident 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 business profits which it might be expected to make if it were a distinct and separate person engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the resident and with all other persons.

• 3 In the determination of the business profits of a permanent establishment, there shall be allowed those deductible expenses which are incurred for the purposes of the permanent establishment including executive and general administrative expenses, whether incurred in the State in which the permanent establishment is situated or elsewhere.

• 4 No business profits shall be attributed to a permanent establishment of a person by reason of the mere purchase by that permanent establishment of goods or merchandise for the person.

• 5 For the purposes of the preceding paragraphs, the business 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 business 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.

Article 8
Shipping and Air Transport

• 1 Profits derived by a resident of a Contracting State from the operation of ships or aircraft in international traffic shall be taxable only in that State.

• 2 Notwithstanding the provisions of paragraph 1 and Article 7, profits derived from the operation of ships or aircraft used principally to transport passengers or goods exclusively between places in a Contracting State may be taxed in that State.

• 3 The provisions of paragraphs 1 and 2 shall also apply to profits referred to in those paragraphs derived by a resident of a Contracting State from its participation in a pool, a joint business or an international operating agency.

Article 9
Associated Persons

• 1 Where

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

  • (b) the same persons participate directly or indirectly in the management, control or capital of a resident of a Contracting State and a resident of the other Contracting State,

  and in either case conditions are made or imposed between the two persons in their commercial or financial relations which differ from those which would be made between independent persons, then any income which would, but for those conditions, have accrued to one of the persons, but, by reason of those conditions, have not so accrued, may be included in the income of that person and taxed accordingly.

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

• 3 A Contracting State shall not change the income of a person in the circumstances referred to in paragraphs 1 and 2 after the expiry of the time limits provided in its national laws and, in any case, after five years from the end of the year in which the income which would be subject to such change would, but for the conditions referred to in paragraph 1, have accrued to that person.

• 4 The provisions of paragraphs 2 and 3 shall not apply in the case of fraud, wilful default or neglect.

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 recipient is the beneficial owner of the dividends the tax so charged shall not exceed:

  • (a) except in the case of dividends paid by a non-resident owned investment corporation that is a resident of Canada, 10 per cent of the gross amount of the dividends if the beneficial owner is a company which controls directly or indirectly at least 10 per cent of the voting power in the company paying the dividends;

  • (b) 15 per cent of the gross amount of the dividends in all other cases.

  The provisions of this paragraph shall not affect the taxation of the company on the profits out of which the dividends are paid.

• 3 The term dividends as used in this Article means income from shares or other rights, not being debt-claims, participating in profits, as well as income 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 paragraph 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 professional 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 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.

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 recipient is the beneficial owner of the interest the tax so charged shall not exceed 10 per cent of the gross amount of the interest.

• 3 Notwithstanding the provisions of paragraph 2:

  • (a) interest arising in a Contracting State and paid in respect of a bond or other similar obligation of the government of that Contracting State or of a political subdivision or local authority thereof shall, provided that the interest is beneficially owned by a resident of the other Contracting State, be taxable only in that other State;

  • (b) interest arising in a Contracting State and paid to the government or the central bank of the other Contracting State, provided the central bank is wholly-owned by that other State, shall be taxable only in that other State;

  • (c) interest arising in Bulgaria and paid to a resident of Canada shall be taxable only in Canada if it is paid in respect of a loan made, guaranteed or insured, or a credit extended, guaranteed or insured by the Export Development Corporation; and

  • (d) interest arising in Canada and paid to a resident of Bulgaria shall be taxable only in Bulgaria if it is paid in respect of a loan made, guaranteed or insured by:

    • (i) the Bulgarian National Bank,

    • (ii) the Bulgarian Foreign Trade Bank, or

    • (iii) any other entity as may be specified and agreed in letters exchanged between the competent authorities of the Contracting States.

• 4 The term interest as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage, and in particular, income from government securities and income from bonds, including premiums attaching to such securities or bonds, as well as income which is subjected to the same taxation treatment as income from money lent by the laws of the State in which the income arises. However, the term interest does not include income dealt with in Article 10.

• 5 The provisions of paragraph 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 professional services from a fixed base situated therein, and the debt-claim in respect of which the interest 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.

• 6 Interest shall be deemed to arise in a Contracting State when the payer is that State itself, a political subdivision, a local authority or 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.

• 7 Where, by reason of a special relationship between the payer and the beneficial owner of the interest 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 recipient is the beneficial owner of the royalties the tax so charged shall not exceed 10 per cent of the gross amount of the royalties.

• 3 Notwithstanding the provisions of paragraph 2, copyright royalties and other like payments in respect of the production or reproduction of any cultural, dramatic, musical or other artistic work (but not including royalties in respect of motion picture films and works on film or videotape or other means of reproduction for use in connection with television), arising in a Contracting State and paid to a resident of the other Contracting State who is subject to tax thereon shall be taxable only in that other State.

• 4 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, patent, certificate of invention, trade mark, design or model, plan, secret formula or process or other intangible property, or for the use of, or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience, and includes payments of any kind in respect of motion picture films and works on film, videotape or other means of reproduction for use in connection with television.

• 5 The provisions of paragraphs 2 and 3 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 professional services from a fixed base situated therein, and the right or property in respect of which the royalties 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.

• 6 Royalties shall be deemed to arise in a Contracting State when the payer is that State itself, a political subdivision, a local authority or 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 obligation 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.

• 7 Where, by reason of a special relationship between the payer and the beneficial owner of the royalties 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 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 a resident 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 professional services, including such gains from the alienation of such a permanent establishment (alone or with the whole enterprise carried on by such resident) or of such a fixed base may be taxed in that other State.

• 3 Gains from the alienation of ships or aircraft operated in international traffic by a resident of a Contracting State or movable property pertaining to the operation of such ships or aircraft, shall be taxable only in that Contracting State.

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

• 5 The provisions of paragraph 4 shall not affect the right of either of the Contracting States to levy, according to its law, a tax on gains from the alienation of any property derived by an individual who is a resident of the other Contracting State and has been a resident of the first-mentioned State at any time during the six years immediately preceding the alienation of the property.

Article 14
Independent Professional Services

• 1 Income derived by an individual who is a resident of a Contracting State in respect of professional services shall be taxable only in that State unless he has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities. If he has such a fixed base, the income may be taxed in the other State but only so much of it as is attributable to that fixed base.

• 2 The term professional services includes especially independent scientific, literary, artistic, educational or teaching activities, independent activities of physicians, lawyers, engineers, architects, dentists and accountants as well as other activities of an independent character.

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 calendar 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 in respect of an employment exercised aboard a ship or aircraft operated in international traffic by a resident of a Contracting State, shall be taxable only in that State unless the remuneration is derived by a resident of the other Contracting State.

Article 16
Directors’ Fees

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 or a similar organ of a company which is a resident of the other Contracting State, may be taxed in that other State.

Article 17
Artistes and Sportsmen

• 1 Notwithstanding the provisions of Articles 7, 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 paragraph 2 shall not apply if it is established that neither the entertainer or the sportsman nor persons related thereto, participate directly or indirectly in the profits of the person referred to in that paragraph.

• 4 The provisions of paragraphs 1 and 2 shall not apply to income derived from activities performed in a Contracting State by a resident of the other Contracting State if these activities are performed:

  • (a) in the context of a visit in the first-mentioned State of a non-profit organization of the other State, provided that the visit is wholly supported by public funds; or

  • (b) in the context of the visit of a cultural group in the first-mentioned State within the framework of a cultural agreement between the Contracting States.

Article 18
Pensions and Annuities

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

• 2 Pensions arising in a Contracting State and paid to a resident of the other Contracting State may also be taxed in the State in which they arise, and according to the law of that State. However, in the case of periodic pension payments, the tax so charged shall not exceed 15 per cent of the gross amount of the payment.

• 3 Annuities arising in a Contracting State and paid to a resident of the other Contracting State may also be taxed in the State in which they arise, and according to the law of that State; but the tax so charged shall not exceed 10 per cent of the portion thereof that is subject to tax in that State. However, this limitation does not apply to lump-sum payments arising on the surrender, cancellation, redemption, sale or other alienation of an annuity, or to payments of any kind under an annuity contract the cost of which was deductible, in whole or in part, in computing the income of any person who acquired the contract.

• 4 For the purposes of this Convention, the term annuity means a stated sum payable to an individual periodically at stated times during his life or during a specified or ascertainable period of time under an obligation to make the payments in return for adequate and full consideration in money or in money’s worth, but does not include a pension or a payment that is not a periodic payment or any annuity the cost of which was deductible for the purposes of taxation in the Contracting State in which it was acquired.

• 5 Notwithstanding anything in this Convention:

  • (a) alimony, maintenance and child support payments in respect of a divorce or a separation, arising in a Contracting State and paid to a resident of the other Contracting State who is subject to tax therein in respect thereof, shall be taxable only in that other State; and

  • (b) payments under the social security legislation in a Contracting State made to a resident of the other Contracting State shall be taxable only in the first-mentioned State.

Article 19
Government Service

• 1 Salaries, wages and similar remuneration, other than a pension, 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. However, such salaries, wages and 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 other State who:

  • (a) is a national of that other State; or

  • (b) became a resident of that other State not solely for the purpose of rendering the services.

• 2 The provisions of paragraph 1 shall not apply to 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

• 1 Payments which a student, business apprentice or trainee 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.

• 2 A student, business apprentice or trainee referred to in paragraph 1 shall be entitled, in the Contracting State that he visits, to the same exemptions, reliefs or reductions in respect of taxes as are available to residents of a third State in the same circumstances.

Article 21
Other Income

• 1 Subject to the provisions of paragraph 2, 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 However, if such income is derived by a resident of a Contracting State from sources in the other Contracting State, such income may also be taxed in the State in which it arises, and according to the law of that State. However, in the case of income arising in Canada from a trust, other than a trust to which contributions were deductible, the tax so charged shall, provided that the income is taxable in Bulgaria, not exceed 15 per cent of the gross amount of the income.

• 3 The provisions of paragraph 1 shall not apply to income, other than income from immovable property, if the recipient of the 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 professional 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.

IV. Taxation of Capital

Article 22
Capital

• 1 Capital represented by immovable property 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 a resident 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 professional services, may be taxed in that other State.

• 3 Capital represented by ships and aircraft operated by a resident of a Contracting State in international traffic and by movable property pertaining to the operation of such ships and aircraft, shall be taxable only in that State.

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

V. Methods for Prevention of Double Taxation

Article 23
Elimination of Double Taxation

• 1 In the case of Canada, double taxation shall be avoided as follows:

  • (a) Subject to the existing provisions of the law of Canada regarding the deduction from tax payable in Canada of tax paid in a territory outside Canada and to any subsequent modification of those provisions — which shall not affect the general principle hereof — and unless a greater deduction or relief is provided under the laws of Canada, tax payable in Bulgaria on profits, income or capital gains arising in Bulgaria shall be deducted from any Canadian tax payable in respect of such profits, income or capital gains.

  • (b) Subject to the existing provisions of the law of Canada regarding the taxation of income from a foreign affiliate and to any subsequent modification of those provisions — which shall not affect the general principle hereof — for the purpose of computing Canadian tax, a company which is a resident of Canada shall be allowed to deduct in computing its taxable income any dividend received by it out of the exempt surplus of a foreign affiliate which is a resident of Bulgaria.

  • (c) Where in accordance with any provision of the Convention income derived or capital owned by a resident of Canada is exempt from tax in Canada, Canada may nevertheless, in calculating the amount of tax on other income or capital, take into account the exempted income or capital.

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

  • (a) Where a resident of Bulgaria derives income or owns capital which in accordance with the provisions of this Convention may be taxed in Canada, Bulgaria shall, subject to the provisions of subparagraphs (b) and (c) of this paragraph, exempt such income or capital from tax.

  • (b) Where a resident of Bulgaria derives dividends, interest, royalties or capital gains which in accordance with the provisions of Articles 10, 11, 12 and paragraph 5 of Article 13 of this Convention may be taxed in Canada, Bulgaria shall allow as a deduction from the tax on the dividends, interest, royalties or capital gains of that resident an amount equal to the tax paid in Canada. Such deduction shall not, however, exceed that part of the tax, as computed before the deduction is given, which is attributable to such dividends, interest, royalties or capital gains derived from Canada.

  • (c) Where in accordance with any provision of this Convention income derived or capital owned by a resident of Bulgaria is exempt from tax in Bulgaria, Bulgaria may nevertheless, in calculating the amount of the tax on the remaining income or capital of such resident, take into account the exempted income or capital.

• 3 For the purposes of this Article, profits, income or capital gains of a resident of a Contracting State which are taxed in the other Contracting State in accordance with this Convention shall be deemed to arise from sources in that other State.

• 4 For the purposes of subparagraph (a) of paragraph 1, tax payable under the law of Bulgaria by a company which is a resident of Canada in respect of profits attributable to manufacturing, tourism and agricultural activities, exploration or exploitation of natural resources and construction or telecommunication projects carried on by it in Bulgaria shall be deemed to include any amount which would have been payable thereon as Bulgarian tax for any year but for an exemption from, or reduction of, tax granted for that year or any part thereof under specific Bulgarian legislation to promote economic development to the extent that the exemption or reduction is for a period not in excess of ten years.

VI. Special Provisions

Article 24
Non-Discrimination

• 1 The nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith which is more burdensome than the taxation and connected requirements to which nationals of that other State in the same circumstances are or may be subjected.

• 2 The taxation on a permanent establishment which a resident 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 residents of that other State carrying on the same activities.

• 3 Nothing in this Article shall 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 or paragraph 7 of Article 12 apply, royalties and other disbursements, other than interest, paid by a resident of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable profits of such resident, be deductible under the same conditions as if they had been paid to a resident of the first-mentioned State. Similarly, any debts of a resident of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable capital of such resident, be deductible under the same conditions as if they had been contracted to a resident of the first-mentioned State.

• 5 Except where the provisions of paragraph 1 of Article 9 or paragraph 7 of Article 11 apply, interest paid by a resident of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable profits of such resident, be deductible under the same conditions as if they had been paid to a resident of a third State.

• 6 Companies which are residents 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 more burdensome than the taxation and connected requirements to which other similar companies which are residents of the first-mentioned State, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of a third State, are or may be subjected.

• 7 In this Article, the term taxation means taxes which are the subject of this Convention.

• 8 The provisions of paragraphs 4 and 5 shall not affect the ability of a Contracting State to provide that a person which is not a resident of that State does not enjoy, under the laws of that State, a tax treatment that is more favourable than that enjoyed by residents of that State.

Article 25
Mutual Agreement Procedure

• 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, address to the competent authority of the Contracting State of which he is a resident an application in writing stating the grounds for claiming the revision of such taxation. To be admissible, the said application must be submitted within two years from the first notification of the action which gives rise to taxation not in accordance with the Convention.

• 2 The competent authority referred to in paragraph 1 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 not in accordance with the Convention.

• 3 A Contracting State shall not, after the expiry of the time limits provided in its national laws, and, in any case, after five years from the end of the taxable period in which the income concerned has accrued, increase the tax base of a resident of either of the Contracting States by including therein items of income which have also been charged to tax in the other Contracting State. This paragraph shall not apply in the case of fraud, wilful default or neglect.

• 4 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.

• 5 The competent authorities of the Contracting States may consult together for the elimination of double taxation in cases not provided for in the Convention and may communicate with each other directly for the purpose of applying the Convention.

Article 26
Exchange of Information

• 1 The competent authorities of the Contracting States shall exchange such information as is relevant 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 taxes. 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 If information is requested by a Contracting State in accordance with this Article, the other Contracting State shall endeavour to obtain the information to which the request relates in the same way as if its own taxation were involved notwithstanding the fact that the other State does not, at that time, need such information.

• 3 Nothing in paragraphs 1 and 2 shall be construed so as to impose on a Contracting State the obligation:

  • (a) to carry out administrative measures at variance with the laws or the 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).

Article 27
Diplomatic Agents and Consular Officers

• 1 Nothing in this Convention shall affect the fiscal privileges of diplomatic agents or consular officers under the general rules of international law or under the provisions of special agreements.

• 2 Notwithstanding Article 4, an individual who is a member of a diplomatic mission, consular post or permanent mission of a Contracting State which is situated in the other Contracting State or in a third State shall be deemed for the purposes of the Convention to be a resident of the sending State if he is liable in the sending State to the same obligations in relation to tax on his total income as are residents of that sending State.

• 3 The Convention shall not apply to international organizations, to organs or officials thereof and to persons who are members of a diplomatic mission, consular post or permanent mission of a third State or group of States, being present in a Contracting State and who are not liable in either Contracting State to the same obligations in relation to tax on their total income as are residents thereof.

Article 28
Miscellaneous Rules

• 1 The provisions of this Convention shall not be construed to restrict in any manner any exemption, allowance, credit or other deduction accorded:

  • (a) by the laws of a Contracting State in the determination of the tax imposed by that State; or

  • (b) by any other agreement entered into by a Contracting State.

• 2 Nothing in the Convention shall be construed as preventing a Contracting State from imposing a tax on amounts included in the income of a resident of that State with respect to a body of persons, trust, or controlled foreign affiliate, in which he has an interest.

• 3 Where under any provision of this Convention any income is relieved from tax in a Contracting State and, under the law in force in the other Contracting State a person, in respect of that income, is subject to tax by reference to the amount thereof which is remitted to or received in that other Contracting State and not by reference to the full amount thereof, then the relief to be allowed under this Convention in the first-mentioned Contracting State shall apply only to so much of the income as is taxed in the other Contracting State.

• 4 For purposes of paragraph 3 of Article XXII (Consultation) of the General Agreement on Trade in Services, the Contracting States agree that, notwithstanding that paragraph, any dispute between them as to whether a measure falls within the scope of this Convention may be brought before the Council for Trade in Services, as provided by that paragraph, only with the consent of both Contracting States. Any doubt as to the interpretation of this paragraph shall be resolved under paragraph 4 of Article 25 or, failing agreement under that procedure, pursuant to any other procedure agreed to by both Contracting States.

VII. Final Provisions

Article 29
Entry into Force

• 1 This Convention shall be ratified and the instruments of ratification shall be exchanged at Sofia.

• 2 The Convention shall enter into force upon the exchange of instruments of ratification and its provisions shall have effect:

  • (a) in respect of tax withheld at the source on amounts paid or credited to non-residents on or after the first day of January in the calendar year next following that in which the exchange of instruments of ratification takes place; and

  • (b) in respect of other tax for taxation years beginning on or after the first day of January in the calendar year next following that in which the exchange of instruments of ratification takes place.

Article 30
Termination

This Convention shall continue in effect indefinitely but either Contracting State may, on or before June 30 of any calendar year beginning after the expiration of a period of five years from the date of its entry into force, give to the other Contracting State a notice of termination in writing through diplomatic channels; in such event, the Convention shall cease to have effect:

• (a) in respect of tax withheld at the source on amounts paid or credited to non-residents on or after the first day of January of the next following calendar year; and

• (b) in respect of other tax for taxation years beginning on or after the first day of January of the next following calendar year.

IN WITNESS WHEREOF the undersigned, duly authorized to that effect, have signed this Convention.

DONE in duplicate at Ottawa, this 3rd day of March 1999, in the English, French and Bulgarian languages, each version being equally authentic.

PART 2
Protocol Signed on March 3, 1999Protocol

At the moment of signing the Convention between the Government of Canada and the Government of the Republic of Bulgaria for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital, the undersigned have agreed upon the following provisions which shall be an integral part of the Convention.

• 1 With reference to subparagraph (a) of paragraph 1 of Article 4 of the Convention it is understood that for the purposes of the application of the Convention to,

  • (a) income taxes, the term “liable to tax” refers to liability to taxes on income and not to taxes on capital;

  • (b) capital taxes, the term “liable to tax” refers to liability to taxes on capital and not to taxes on income.

• 2 It is understood that the provisions of paragraph 1 of Article 6 of the Convention shall apply to income from the alienation of immovable property.

• 3 With reference to Article 7 of the Convention, it is understood that where a resident of a Contracting State has carried on business in the other Contracting State through a permanent establishment situated therein, the business profits of the resident that are attributable to that permanent establishment and that are received by the resident after it has ceased to carry on business as aforesaid, may be taxed in that other State in accordance with the principles laid down in Article 7.

• 4 It is understood that, notwithstanding any provision of the Convention, a company or a legal person which is a resident of Bulgaria and which has a permanent establishment in Canada shall, in accordance with the provisions of Canadian law, remain subject to the additional tax on companies other than Canadian corporations, but the rate of such tax shall not exceed 10 per cent.

• 5 It is understood that, notwithstanding the provisions of paragraph 4 of Article 13 of the Convention, gains derived by a resident of a Contracting State from the alienation of:

  • (a) shares (other than shares quoted on an approved stock exchange in the other State) forming part of a substantial interest in the capital stock of a company which is a resident of that other State the value of which shares is derived principally from immovable property situated in that other State; or

  • (b) a substantial interest in a partnership or trust, established under the law in the other State, the value of which is derived principally from immovable property situated in that other State,

  may be taxed in that other State. For the purposes of this paragraph, the term immovable property includes the shares of a company referred to in subparagraph (a) or an interest in a partnership or trust referred to in subparagraph (b) but does not include any property, other than rental property, in which the business of the company, partnership or trust is carried on; and a substantial interest exists when the resident or persons related thereto own 25 per cent or more of the shares of any class of the capital stock of a company or have an interest of 25 per cent or more in a partnership or trust.

• 6 With reference to Article 14 of the Convention, it is understood that where a resident of a Contracting State has exercised independent professional services in the other Contracting State through a fixed base situated therein, the income of the resident that is attributable to that fixed base and that is received by the resident after the resident has ceased to exercise services as aforesaid, may be taxed in that other State in accordance with the principles laid down in Article 14.

• 7 In the event that pursuant to an Agreement or Convention concluded with a country that is a member country of the Organisation for Economic Co-operation and Development after the date of signature of this Convention, Bulgaria agrees to a rate of tax on dividends or royalties that is lower than 10 per cent, then such lower rate (but not in any event a rate below 5 per cent for dividends) shall apply for the purpose of subparagraph (a) of paragraph 2 of Article 10 of the Convention with respect to dividends or paragraph 2 of Article 12 of the Convention with respect to royalties for the use of, or the right to use, computer software or 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), as the case may be.

• 8 Notwithstanding anything in the Convention, the provisions of paragraph 4 of Article 23 of the Convention shall apply only for the first five years for which the Convention is effective, but the competent authorities of the Contracting States may consult with each other to determine whether this period shall be extended for a further period of five years.

IN WITNESS WHEREOF, the undersigned, duly authorized to that effect, have signed this Protocol.

DONE in duplicate at Ottawa, this 3rd day of March 1999, in the English, French and Bulgarian languages, each version being equally authentic.

PART 1
Convention Signed on June 14, 1999Convention Between the Government of Canada and the Government of the Portuguese Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income

The Government of Canada and the Government of the Portuguese Republic, desiring to conclude a Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, have agreed as follows:

Article 1

I. Scope of the Convention
Persons Covered

This Convention shall apply to persons who are residents of one or both of the Contracting States.

Article 2
Taxes Covered

• 1 The existing taxes to which the Convention shall apply are:

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

  • (b) in the case of Portugal:

    • (i) the personal income tax (Imposto sobre o Rendimento das Pessoas Singulares — IRS),

    • (ii) the corporate income tax (Imposto sobre o Rendimento das Pessoas Colectivas — IRC),

    • (iii) the local surtax on the corporate income tax (Derrama),

    (hereinafter referred to as “Portuguese tax”).

• 2 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 any significant changes which have been made in their respective taxation laws.

Article 3

II. Definitions
General Definitions

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

  • (a) the terms a Contracting State and the other Contracting State mean Canada or Portugal as the context requires;

  • (b) the term Canada, used in a geographical sense, means the territory of Canada, including:

    • (i) any area beyond the territorial sea of Canada that, in accordance with international law and the laws of Canada, is an area in respect of which Canada may exercise rights with respect to the seabed and subsoil and their natural resources,

    • (ii) the sea and airspace above every area referred to in clause (i) in respect of any activity carried on in connection with the exploration for or the exploitation of the natural resources referred to therein;

  • (c) the term Portugal, used in a geographical sense, means the territory of the Portuguese Republic situated in the European Continent and the archipelagoes of Azores and Madeira, the territorial sea as well as any other zone in which, in accordance with the laws of Portugal and international law, the Portuguese Republic has jurisdiction or sovereign rights with respect to the exploration and exploitation of the natural resources of the seabed and subsoil, and of the superjacent waters;

  • (d) the term person includes an individual, a trust, a company and any other body of persons;

  • (e) the term company means any body corporate or any entity which is treated as a body corporate for tax purposes;

  • (f) 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;

  • (g) the term competent authority means:

    • (i) in the case of Canada, the Minister of National Revenue or the Minister’s authorized representative,

    • (ii) in the case of Portugal, the Minister of Finance, the Director General of Taxation or their authorized representatives;

  • (h) 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;

  • (i) the term tax means, as the context requires, Canadian tax or Portuguese tax;

  • (j) the term international traffic, with reference to an enterprise of a Contracting State, means any voyage of a ship or aircraft to transport passengers or property except where the principal purpose of the voyage is to transport passengers or property between places within the other 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 which 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:

  • (a) any person who, under the laws of that State, is liable to tax therein by reason of the person’s domicile, residence, place of management or any other criterion of a similar nature; however, this term does not include any person that is liable to tax in that State in respect only of income from sources in that State;

  • (b) that State itself or a political or administrative subdivision or local authority thereof or any agency or instrumentality of any such government, subdivision or authority.

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

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

  • (b) if the State in which the individual’s centre of vital interests is situated cannot be determined, or if there is not a permanent home available to the individual in either State, the individual shall be deemed to be a resident only of the State in which the individual has an habitual abode;

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

  • (d) if the individual 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, the competent authorities of the Contracting States shall by mutual agreement endeavour to settle the question and to determine the mode of application of the Convention to such person. In the absence of such agreement, such person shall be considered not to be a resident of either Contracting State for the purposes of enjoying benefits under the Convention.

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; and

  • (f) a mine, an oil or gas well, a quarry or any other place relating to the exploration for or the exploitation of natural resources.

• 3 A building site or construction or installation project constitutes a permanent establishment only if it lasts for more than six months.

• 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, display or delivery 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, display or delivery;

  • (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 on behalf of an enterprise and has, and habitually exercises, in a Contracting State an authority to conclude contracts in the name of the enterprise, that enterprise shall be deemed to have a permanent establishment in that State in respect of any activities which that person undertakes for 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.

• 6 Subject to the provisions of paragraphs 4, 7 and 8, an enterprise of a Contracting State that carries on business in the other Contracting State through its own employees or any other personnel rendering substantially similar services for a period or periods amounting to or exceeding 120 days in any twelve month period commencing or ending in the taxation year concerned shall be deemed to have a permanent establishment in that other State.

• 7 An enterprise shall not be deemed to have a permanent establishment in a Contracting State merely because it carries on business in that 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.

• 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.

Article 6

III. Taxation of Income
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 For the purposes of this Convention, 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 and aircraft shall not be regarded as immovable property.

• 3 The provisions of paragraph 1 shall 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 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 determining the profits of a permanent establishment, there shall be allowed as deduction expenses which are incurred for the purposes 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.

• 4 No profits shall be attributed to a permanent establishment by reason of the mere purchase by that permanent establishment of goods or merchandise for the enterprise.

• 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.

Article 8
Shipping and Air Transport

• 1 Profits derived by an enterprise of a Contracting State from the operation of ships or aircraft in international traffic shall be taxable only in that State.

• 2 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 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 income which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, has not so accrued, may be included in the income of that enterprise and taxed accordingly.

• 2 Where a Contracting State includes in the income of an enterprise of that State — and taxes accordingly — income on which an enterprise of the other Contracting State has been charged to tax in that other State and the income so included is income 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 tax charged therein on that income. In determining such adjustment, due regard shall be had to the other provisions of this Convention and the competent authorities of the Contracting States shall if necessary consult each other.

• 3 A Contracting State shall not change the income of an enterprise in the circumstances referred to in paragraph 1 after the expiry of the time limits provided in its domestic laws and, in any case, after five years from the end of the year in which the income which would be subject to such change would, but for the conditions referred to in paragraph 1, have accrued to that enterprise.

• 4 The provisions of paragraphs 2 and 3 shall not apply in the case of fraud, wilful default or neglect.

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) (i) in the case of dividends paid by a company that is a resident of Canada, except in the case of dividends paid by a non-resident-owned investment corporation, 10 per cent of the gross amount of the dividends if the beneficial owner is a company that is a resident of Portugal and that controls directly or indirectly at least 25 per cent of the voting power in the company paying the dividends;

    • (ii) in the case of dividends paid by a company that is a resident of Portugal, 10 per cent of the gross amount of the dividends if the beneficial owner is a company that is a resident of Canada and that, for an uninterrupted period of 2 years prior to the payment of the dividends owns at least 25 per cent of the capital (capital social) of the company paying the dividends;

  • (b) 15 per cent of the gross amount of the dividends in all other cases.

  The provisions of 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 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 paragraph 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 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.

• 6 Notwithstanding any provision in this Convention, a Contracting State may impose on the earnings of a company attributable to permanent establishments situated in that State, or on the alienation of immovable property situated in that State by a company carrying on a trade in immovable property, tax in addition to the tax which would be chargeable on the earnings of a company that is a resident of that State, provided that the rate of such additional tax so imposed shall not exceed the 10 per cent of the amount of such earnings which have not been subjected to such additional tax in previous taxation years. For the purpose of this provision, the term earnings means:

  • (a) the earnings attributable to the alienation of such immovable property situated in a Contracting State as may be taxed by that State under the provisions of Article 6 or of paragraph 1 of Article 13; and

  • (b) the profits attributable to such permanent establishments in that State (including gains from the alienation of property forming part of the business property, referred to in paragraph 2 of Article 13, of such permanent establishments) in accordance with Article 7 in a year and previous years after deducting therefrom:

    • (i) business losses attributable to such permanent establishments (including losses from the alienation of property forming part of the business property of such permanent establishments) in such year and previous years,

    • (ii) all taxes chargeable in that State on such profits, other than the additional tax referred to herein,

    • (iii) the profits reinvested in that State, provided that the amount of such deduction shall be determined in accordance with the provisions of the law of that State, as they be amended from time to time without changing the general principle hereof, regarding the computation of the allowance in respect of investment in property in that State, and

    • (iv) five hundred thousand Canadian dollars ($500,000) or its equivalent in the currency of Portugal, less any amount deducted

      • (A) by the company, or

      • (B) by a person related thereto from the same or a similar business as that carried on by the company

      under this clause; for the purposes of this clause, a company is related to another company if one company directly or indirectly controls the other, or both companies are directly or indirectly controlled by the same person or persons, or if the two companies deal with each other not at arm’s length.

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 10 per cent of the gross amount of the interest.

• 3 Notwithstanding the provisions of paragraph 2, interest arising in a Contracting State shall be exempt from tax in that State if:

  • (a) the debtor of such interest is the Government of that State or a political or administrative subdivision or a local authority thereof; or

  • (b) the interest is paid to the Government of the other Contracting State or to a political or administrative subdivision or local authority thereof, or to an institution or organization (including a financial institution) with respect to a financing between the Governments of the Contracting States; or

  • (c) the interest is paid in respect of a loan made or a credit extended by:

    • (i) in the case of Canada, the Export Development Corporation, and

    • (ii) in the case of Portugal, the Companhia de Seguro de Créditos (COSEC).

• 4 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, as well as income which is subjected to the same taxation treatment as income from money lent by the laws of the State in which the income arises. However, the term interest does not include income dealt with in Article 10.

• 5 The provisions of paragraph 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 such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

• 6 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 the person 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.

• 7 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 10 per cent of the gross amount of the royalties.

• 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, any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial or scientific equipment, and for information concerning industrial, commercial or scientific experience, and includes payments of any kind in respect of motion picture films and works on film, videotape or other means of reproduction for use in connection with television.

• 4 The provisions of paragraph 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 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 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 the person 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 obligation 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 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 a fixed base may be taxed in that other State.

• 3 Gains from the alienation of ships or aircraft operated in international traffic by an enterprise of a Contracting State or movable property pertaining to the operation of such ships or aircraft, shall be taxable only in that State.

• 4 Gains derived by a resident of a Contracting State from the alienation of:

  • (a) shares, the value of which is derived principally from immovable property situated in the other State,

  • (b) an interest in a partnership or trust, the value of which is derived principally from immovable property situated in that other State,

  may be taxed in that other State.

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

• 6 The provisions of paragraph 5 shall not affect the right of a Contracting State to levy, according to its law, a tax on gains from the alienation of any property derived by an individual who is a resident of the other Contracting State if the alienator:

  • (a) is a national of the first-mentioned Contracting State or has been a resident of that State for fifteen years or more prior to the alienation of the property; and

  • (b) was a resident of that first-mentioned State at any time during the five years immediately preceding such the alienation.

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. However, such income may also be taxed in the other Contracting State in the following cases:

  • (a) if a fixed base is regularly available to the resident in that other State for the purpose of performing the activities; in that case, only so much of the income as is attributable to that fixed base may be taxed in that other State; or

  • (b) if the resident’s stay in that other State is for a period or periods amounting to or exceeding in the aggregate 183 days in any twelve month period commencing or ending in the calendar year concerned.

• 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 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 calendar 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 in respect of an employment exercised aboard a ship or aircraft operated in international traffic by an enterprise of a Contracting State may be taxed in that State.

Article 16
Directors’ Fees

Directors’ fees and other similar payments derived by a resident of a Contracting State in the capacity as a member of the board of directors or supervisory board (in Portugal, conselho fiscal) or a similar organ 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 that resident’s 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 that individual’s capacity as such accrues not to the entertainer or sportsperson personally 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.

• 3 The provisions of paragraphs 1 and 2 shall not apply to income derived from activities performed in a Contracting State by a resident of the other Contracting State in the context of a visit in the first-mentioned State of a non-profit organization of the other State, provided the visit is principally supported by public funds.

Article 18
Pensions and Annuities

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

• 2 Pensions arising in a Contracting State and paid to a resident of the other Contracting State may also be taxed in the State in which they arise and according to the law of that State, but in the case of periodic pension payments, the tax so charged shall not exceed the lesser of:

  • (a) 15 per cent of the gross amount of such periodic pension payments paid to the recipient in the calendar year concerned that exceeds twelve thousand Canadian dollars or its equivalent in Portuguese currency; and

  • (b) the rate determined by reference to the amount of tax that the recipient of the payment would otherwise be required to pay for the year on the total amount of the periodic pension payments received by the individual in the year, if the individual were a resident of the Contracting State in which the payment arises.

• 3 Annuities arising in a Contracting State and paid to a resident of the other Contracting State may also be taxed in the State in which they arise and according to the laws of that State, but the tax so charged shall not exceed 15 per cent of the portion thereof that is subject to tax in that State. However, this limitation does not apply to lump-sum payments arising on the surrender, cancellation, redemption, sale or other alienation of an annuity, or to payments of any kind under an annuity contract the cost of which was deductible, in whole or in part, in computing the income of any person who acquired the contract.

• 4 Notwithstanding anything in this Convention:

  • (a) 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 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;

  • (b) alimony and other similar payments arising in a Contracting State and paid to a resident of the other Contracting State who is subject to tax therein in respect thereof, shall be taxable only in that other State.

Article 19
Government Service

• 1

  • (a) Salaries, wages and other similar remuneration, other than a pension, paid by a Contracting State or a political or administrative 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 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 The provisions of Articles 15, 16 and 17 shall apply to salaries, wages and other similar remuneration in respect of services rendered in connection with a business carried on by a Contracting State or a political or administrative subdivision or a local authority thereof.

Article 20
Students

Payments which a student, apprentice or business trainee 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 that individual’s education or training receives for the purpose of that individual’s 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 Subject to the provisions of paragraph 2, 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 However, if such income is derived by a resident of a Contracting State from sources in the other Contracting State, such income may also be taxed in the State in which it arises, and according to the law of that State. Where such income is income from a trust, other than a trust to which contributions were deductible, the tax so charged shall, provided that the income is taxable in the Contracting State in which the beneficial owner is a resident, not exceed 15 per cent of the gross amount of the income.

Article 22

IV. Methods for Prevention of Double Taxation
Elimination of Double Taxation

• 1 In the case of Canada, double taxation shall be avoided as follows:

  • (a) subject to the existing provisions of the law of Canada regarding the deduction from tax payable in Canada of tax paid in a territory outside Canada and to any subsequent modification of those provisions — which shall not affect the general principle hereof — and unless a greater deduction or relief is provided under the laws of Canada, tax payable in Portugal on profits, income or gains arising in Portugal shall be deducted from any Canadian tax payable in respect of such profits, income or gains;

  • (b) where in accordance with any provision of the Convention income derived by a resident of Canada is exempt from tax in Canada, Canada may nevertheless, in calculating the amount of tax on other income, take into account the exempted income.

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

  • (a) where a resident of Portugal derives income that, in accordance with the provisions of this Convention, may be taxed in Canada, Portugal shall allow as a deduction from the tax on the income of that resident an amount equal to the income tax paid in Canada; such deduction shall not, however, exceed that part of the income tax, as computed before the deduction is given, that is attributable to the income that may be taxed in Canada;

  • (b) where in accordance with any provision of the Convention income derived by a resident of Portugal is exempt from tax in Portugal, Portugal may nevertheless, in calculating the amount of tax on the remaining income of such resident, take into account the exempted income.

• 3 For the purposes of this Article, profits, income or gains of a resident of a Contracting State which may be taxed in the other Contracting State in accordance with this Convention shall be deemed to arise from sources in that other State.

Article 23

V. Special Provisions
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 individuals who are not residents of one or both of the Contracting States.

• 2 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.

• 3 Except where the provisions of paragraph 1 of Article 9, paragraph 7 of Article 11, or paragraph 6 of Article 12, apply, interest, royalties or 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.

• 4 The provisions of paragraph 3 shall not affect the operation of any provision of the taxation laws of a Contracting State:

  • (a) relating to the deductibility of interest and which is in force on the date of signature of this Convention (including any subsequent modification of such provisions that does not change the general nature thereof); or

  • (b) adopted after such date by a Contracting State and which is designed to ensure that a person who is not a resident of that State does not enjoy, under the laws of that State, a tax treatment that is more favourable than that enjoyed by residents of that 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, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of a third State, are or may be subjected.

• 6 In this Article, the term taxation means taxes which are the subject of this Convention.

Article 24
Mutual Agreement Procedure

• 1 Where a person considers that the actions of one or both of the Contracting States result or will result for that person in taxation not in accordance with the provisions of this Convention, that person may, irrespective of the remedies provided by the domestic law of those States, address to the competent authority of the Contracting State of which that person is a resident or, if that person’s case comes under paragraph 1 of Article 23, to that of the Contracting State of which that person is a national, an application in writing stating the grounds for claiming the revision of such taxation. To be admissible, the said application must be submitted within two years from the first notification of the action which gives rise to taxation not in accordance with the provisions of the Convention.

• 2 The competent authority referred to in paragraph 1 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 not in accordance with the Convention.

• 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.

• 4 The competent authorities of the Contracting States may communicate with each other directly for the purpose of applying the Convention.

Article 25
Exchange of Information

• 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) concerned with the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation to, taxes. 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:

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

Article 26
Members of Diplomatic Missions and Consular Posts

• 1 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.

• 2 Notwithstanding Article 4, an individual who is a member of a diplomatic mission, consular post or permanent mission of a Contracting State which is situated in the other Contracting State or in a third State shall be deemed for the purposes of the Convention to be a resident of the sending State if that individual is liable in the sending State to the same obligations in relation to tax on total income as are residents of that sending State.

• 3 The Convention shall not apply to international organizations, to organs or officials thereof and to persons who are members of a diplomatic mission, consular post or permanent mission of a third State or group of States, being present in a Contracting State and who are not liable in either Contracting State to the same obligations in relation to tax on their total income as are residents thereof.

Article 27
Miscellaneous Rules

• 1 The provisions of this Convention shall not be construed to restrict in any manner any exemption, allowance, credit or other deduction accorded:

  • (a) by the laws of a Contracting State in the determination of the tax imposed by that State; or

  • (b) by any other agreement entered into by a Contracting State.

• 2 Nothing in the Convention shall be construed as preventing a Contracting State from imposing a tax on amounts included in the income of a resident of that State with respect to a partnership, trust, or controlled foreign affiliate, in which that resident has an interest.

• 3 Notwithstanding the provisions of Article 4, a company or other entity that is entitled to income tax benefits under the legislation and other measures relating to the tax-free zones of a Contracting State, or to benefits similar to those provided with respect to such tax-free zones that are made available under any legislation or other measure adopted after the date of signature of the Convention, shall be deemed not to be a resident of that State for the purposes of the Convention. However, this paragraph shall not apply to a company or other entity deriving income from:

  • (a) an active trade or business in that State, the selling of goods or merchandise in that State or the rendering of services, other than services referred to in subparagraph (b), in that State; or

  • (b) the rendering of services offered in the ordinary course of business by a bank, an insurance company, a registered securities dealer or a deposit-taking financial institution, if at least 75 per cent of its income from all sources is taxed under the ordinary rules of the tax law of that State.

• 4 For the purposes of paragraph 3 of Article XXII (Consultation) of the General Agreement on Trade in Services, the Contracting States agree that, notwithstanding that paragraph, any dispute between them as to whether a measure falls within the scope of this Convention may be brought before the Council for Trade in Services, as provided by that paragraph, only with the consent of both Contracting States. Any doubt as to the interpretation of this paragraph shall be resolved under paragraph 3 of Article 24 or, failing agreement under that procedure, pursuant to any other procedure agreed to by both Contracting States.

Article 28

VI. Final Provisions
Entry into Force

• 1 This Convention shall be ratified and the instruments of ratification shall be exchanged as soon as possible.

• 2 The Convention shall enter into force 30 days after the exchange of instruments of ratification and its provisions shall have effect:

  • (a) in Canada:

    • (i) in respect of tax withheld at the source on amounts paid or credited to non-residents, on or after the first day of January in the calendar year next following that in which the Convention enters into force,

    • (ii) in respect of other Canadian tax, for taxation years beginning on or after the first day of January in the calendar year next following that in which the Convention enters into force;

  • (b) in Portugal:

    • (i) in respect of taxes withheld at source, the fact given rise to them appearing on or after the first day of January in the calendar year next following that in which the Convention enters into force,

    • (ii) in respect of other taxes, to income derived during any taxable period beginning on or after the first day of January in the calendar year next following that in which the Convention enters into force.

• 3 Notwithstanding the provisions of paragraph 2, the provisions of Article 8 and of paragraph 3 of Article 13 shall have effect in respect of taxes on income arising during the 1994 taxation year and subsequent taxation years.

Article 29
Termination

This Convention shall remain in force until terminated by a Contracting State. Either Contracting State may terminate the Convention in writing and through the diplomatic channel, by giving at least six months notice before the end of any calendar year beginning from the second year following that in which the instruments of ratification are exchanged. In such event, the Convention shall cease to have effect:

• (a) in Canada:

  • (i) in respect of tax withheld at the source on amounts paid or credited to non-residents, on or after the first day of January of the calendar year next following that mentioned in the notice of termination,

  • (ii) in respect of other Canadian tax, for taxation years beginning on or after the first day of January of the calendar year next following that mentioned in the notice of termination;

• (b) in Portugal:

  • (i) in respect of taxes withheld at source, the fact given rise to them appearing on or after the first day of January of the calendar year next following that mentioned in the notice of termination,

  • (ii) in respect of other taxes, to income derived during any taxable period beginning on or after the first day of January of the calendar year next following that mentioned in the notice of termination.

IN WITNESS WHEREOF the undersigned, duly authorized to that effect, have signed this Convention.

DONE in duplicate at Ottawa, this 14th day of June 1999, in the English, French and Portuguese languages, each version being equally authentic.

PART 2
Protocol Signed on June 14, 1999Protocol

At the moment of signing the Convention this day concluded between Canada and the Portuguese Republic for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, the undersigned have agreed upon the following provisions which shall be an integral part of the Convention.

• 1 With reference to Article 3, paragraph 1(j), and Articles 5 and 8, ferry-boats, deep-sea ferry-boats or other vessels devoted principally to the transportation of passengers or goods exclusively between places in a Contracting State shall, when so operated, be deemed not to be operated in international traffic; the landing site or sites situated in a Contracting State and used regularly in such operation by such boats or vessels shall constitute a permanent establishment in that State of the enterprise operating such boats or vessels.

• 2 With reference to Article 6, it is understood that its provisions shall also apply to income from immovable property and services which, according to the tax legislation of the Contracting State in which the property in question is situated, is assimilated to income from immovable property.

• 3 With reference to Article 6, paragraph 3, it is understood that its provisions shall also apply to income from the alienation of property referred to therein.

• 4 With reference to Article 7, paragraph 1, it is understood that the profits attributable to a permanent establishment in a Contracting State may be taxed in that State even though the permanent establishment has ceased to exist.

• 5 With reference to Article 7, paragraph 3, the term expenses which are incurred for the purposes of the permanent establishment refers to expenses directly related to the activity of the permanent establishment which are deductible under the laws of the Contracting State in which the permanent establishment is situated.

• 6 With reference to Article 9, paragraph 2, it is understood that the State being asked to make the adjustment to income is required to do it only if it considers that the adjustment made in the other Contracting State is justified in principle and in its amount.

• 7 With reference to Article 10, paragraph 3, the term dividends also means, in the case of Portugal, profits attributable or paid under an arrangement for participation in profits (associaçao em participaçao).

• 8 With reference to Article 12, it is understood that its provisions shall also apply to remuneration for technical assistance where such assistance is related to the use of, or the right to use, rights, property or information referred to in paragraph 3 of that Article.

• 9 With reference to paragraph 6 of Article 13, it is agreed that, if the Canadian legislation concerning the taxation of former residents is amended in the sense of the Canadian announcement of December 23, 1998 (Communique no. 98-134), the provisions of paragraph 6 of Article 13 will automatically be replaced by the following:

  “6. Where an individual who ceases to be a resident of a Contracting State, and immediately thereafter becomes a resident of the other Contracting State, is treated for the purposes of taxation in the first-mentioned State as having alienated a property and is taxed in that State by reason thereof, the individual may elect to be treated for purposes of taxation in the other State as if the individual had, immediately before becoming a resident of that State, sold and repurchased the property for an amount equal to its fair market value at that time. However, this provision shall not apply to property any gain from which, arising immediately before the individual became a resident of that other State, may be taxed in that other State nor to immovable property situated in a third State.”

• 10 With reference to Article 14, paragraph 1, it is understood that the profits attributable to a fixed base in a Contracting State may be taxed in that State even though the fixed base has ceased to exist.

• 11 With reference to Article 16, it is understood that remuneration paid by a company to a member of its boards in respect of the exercise of a continuous activity may be taxed in accordance with the provisions of Article 15.

• 12 With reference to Article 17, paragraph 2, it is understood that its provisions shall not apply if it is established that neither the entertainer or the sportsperson nor persons related thereto, participate directly or indirectly in the profits of the person referred to in that paragraph.

• 13 With reference to subparagraph (a) of paragraph 1 of Article 22, it is understood that the existing provisions of the law of Canada regarding the taxation of income from a foreign affiliate in force at the time of signature of the Convention shall continue to apply as long as they are not amended or terminated.

IN WITNESS WHEREOF the undersigned, duly authorized to that effect, have signed this Protocol.

DONE in duplicate at Ottawa, this 14th day of June 1999, in the English, French and Portuguese languages, each version being equally authentic.

PART 1
Convention Signed on June 17, 1999Convention Between the Government of Canada and the Government of the Republic of Uzbekistan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and on Capital

The Government of Canada and the Government of the Republic of Uzbekistan, hereinafter referred to as the “Parties”, desiring to conclude a Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital, have agreed as follows:

Article 1
Personal Scope

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 Canada and on behalf of the Republic of Uzbekistan or of its 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 this 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 the Republic of Uzbekistan:

    • (i) the tax on income (profits) of legal persons,

    • (ii) the tax on income of individuals, and

    • (iii) the property tax,

    (hereinafter referred to as “Uzbekistan tax”).

• 4 This Convention shall also apply to any substantially similar taxes which are imposed by either Contracting State after the date of signature of this Convention in addition to, or in place of, the existing taxes. The competent authorities of the Contracting States shall notify each other of any substantial changes which have been made in their respective taxation laws.

Article 3
General Definitions

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

  • (a) the term Canada used in a geographical sense, means the territory of Canada, including:

    • (i) any area beyond the territorial sea of Canada which, in accordance with international law and the laws of Canada, is an area within which Canada may exercise rights with respect to the seabed and subsoil and their natural resources,

    • (ii) the sea and airspace above every area referred to in clause (i) in respect of any activity carried on in connection with the exploration for or the exploitation of the natural resources referred to therein;

  • (b) the term Uzbekistan means the Republic of Uzbekistan, including the territorial sea, and any area outside the territorial sea within which, in accordance with international law, the Republic of Uzbekistan has sovereign rights for the purpose of exploring and exploiting the natural resources of the seabed and its subsoil and the superjacent waters;

  • (c) the terms a Contracting State and the other Contracting State mean, as the context requires, Canada or Uzbekistan;

  • (d) 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;

  • (e) the term person includes an individual, an estate, a trust, a company, a partnership and any other body of persons;

  • (f) the term company means any body corporate or any entity which is treated as a body corporate for tax purposes;

  • (g) the term competent authority means:

    • (i) in the case of Canada, the Minister of National Revenue or his authorized representative,

    • (ii) in the case of the Republic of Uzbekistan, the Chairman of the State Tax Committee or his authorized representative;

  • (h) the term national means:

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

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

  • (i) the term international traffic with reference to a resident of a Contracting State means any voyage of a ship or aircraft to transport passengers or property (whether or not operated or used by that resident) except where the principal purpose of the voyage is to transport passengers or property between places within the other Contracting State.

• 2 As regards the application at any time of this Convention by a Contracting State, any term not defined therein shall, unless the context otherwise requires, have the meaning which it has at that time for the purposes of the law of that State concerning the taxes to which this Convention applies.

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. But this term 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. The term shall also include the government of a Contracting State or a local authority thereof, or any agency or instrumentality of any such government or authority.

• 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 company is a resident of both Contracting States, then its status shall be determined as follows:

  • (a) it shall be deemed to be a resident only of the State of which it is a national;

  • (b) if it is a national of neither of the States, it shall be deemed to be a resident only of the State in which its place of effective management is situated.

• 4 Where by reason of the provisions of paragraph 1 a person other than an individual or a company is a resident of both Contracting States, the competent authorities of the Contracting States shall by mutual agreement endeavour to settle the question and to determine the mode of application of this Convention to such person. In the absence of such agreement, such person shall not be considered to be a resident of either Contracting State for the purposes of enjoying benefits under this Convention.

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; and

  • (f) a mine, an oil or gas well, a quarry or any other place relating to the exploration for or the exploitation of natural resources.

• 3 A building site or construction or installation project constitutes a permanent establishment only if it lasts for more than twelve months.

• 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, display or delivery 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, display or delivery;

  • (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 6 applies — is acting on behalf of an enterprise and has, and habitually exercises, in a Contracting State an authority to conclude contracts on behalf of the enterprise, that enterprise shall be deemed to have a permanent establishment in that State in respect of any activities which that person undertakes for 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.

• 6 An enterprise shall not be deemed to have a permanent establishment in a Contracting State merely because it carries on business in that 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.

• 7 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.

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 For the purposes of this Convention, the term immovable property shall have the meaning which it has for the purposes of the taxation 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 and aircraft shall not be regarded as immovable property.

• 3 The provisions of paragraph 1 shall apply to income derived from the direct use, letting, or use in any other form of immovable property and to income from the alienation of such 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 or has carried 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 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 and with all other persons.

• 3 In the determination of the profits of a permanent establishment, there shall be allowed those deductible expenses which are incurred for the purposes of the business of the permanent establishment including executive and general administrative expenses, whether incurred in the State in which the permanent establishment is situated or elsewhere. However, no such deductions 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 as defined in Article 12, 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 as defined in Article 11, 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 as defined in Article 12, 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 as defined in Article 11, on moneys lent to the head office of the enterprise or any of its other offices.

• 4 Insofar 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 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 No profits shall be attributed to a permanent establishment by reason of the mere purchase by that permanent establishment of goods or merchandise for the enterprise.

• 6 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.

• 7 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.

Article 8
International Transport

• 1 Profits derived by an enterprise of a Contracting State from the operation of ships or aircraft in international traffic shall be taxable only in that State.

• 2 Notwithstanding the provisions of paragraph 1 and of Article 7, profits derived by an enterprise of a Contracting State from a voyage of a ship or aircraft where the principal purpose of the voyage is to transport passengers or property between places in the other Contracting State may be taxed in that other State.

• 3 For the purposes of this Article, profits derived by an enterprise of a Contracting State from the operation of ships or aircraft in international traffic include profits from:

  • (a) the rental on a bareboat basis of ships or aircraft operated in international traffic, and

  • (b) the use, maintenance or rental of containers (including trailers and related equipment for the transport of containers) used in international traffic,

  where such rental or such use, maintenance or rental, as the case may be, is incidental to the operation of ships or aircraft in international traffic.

• 4 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 tax charged therein on those profits. In determining such adjustment, due regard shall be had to the other provisions of this Convention and the competent authorities of the Contracting States shall if necessary consult each other.

• 3 A Contracting State shall not change the profits of an enterprise in the circumstances referred to in paragraph 1 after five years from the end of the year in which the profits which would be subject to such change would have accrued to that enterprise.

• 4 The provisions of paragraphs 2 and 3 shall not apply in the case of fraud 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 a resident of the other Contracting State is the beneficial owner of the dividends the tax so charged shall not exceed:

  • (a) 5 per cent of the gross amount of the dividends if the beneficial owner is a company which controls directly or indirectly at least 10 per cent of the voting power in the company paying the dividends;

  • (b) 15 per cent of the gross amount of the dividends in all other cases.

  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 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 paragraph 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 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 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.

• 6 Nothing in this Convention shall be construed as preventing a Contracting State from imposing on the earnings of a company attributable to a permanent establishment in that State, a tax in addition to the tax which would be chargeable on the earnings of a company which is a national of that State, provided that any additional tax so imposed shall not exceed 5 per cent of the amount of such earnings which have not been subjected to such additional tax in previous taxation years. For the purpose of this provision, the term earnings means the profits, including any gains, attributable to a permanent establishment in a Contracting State in a year and previous years after deducting therefrom all taxes, other than the additional tax referred to herein, imposed on such profits by that State.

• 7 The provisions of paragraph 6 shall also apply with respect to earnings derived from the alienation of immovable property in one of the States by a company carrying on a trade in immovable property, whether or not it has a permanent establishment in that State, but only insofar as these earnings may be taxed in that State under the provisions of Article 6 or paragraph 1 of Article 13.

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 a resident of the other Contracting State is the beneficial owner of the interest the tax so charged shall not exceed 10 per cent of the gross amount of the interest.

• 3 Notwithstanding the provisions of paragraph 2:

  • (a) interest arising in a Contracting State and paid in respect of indebtedness of the government of that State or of a local authority thereof shall, provided that the interest is beneficially owned by a resident of the other Contracting State, be taxable only in that other State;

  • (b) interest arising in Canada and paid to a resident of Uzbekistan shall be taxable only in Uzbekistan if it is paid in respect of a loan made, guaranteed or insured, or a credit extended, guaranteed or insured by the Central Bank of the Republic of Uzbekistan; and

  • (c) interest arising in Uzbekistan and paid to a resident of Canada shall be taxable only in Canada if it is paid in respect of a loan made, guaranteed or insured, or a credit extended, guaranteed or insured by the Export Development Corporation of Canada.

• 4 The term interest as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage, and in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures, as well as income which is subjected to the same taxation treatment as income from money lent by the laws of the State in which the income arises. However, the term interest does not include income dealt with in Article 10. Penalty charges for late payment shall not be regarded as interest for the purpose of this Article.

• 5 The provisions of paragraph 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 such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

• 6 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.

• 7 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.

• 8 The provisions of this Article shall not apply if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the debt-claim in respect of which the interest is paid to take advantage of this Article by means of that creation or assignment.

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 a resident of the other Contracting State is the beneficial owner of the royalties the tax so charged shall not exceed:

  • (a) 5 per cent of the gross amount of the royalties 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

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

  • (b) 10 per cent of the gross amount of the royalties in all other cases.

• 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, patent, trade mark, design or model, plan, secret formula or process or other intangible property, or for the use of, or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience (know-how), and includes payments of any kind in respect of motion picture films and works on film, videotape or other means of reproduction for use in connection with television.

• 4 The provisions of paragraph 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 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 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 obligation 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.

• 7 The provisions of this Article shall not apply if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the rights in respect of which the royalties are paid to take advantage of this Article by means of that creation or assignment.

Article 13
Capital Gains

• 1 Gains derived by a resident of a Contracting State from the alienation of immovable property 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 a fixed base, may be taxed in that other State.

• 3 Gains derived by an enterprise of a Contracting State from the alienation of ships or aircraft operated in international traffic or movable property pertaining to the operation of such ships or aircraft, shall be taxable only in that State.

• 4 Gains derived by a resident of a Contracting State from the alienation of:

  • (a) shares (other than shares listed on an approved stock exchange in the other Contracting State) forming part of a substantial interest in the capital stock of a company the value of which shares is derived principally from immovable property situated in the other Contracting State, or

  • (b) a substantial interest in a partnership, trust or estate, established under the law in a Contracting State, the value of which is derived principally from immovable property situated in the other Contracting State,

  may be taxed in that other State. For the purposes of this paragraph, the term immovable property includes the shares of a company referred to in subparagraph (a) or an interest in a partnership, trust or estate referred to in subparagraph (b) but does not include any property, other than rental property, in which the business of the company, partnership, trust or estate is carried on; and a substantial interest exists when the resident or persons related thereto own 25 per cent or more of the shares of any class of the capital stock of a company or have an interest of 25 per cent or more in a partnership, trust or estate.

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

• 6 The provisions of paragraph 5 shall not affect the right of a Contracting State to levy, according to its law, a tax on gains from the alienation of any property derived by an individual who is a resident of the other Contracting State and has been a resident of the first-mentioned State at any time during the six years immediately preceding the alienation of the property.

Article 14
Independent Personal Services

• 1 Income derived by an individual who is 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 unless he has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities. If he has or had such a fixed base, the income may be taxed in the other State but only so much of it as is attributable to that fixed base.

• 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 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 calendar 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 by an enterprise of a Contracting State may be taxed in that State.

Article 16
Directors’ Fees

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 or a similar organ of a company which is a resident of the other Contracting State, may be taxed in that other State.

Article 17
Artistes and Sportsmen

• 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 derived from activities performed in a Contracting State by artistes or sportsmen if the visit to that State is wholly or substantially supported by public funds of one or both of the Contracting States or of local authorities thereof. In such a case, the income is taxable only in the Contracting State of which the artiste or the sportsman is a resident.

Article 18
Pensions and Similar Payments

Pensions and other similar payments of any kind arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in the first-mentioned State.

Article 19
Government Service

• 1

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

  • (b) However, such salaries, wages and similar remuneration shall be taxable only in the other Contracting State if the services are rendered in that 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 The provisions of Articles 15, 16 and 17 shall apply to remuneration in respect of services rendered in connection with a business carried on by a Contracting State or a local authority thereof.

Article 20
Students

Payments which a student or business 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, 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, if such income is derived by a resident of a Contracting State from sources in the other Contracting State, such income may also be taxed in the State in which it arises and according to the law of that State.

Article 22
Capital

• 1 Capital represented by immovable property 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 by an enterprise of a Contracting State in international traffic and by movable property pertaining to the operation of such ships and aircraft, shall be taxable only in that State.

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

Article 23
Elimination of Double Taxation

• 1 In the case of Canada, double taxation shall be avoided as follows:

  • (a) subject to the existing provisions of the law of Canada regarding the deduction from tax payable in Canada of tax paid in a territory outside Canada and to any subsequent modification of those provisions — which shall not affect the general principle hereof — and unless a greater deduction or relief is provided under the laws of Canada, tax payable in Uzbekistan on profits, income or gains arising in Uzbekistan shall be deducted from any Canadian tax payable in respect of such profits, income or gains;

  • (b) subject to the existing provisions of the law of Canada regarding the taxation of income from a foreign affiliate and to any subsequent modification of those provisions — which shall not affect the general principle hereof — for the purpose of computing Canadian tax, a company which is a resident of Canada shall be allowed to deduct in computing its taxable income any dividend received by it out of the exempt surplus of a foreign affiliate which is a resident of Uzbekistan;

  • (c) where in accordance with any provision of this Convention income derived or capital owned by a resident of Canada is exempt from tax in Canada, Canada may nevertheless, in calculating the amount of tax on other income or capital, take into account the exempted income or capital;

  • (d) for the purposes of this paragraph, profits, income or gains of a resident of a Canada which may be taxed in Uzbekistan in accordance with this Convention shall be deemed to arise from sources in Uzbekistan.

• 2 In the case of Uzbekistan, double taxation shall be eliminated as follows:

  • (a) Where a resident of Uzbekistan derives income or owns capital which, in accordance with the provisions of this Convention may be taxed in Canada, Uzbekistan shall allow:

    • (i) as a deduction from the tax on the income of that resident, an amount equal to the income tax paid in Canada,

    • (ii) as a deduction from the tax on the property of that resident, an amount equal to the property tax paid in Canada.

    Such deduction in either case shall not, however, exceed that part of the income tax or property 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 Canada.

  • (b) Where in accordance with any provision of this Convention income derived or capital owned by a resident of Uzbekistan is exempt from tax in Uzbekistan, Uzbekistan 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.

  • (c) For the purpose of subparagraphs (a) and (b) of this paragraph, profits, income and capital derived by a resident of Uzbekistan which may be taxed in Canada in accordance with this Convention shall be deemed to be derived from sources in Canada.

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

• 2 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.

• 3 Nothing in this Article shall 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 7 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 more burdensome than the taxation and connected requirements to which other similar enterprises of the first-mentioned State, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of a third State, are or may be subjected.

• 6 In this Article, the term taxation means taxes which are the subject of this Convention.

• 7 The provisions of paragraph 4 shall not affect the provisions of the taxation laws of a Contracting State that are designed to counter transactions or arrangements having as their objective the avoidance of taxation.

Article 25
Mutual Agreement Procedure

• 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, address 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, an application in writing stating the grounds for claiming the revision of such taxation. To be admissible, the said application must be submitted within two years from the first notification of the action which gives rise to taxation not in accordance with the provisions of this Convention.

• 2 The competent authority referred to in paragraph 1 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 not in accordance with this Convention.

• 3 A Contracting State shall not, after the expiry of the time limits provided in its national laws and, in any case, after five years from the end of the taxable period in which the income concerned has accrued, increase the tax base of a resident of either of the Contracting States by including therein items of income which have also been charged to tax in the other Contracting State. This paragraph shall not apply in the case of fraud, wilful default or neglect.

• 4 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 this Convention.

• 5 The competent authorities of the Contracting States may consult together for the elimination of double taxation in cases not provided for in this Convention and may communicate with each other directly for the purpose of reaching an agreement in the sense of the preceding paragraphs.

Article 26
Exchange of Information

• 1 The competent authorities of the Contracting States shall exchange such information as is relevant for carrying out the provisions of this Convention or of the domestic laws of the Contracting States concerning taxation insofar as such taxation is not contrary to this Convention, in particular, to prevent fraud and to facilitate the administration of statutory provisions against legal avoidance. 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 or prosecution in respect of, or the determination of appeals in relation to taxes. 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:

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

• 3 If information is requested by a Contracting State in accordance with this Article, the other Contracting State shall endeavour to obtain the information to which the request relates in the same way as if its own taxation was involved notwithstanding the fact that the other State does not, at that time, need such information. If specifically requested by the competent authority of a Contracting State, the competent authority of the other Contracting State shall endeavour to provide information under this Article in the form requested, such as depositions of witnesses and copies of unedited original documents (including books, papers, statements, records, accounts or writings), to the same extent such depositions and documents can be obtained under the laws and administrative practices of that other State with respect to its own taxes.

Article 27
Diplomatic Agents and Consular Officers

• 1 Nothing in this Convention shall affect the fiscal privileges of diplomatic agents or consular officers under the general rules of international law or under the provisions of special agreements.

• 2 Notwithstanding Article 4, an individual who is a member of a diplomatic mission, consular post or permanent mission of a Contracting State which is situated in the other Contracting State or in a third State shall be deemed for the purposes of this Convention to be a resident of the sending State if he is liable in the sending State to the same obligations in relation to tax on his total income or capital as are residents of that sending State.

• 3 This Convention shall not apply to international organizations, to organs or officials thereof and to persons who are members of a diplomatic mission, consular post or permanent mission of a third State or group of States, being present in a Contracting State and who are not liable in either Contracting State to the same obligations in relation to tax on their total income or capital as are residents thereof.

Article 28
Miscellaneous Rules

The provisions of this Convention shall not be construed to restrict in any manner any exemption, allowance, credit or other deduction accorded by the laws of a Contracting State in the determination of the tax imposed by that State.

Article 29
Entry into Force

Each of the Contracting States shall notify to the other through diplomatic channels the completion of the procedures required by its law for the bringing into force of this Convention. This Convention shall enter into force on the date of the later of these notifications and shall thereupon have effect:

• (a) in respect of tax withheld at the source on amounts paid or credited to non-residents on or after the first day of January of the calendar year next following that in which this Convention enters into force; and

• (b) in respect of other taxes for taxation years beginning on or after the first day of January of the calendar year next following that in which this Convention enters into force.

Article 30
Termination

This Convention shall remain in force until terminated by one of the Contracting States. Either Contracting State may terminate this Convention, through diplomatic channels, by giving notice of termination at least six months before the end of any calendar year beginning after the expiry of five years from the date of entry into force of this Convention. In such event, this Convention shall cease to have effect:

• (a) in respect of tax withheld at the source on amounts paid or credited to non-residents on or after the first day of January of the calendar year next following that in which the notice is given; and

• (b) in respect of other taxes for taxation years beginning on or after the first day of January of the calendar year next following that in which the notice is given.

IN WITNESS WHEREOF the undersigned, duly authorised thereto, have signed this Convention.

DONE in duplicate at Ottawa, this 17^th day of June 1999, in the English, French and Uzbek languages, each version being equally authentic.

PART 2
Protocol Signed on June 17, 1999Protocol

At the signing of the Convention between the Government of Canada and the Government of the Republic of Uzbekistan for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital, the undersigned have agreed on the following provisions which shall form an integral part of the Convention.

• 1 With reference to paragraph 1 of Article 4, it is understood that for the purposes of the application of this Convention to:

  • (a) income taxes, the term “liable to tax” refers to liability to taxes on income and not to taxes on property;

  • (b) property taxes, the term “liable to tax” refers to liability to taxes on property and not to taxes on income.

• 2 Paragraphs 4 and 7 of Article 24 of this Convention shall, notwithstanding the provisions of Article 29 of this Convention, take effect only from the date specified in an exchange of letters between the competent authorities of the Contracting States.

• 3 With reference to this Convention, it is understood that the terms State or a local authority or State or of a local authority includes, in the case of Canada, the political subdivisions in Canada.

• 4 Nothing in this Convention shall be construed as preventing a Contracting State from imposing a tax on amounts included in the income of a resident of that State with respect to a partnership, trust, or controlled foreign affiliate, in which he has an interest.

• 5 This Convention shall not apply to any company (nor to income derived from such company by a shareholder thereof), trust or partnership that is a resident of a Contracting State and is beneficially owned or controlled directly or indirectly by one or more persons who are not residents of that State, if the amount of the tax imposed on the income or capital of the company, trust or partnership by that State is substantially lower than the amount that would be imposed by that State if all of the shares of the capital stock of the company or all of the interests in the trust or partnership, as the case may be, were beneficially owned by one or more individuals who were residents of that State.

• 6 In the event that the Republic of Uzbekistan becomes a member of the General Agreement on Trade in Services, the following provision shall take effect from the date the Republic of Uzbekistan becomes such a member:

  For purposes of paragraph 3 of Article XXII (Consultation) of the General Agreement on Trade in Services, the Contracting States agree that, notwithstanding that paragraph, any dispute between them as to whether a measure falls within the scope of this Convention may be brought before the Council for Trade in Services, as provided by that paragraph, only with the consent of both Contracting States. Any doubt as to the interpretation of this paragraph shall be resolved under paragraph 4 of Article 25 of this Convention or, failing agreement under that procedure, pursuant to any other procedure agreed to by both Contracting States.

IN WITNESS WHEREOF the undersigned, duly authorised thereto, have signed this Protocol.

DONE in duplicate at Ottawa, this 17^th day of June 1999, in the English, French and Uzbek languages, each version being equally authentic.

PART 1
Convention Signed on September 6, 1999Convention Between the Government of Canada and the Hashemite Kingdom of Jordan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income

The Government of Canada and the Government of the Hashemite Kingdom of Jordan desiring to conclude a Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, have agreed as follows:

Article 1

I. Scope of the Convention
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 imposed on behalf of each Contracting State, irrespective of the manner in which they are levied.

• 2 There shall be regarded as taxes on income all taxes imposed on total income or on elements of income, including taxes on gains from the alienation of movable or immovable property, as well as taxes on capital appreciation.

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

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

  • (b) in the case of Jordan:

    • (i) the income tax,

    • (ii) the distribution tax,

    • (iii) the social service tax,

    (hereinafter referred to as “Jordanian tax”).

• 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 any significant changes which have been made in their respective taxation laws.

Article 3

II. Definitions
General Definitions

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

  (a)(i) the term Canada used in a geographical sense, means the territory of Canada, including

  • (A) any area beyond the territorial sea of Canada which, in accordance with international law and the laws of Canada, is an area within which Canada may exercise rights with respect to the seabed and subsoil and their natural resources, and

  • (B) the sea and airspace above every area referred to in (A) in respect of any activity carried on in connection with the exploration for or the exploitation of the natural resources referred to therein,

  • (ii) the term Jordan means the Hashemite Kingdom of Jordan, the territorial waters of Jordan, and the seabed and subsoil of the territorial waters, and includes any area extending beyond the limits of the territorial waters of Jordan, and the seabed and subsoil of any such area, which has been or may hereafter be designated, under the laws of Jordan, and in accordance with international law as an area over which Jordan has sovereign rights for the purposes of exploring and exploiting the natural resources, whether living or non-living;

  • (b) the terms a Contracting State and the other Contracting State mean, as the context requires, Canada or Jordan;

  • (c) the term person includes an individual, an estate, a trust, a company, a partnership and any other body of persons;

  • (d) the term company means any body corporate or any entity which is treated as a body corporate for tax purposes;

  • (e) 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;

  • (f) the term competent authority means:

    • (i) in the case of Canada, the Minister of National Revenue or the Minister’s authorized representative,

    • (ii) in the case of Jordan, the Minister of Finance or the Minister’s authorized representative;

  • (g) the term tax means Canadian tax or Jordanian tax, as the context requires;

  • (h) 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 which it has at that time under the law of that State for the purposes of the taxes to which the Convention applies.

Article 4
Resident

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

  • (a) any person who, under the laws of that State, is liable to tax therein by reason of the person’s domicile, residence, place of management or any other criterion of a similar nature but does not include any person who is liable to tax in that State in respect only of income from sources in that State; and

  • (b) that State or a political subdivision or local authority thereof or any agency or instrumentality of any such government, subdivision or authority.

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

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

  • (b) if the State in which the individual’s centre of vital interests cannot be determined, or if there is not a permanent home available to the individual in either State, the individual shall be deemed to be a resident only of the State in which the individual has an habitual abode;

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

  • (d) if the individual 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, the competent authorities of the Contracting States shall by mutual agreement endeavour to settle the question and to determine the mode of application of the Convention to such person. In the absence of such agreement, such person shall not be entitled to claim any relief or exemption from tax provided by the Convention.

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 relating to the exploration for or the exploitation of natural resources;

  • (g) a building site or construction or installation project which exists for more than 6 months;

  • (h) a farm or plantation; and

  • (i) premises used as a sales outlet.

• 3 An enterprise shall be deemed to have a permanent establishment in a Contracting State and to carry on business through that permanent establishment if it provides services or facilities in connection with, or supplies plant and machinery on hire used for or to be used in the prospecting for, or extraction or exploitation of natural resources in that State.

• 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, display or delivery 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, display or delivery;

  • (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 6 applies — is acting on behalf of an enterprise and has, and habitually exercises in a Contracting State an authority to conclude contracts in the name of the enterprise, that enterprise shall be deemed to have a permanent establishment in that State in respect of any activities which that person undertakes for 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.

• 6 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, that agent will not be considered an agent of an independent status within the meaning of this paragraph.

• 7 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.

Article 6

III. Taxation of Income
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 For the purposes of this Convention, the term immovable property shall have the meaning which it has for the purposes of the relevant tax 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 and aircraft shall not be regarded as immovable property.

• 3 The provisions of paragraph 1 shall apply to income derived from the direct use, letting, or use in any other form of immovable property and to income from the alienation of such 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 or has carried 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; or

  • (b) sales of goods or merchandise of the same or similar kind as those sold, or from other business activities of the same or similar kind as those affected, 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 those deductible 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 permanent establishment or any of its other offices.

• 4 No profits shall be attributed to a permanent establishment by reason of the mere purchase by that permanent establishment of goods or merchandise for the enterprise.

• 5 Insofar 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.

• 6 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.

• 7 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.

Article 8
Shipping and Air Transport

• 1 Profits derived by an enterprise of a Contracting State from the operation of ships or aircraft in international traffic shall be taxable only in that State.

• 2 Notwithstanding the provisions of paragraph 1 and Article 7, profits derived from the operation of ships or aircraft used principally to transport passengers or goods exclusively between places in a Contracting State may be taxed in that State.

• 3 The provisions of paragraphs 1 and 2 shall also apply to profits referred to in those paragraphs derived by an enterprise of a Contracting State from its participation in a pool, a joint business or an international operating agency.

• 4 For the purposes of this Article,

  • (a) the term profits includes

    • (i) gross receipts and revenues derived directly from the operation of ships or aircraft in international traffic, and

    • (ii) interest on sums generated directly from the operation of ships or aircraft in international traffic if that interest is incidental to the operation; and

  • (b) the term operation of ships or aircraft in international traffic by an enterprise, includes

    • (i) the charter or rental of ships or aircraft,

    • (ii) the rental of containers and related equipment, and

    • (iii) the alienation of ships, aircraft, containers and related equipment,

    by that enterprise if that charter, rental or alienation is incidental to the operation by that enterprise of ships or aircraft in international traffic.

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 tax charged therein on those profits. In determining such adjustment, due regard shall be had to the other provisions of this Convention and the competent authorities of the Contracting States shall if necessary consult each other.

• 3 A Contracting State shall not change the profits of an enterprise in the circumstances referred to in paragraph 1 after the expiry of the time limits provided in its national laws and, in any case, after five years from the end of the year in which the profits which would be subject to such change would have accrued to an enterprise of that State.

• 4 The provisions of paragraphs 2 and 3 shall not apply in the case of fraud 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) except in the case of dividends paid by a non-resident-owned investment corporation that is a resident of Canada, 10 per cent of the gross amount of the dividends if the beneficial owner is a company that controls directly or indirectly at least 10 per cent of the voting power in the company paying the dividends; and

  • (b) 15 per cent of the gross amount of the dividends, in all other cases.

  The provisions of 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 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 maybe, 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 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.

• 6 Notwithstanding any other provision of this Convention, where a company which is a resident of a Contracting State has a permanent establishment in the other Contracting State, the profits attributable to that permanent establishment may be subject to an additional tax in that other State, in accordance with its laws, but the additional charge shall not exceed 10 per cent of the amount of those profits.

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 10 per cent of the gross amount of the interest.

• 3 Notwithstanding the provisions of paragraph 2, interest beneficially derived by

  • (a) a Contracting State, or by an instrumentality of that Contracting State, not subject to tax by that Contracting State on its income, or

  • (b) a resident of such Contracting State with respect to loans made, guaranteed or insured by that Contracting State or an instrumentality thereof,

  shall be exempt from tax by the other Contracting State.

• 4 The term interest as used in this Article means income from debt-claims of every kind, and in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures, as well as income which is subjected to the same taxation treatment as income from money lent by the laws of the State in which the income arises. However, the term interest does not include income dealt with in Article 8.

• 5 The provisions of paragraphs 1, 2 and 3 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 such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

• 6 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 the payer 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.

• 7 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 a 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 10 per cent of the gross amount of the royalties.

• 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, patent, trade mark, 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, and includes payments of any kind in respect of motion picture films and works on films, videotapes or other means of reproduction for use in connection with television.

• 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 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 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 the payer 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 obligation 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
Independent Personal Services

• 1 Income derived by an individual who is 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. However, such income may be taxed in the other Contracting State in the following circumstances:

  • (a) if the individual has a fixed base regularly available in the other Contracting State for the purpose of performing the 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 the individual’s stay in the other Contracting State is for a period or periods amounting to or exceeding in the aggregate 183 days in any twelve month period commencing or ending in the fiscal year concerned; in that case, only so much of the income as is derived from the activity exercised in the other Contracting State may be taxed in that other State; or

  • (c) if the income for the individual’s activities in the other Contracting State is paid by a resident of that Contracting State or is borne by a permanent establishment or a fixed base situated in that Contracting State and exceeds in the fiscal year the equivalent of 10,000 Canadian dollars.

• 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 14
Dependent Personal Services

• 1 Subject to the provisions of Articles 15, 17 and 18, salaries, wages and other 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 Contracting State for a period or periods not exceeding in the aggregate 183 days in any twelve month period commencing or ending in the calendar 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 by an enterprise of a Contracting State may be taxed in that State.

Article 15
Director’s Fees and Remuneration of Top-Level Managerial Officials

• 1 Directors’ fees and other similar payments derived by a resident of a Contracting State in that resident’s capacity as a member of the board of directors or a similar organ of a company which is a resident of the other Contracting State, may be taxed in that other State.

• 2 Salaries, wages and other remuneration derived by a resident of a Contracting State in that resident’s 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 16
Artistes and Sportspersons

• 1 Notwithstanding the provisions of Articles 13 and 14, 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 that resident’s 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 by an entertainer or a sportsperson in that individual’s capacity as such accrues not to the entertainer or sportsperson personally but to another person, that income may, notwithstanding the provisions of Articles 7, 13 and 14, be taxed in the Contracting State in which the activities of the entertainer or sportsperson are exercised.

• 3 Where the services mentioned in paragraph 1 are provided in a Contracting State by an enterprise of the other Contracting State, then the income derived from providing those services by such enterprise shall be exempt from tax in the first-mentioned Contracting State, if the enterprise is directly or indirectly supported, wholly or substantially, from the public funds of the Government of that other Contracting State in connection with the provisions of such services.

Article 17
Pensions

Pensions arising in a Contacting State and paid to a resident of the other Contracting State shall be taxable only in the country in which they arise.

Article 18
Government Service

• 1

  • (a) Salaries, wages and other similar remuneration, other than a pension, 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 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 The provisions of Articles 14, 15 and 16 shall apply to salaries, wages 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 19
Students

Payments which a student, apprentice or business trainee 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 that individual’s education or training receives for the purpose of that individual’s maintenance, education or training shall not be taxed in that State, provided that such payments arise from sources outside that State.

Article 20
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 form immovable property, 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.

Article 21

IV. Methods for Prevention of Double Taxation
Elimination of Double Taxation

• 1 In the case of Canada, double taxation shall be avoided as follows:

  • (a) subject to the existing provisions of the law of Canada regarding the deduction from tax payable in Canada of tax paid in a territory outside Canada and to any subsequent modification of those provisions — which shall not affect the general principle hereof — and unless a greater deduction or relief is provided under the laws of Canada, tax payable in Jordan on profits, income or gains arising in Jordan shall be deducted from any Canadian tax payable in respect of such profits, income or gains;

  • (b) where, in accordance with any provision of this Convention, income derived by a resident of Canada is exempt from tax in Canada, Canada may nevertheless, in calculating the amount of tax on other income, take into account the exempted income.

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

  • (a) where a person being a resident of Jordan derives income from Canada and that income, in accordance with the provisions of this Convention may be taxed in Canada, Jordan shall allow as a deduction from the tax on the income of that person an amount equal to the tax paid in Canada. Such deduction shall not, however, exceed that part of the tax, as computed before the deduction is given, which is appropriate to the income derived from Canada;

  • (b) where, in accordance with any provision of this Convention, income derived by a resident of Jordan is exempt from tax in Jordan, Jordan may nevertheless, in calculating the amount of tax on other income, take into account the exempted income.

• 3 For the purposes of this Article, profits, income or gains of a resident of a Contracting State which may be taxed in the other Contracting State in accordance with this Convention shall be deemed to arise from sources in that other State.

Article 22

V. Special Provisions
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 are or may be subjected.

• 2 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.

• 3 Nothing in this Article shall 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 In this Article, the term taxation means taxes which are the subject of the Convention.

Article 23
Mutual Agreement Procedure

• 1 Where a person considers that the actions of one or both of the Contracting States result or will result for that person in taxation not in accordance with the provisions of this Convention, that person may, irrespective of the remedies provided by the domestic law of those States, address to the competent authority of the Contracting State of which that person is a resident, or if the individual’s case comes under paragraph 1 of Article 22, to that of the Contracting State of which the individual is a resident, an application in writing stating the grounds for claiming the revision of such taxation. To be admissible, the said application must be submitted within two years from the first notification of the action which gives rise to taxation not in accordance with the provisions of the Convention.

• 2 The competent authority referred to in paragraph 1 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 the Convention.

• 3 A Contracting State shall not, after the expiry of the time limits provided in its national laws and, in any case, after five years from the end of the taxable period in which the income concerned has accrued, increase the tax base of a resident of either of the Contracting States by including therein items of income which have also been charged to tax in the other Contracting State. This paragraph shall not apply in the case of fraud or wilful default.

• 4 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.

• 5 The competent authorities of the Contracting States may consult together for the elimination of double taxation in cases not provided for in the Convention and may communicate with each other directly for the purpose of applying the Convention.

Article 24
Exchange of Information

• 1 The competent authorities of the Contracting States shall exchange such information as is relevant 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, taxes. 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:

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

• 3 If information is requested by a Contracting State in accordance with this Article, the other Contracting State shall endeavour to obtain the information to which the request relates in the same way as if its own taxation were involved notwithstanding the fact that the other State does not, at that time, need such information.

Article 25
Members of Diplomatic Missions and Consular Posts

• 1 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.

• 2 Notwithstanding the provisions of Article 4, an individual who is a member of a diplomatic mission, consular post or permanent mission of a Contracting State which is situated in the other Contracting State or in a third State shall be deemed for the purposes of the Convention to be a resident of the sending State if that individual is liable in the sending State to the same obligations in relation to tax on the individual’s total income as are residents of that sending State.

• 3 The Convention shall not apply to international organizations, to organs or officials thereof and to persons who are members of a diplomatic mission, consular post or permanent mission of a third State or group of States, being present in a Contracting State and who are not liable in either Contracting State to the same obligations in relation to tax on their total income as are residents thereof.

Article 26
Miscellaneous Rules

• 1 The provisions of this Convention shall not be construed to restrict in any manner any exemption, allowance, credit, or other deduction now or hereafter accorded by the laws of a Contracting State in the determination of the tax imposed by that State.

• 2 Nothing in the Convention shall be construed as preventing a Contracting State from imposing a tax on amounts included in the income of a resident of that State with respect to a partnership, trust, or controlled foreign affiliate, in which that resident has an interest.

• 3 The Convention shall not apply to any company, trust or partnership that is a resident of a Contracting State and is beneficially owned or controlled, directly or indirectly, by one or more persons who are not residents of that State, if the amount of the tax imposed on the income or capital of the company, trust or partnership by that State is substantially lower than the amount that would be imposed by that State if all of the shares of the capital stock of the company or all of the interests in the trust or partnership, as the case may be, were beneficially owned by one or more individuals who were residents of that State.

• 4 With respect to the application, at any time, of other conventions or agreements to which the Contracting States are parties at that time, the Contracting States shall not have more rights than they would have had otherwise if this Convention had been concluded before January 1, 1995.

Article 27

VI. Final Provisions
Entry into Force

• 1 This Convention shall be ratified and the instruments of ratification shall be exchanged as soon as possible.

• 2 The Convention shall enter into force upon the exchange of instruments of ratification and its provisions shall have effect for the first time:

  • (a) in respect of tax withheld at the source on amounts paid or credited on or after the first day of January in the calendar year following that in which the exchange of instruments of ratification takes place; and

  • (b) in respect of other taxes for taxation years beginning on or after the first day of January in the calendar year following that in which the exchange of instruments of ratification takes place.

Article 28
Termination

This Convention shall continue in effect indefinitely but either Contracting State may, on or before June 30 in any calendar year after the year of the exchange of instruments of ratification, give to the other Contracting State a notice of termination in writing through diplomatic channels; in such event, the Convention shall cease to have effect:

• (a) in respect of tax withheld at the source on amounts paid or credited on or after the first day of January in the calendar year following that in which the notice is given; and

• (b) in respect of other taxes for taxation years beginning on or after the first day of January in the calendar year following that in which the notice is given.

IN WITNESS WHEREOF the undersigned, duly authorized to that effect, have signed this Convention.

DONE in duplicate at Amman, this 6th day of September 1999 in the English, French and Arabic languages, each version being equally authentic.

PART 2
Protocol Signed on September 6, 1999Protocol

At the moment of signing the Convention this day concluded between Canada and the Hashemite Kingdom of Jordan for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, the undersigned have agreed upon the following provision which shall be an integral part of the Convention.

• 1 With respect to Articles 10 and 11 of the Convention, where a Contracting State subjects income to the same taxation treatment as income from share and that income also falls under the definition of the term interest in paragraph 4 of Article 11, it is understood that such income is deemed to be income falling under the definition of the term dividends in paragraph 3 of Article 10.

• 2 With respect to paragraph 3 of Article 26 of the Convention, it is understood that the competent authorities of the Contracting States may consult to agree on a common meaning of the term substantially.

• 3 Given that no tax on capital gains is imposed in one of the Contracting States at the time of signature of the Convention, the Contracting States agree that, should the situation change in the future and results in double taxation, they will meet with a view to suggesting amendments to the Convention in order to ensure that no such double taxation exists.

IN WITNESS WHEREOF the undersigned, duly authorized to that effect, have signed this Protocol.

DONE in duplicate at Amman, this 6th day of September 1999 in the English, French and Arabic languages, each version being equally authentic.

[Amendment]

PART 1
Convention Signed on September 10, 1999Convention Between the Government of Canada and the Government of the Grand Duchy of Luxembourg for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and on Capital

The Government of Canada and the Government of the Grand Duchy of Luxembourg desiring to conclude a Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital, have agreed as follows:

Article 1

I. Scope of the Convention
Persons Covered

This Convention shall apply to persons who are residents of one or both of the Contracting States.

Article 2
Taxes Covered

• 1 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 Luxembourg:

    • (i) the income tax on individuals,

    • (ii) the corporation tax,

    • (iii) the special tax on directors’ fees,

    • (iv) the capital tax, and

    • (v) the communal trade tax,

    (hereinafter referred to as “Luxembourg tax”).

• 2 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 any significant changes which have been made in their respective taxation laws.

Article 3

II. Definitions
General Definitions

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

  • (a) the term Canada used in a geographical sense, means the territory of Canada, including:

    • (i) any area beyond the territorial sea of Canada which, in accordance with international law and the laws of Canada, is an area within which Canada may exercise rights with respect to the seabed and subsoil and their natural resources;

    • (ii) the sea and airspace above every area referred to in subparagraph (i) in respect of any activity carried on in connection with the exploration for or the exploitation of the natural resources referred to therein;

  • (b) the term Luxembourg used in a geographical sense, means the territory of the Grand Duchy of Luxembourg;

  • (c) the terms a Contracting State and the other Contracting State mean, as the context requires, Canada or Luxembourg;

  • (d) the terms person includes an individual, an estate, a trust, a company, a partnership and any other body of persons;

  • (e) the term company means any body corporate or any entity which is treated as a body corporate for tax purposes;

  • (f) the term 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;

  • (g) the term competent authority means:

    • (i) in the case of Canada, the Minister of National Revenue or the Minister’s authorized representative,

    • (ii) in the case of Luxembourg, the Minister of Finance or the Minister’s authorized representative;

  • (h) 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 that person’s domicile, residence, place of management or any other criterion of a similar nature. This term also includes a Contracting State or a political subdivision or local authority thereof or any agency or instrumentality of any such State, subdivision or authority. 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.

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

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

  • (b) if the State in which the individual’s centre of vital interests is situated cannot be determined, or if there is not a permanent home available to the individual in either State, the individual shall be deemed to be a resident only of the State in which the individual has an habitual abode;

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

  • (d) if the individual 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, the competent authorities of the Contracting States shall by mutual agreement endeavour to settle the question. In the absence of such agreement, such person shall not be entitled to claim any relief or exemption from tax provided by the Convention.

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 relating to the exploration for or the exploitation of natural resources.

• 3 A building site or construction or installation project constitutes a permanent establishment only if it lasts more than twelve months.

• 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, display or delivery 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, display or delivery;

  • (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 for 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 6 applies — is acting on behalf of an enterprise and has, and habitually exercises in a Contracting State an authority to conclude contracts in the name of the enterprise, that enterprise shall be deemed to have a permanent establishment in that State in respect of any activities which that person undertakes for 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.

• 6 An enterprise shall not be deemed to have a permanent establishment in a Contracting State merely because it carries on business in that 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.

• 7 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.

Article 6

III. Taxation of Income
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 For the purposes of this Convention, the term immovable property shall have the meaning which it has for the purposes of the relevant tax 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 and aircraft shall not be regarded as immovable property.

• 3 The provisions of paragraph 1 shall apply to income derived from the direct use, letting, or use in any other form of immovable property and to income from the alienation of such 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 or has carried 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 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 and with all other persons.

• 3 In the determination of the profits of a permanent establishment, there shall be allowed those deductible expenses which are incurred for the purposes of the permanent establishment including executive and general administrative expenses, whether incurred in the State in which the permanent establishment is situated or elsewhere.

• 4 No profits shall be attributed to a permanent establishment by reason of the mere purchase by that permanent establishment of goods or merchandise for the enterprise.

• 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 the Convention, then the provisions of those Articles shall not be affected by the provisions of this Article.

Article 8
Shipping and Air Transport

• 1 Profits derived by an enterprise of a Contracting State from the operation of ships or aircraft in international traffic shall be taxable only in that State.

• 2 Notwithstanding the provisions of paragraph 1 and of Article 7, profits derived by an enterprise of a Contracting State from a voyage of a ship where the principal purpose of the voyage is to transport passengers or goods exclusively between places in the other Contracting State may be taxed in that other State.

• 3 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.

• 4 For the purposes of this Article,

  • (a) the term profits includes

    • (i) gross receipts and revenues derived directly from the operation of ships or aircraft in international traffic, and

    • (ii) interest on sums generated directly from the operation of ships or aircraft in international traffic if that interest is incidental to the operation; and

  • (b) the term operation of ships or aircraft in international traffic by an enterprise, includes

    • (i) the charter or rental of ships or aircraft,

    • (ii) the rental of containers and related equipment, and

    • (iii) the alienation of ships, aircraft, containers and related equipment

    by that enterprise if that charter, rental or alienation is incidental to the operation by that enterprise of ships or aircraft in international traffic.

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 income 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 income of that enterprise and taxed accordingly.

• 2 Where a Contracting State includes in the income of an enterprise of that State — and taxes accordingly — income on which an enterprise of the other Contracting State has been charged to tax in that other State and the income so included is income 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 tax charged therein on that income. In determining such adjustment, due regard shall be had to the other provisions of this Convention and the competent authorities of the Contracting States shall if necessary consult each other.

• 3 A Contracting State shall not change the income of an enterprise in the circumstances referred to in paragraph 1 after the expiry of the time limits provided in its national laws and, in any case, after five years from the end of the year in which the income which would be subject to such change would, but for the conditions referred to in paragraph 1, have accrued to that enterprise.

• 4 The provisions of paragraphs 2 and 3 shall not apply in the case of fraud 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) 5 per cent of the gross amount of the dividends if the beneficial owner is a company (other than a partnership) which controls directly or indirectly at least 10 per cent of the voting power in the company paying the dividends;

  • (b) notwithstanding the provisions of subparagraph (a), 10 per cent of the gross amount of the dividends if the dividends are paid by a non-resident-owned investment corporation that is a resident of Canada to a beneficial owner that is a company (other than a partnership) that is a resident of Luxembourg and that owns at least 25 per cent of the capital of the company paying the dividends; and

  • (c) 15 per cent of the gross amount of the dividends in all other cases.

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

• 3 Notwithstanding the provisions of paragraph 2, dividends paid by a company that is a resident of Luxembourg shall not be taxable in Luxembourg if the beneficial owner of the dividends is a company that is a resident of Canada and that has had during an uninterrupted period of two years preceding the date of payment of the dividends, a direct shareholding of at least 25 per cent of the voting stock of the company paying the dividends. This provision only applies to dividends attributable to that part of the shareholding that has been owned without interruption by the beneficial owner during such two-year period. Furthermore, the provisions of this paragraph shall only apply if the distributed dividend is derived from the active conduct of a trade or business in Luxembourg (other than the business of making or managing investments, unless such business is carried on by a banking or insurance company) and if such dividends are exempt in Canada.

• 4 Notwithstanding the provisions of paragraph 2, dividends arising in a Contracting State and paid to an organization that was constituted and is operated in the other Contracting State exclusively to administer or provide benefits under one or more pension, retirement or other employee benefits plans shall be exempt from tax in the first-mentioned State provided that:

  • (a) the organization is the effective owner of the shares on which the dividends are paid, holds those shares as an investment and is generally exempt from tax in the other State;

  • (b) the organization does not own directly or indirectly more than 5 per cent of the capital or 5 per cent of the voting stock of the company paying the dividends; and

  • (c) the class of shares of the company on which the dividends are paid is regularly traded on an approved stock exchange.

• 5 For the purposes of paragraph 4, the term approved stock exchange means:

  • (a) in the case of dividends arising in Canada, a Canadian stock exchange prescribed for the purposes of the Income Tax Act;

  • (b) in the case of dividends arising in Luxembourg, the Luxembourg Stock Exchange; and

  • (c) any other stock exchange agreed to in letters exchanged between the competent authorities of the Contracting States.

• 6 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 same taxation treatment as income from shares by the laws of the State of which the company making the distribution is a resident.

• 7 The provisions of paragraphs 1, 2 and 3 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.

• 8 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.

• 9 Notwithstanding any provision in this Convention, Canada may impose on the earnings of a company attributable to permanent establishments in Canada, tax in addition to the tax which would be chargeable on the earnings of a company incorporated in Canada, provided that the rate of such additional tax so imposed shall not exceed 5 per cent. For the purpose of this provision, the term earnings means the profits attributable to such permanent establishments in Canada (including gains from the alienation of property forming part of the business property, referred to in paragraph 2 of Article 13, of such permanent establishments) in accordance with Article 7 in a year and previous years after deducting therefrom:

  • (a) business losses attributable to such permanent establishments (including losses from the alienation of property forming part of the business property of such permanent establishments) in such year and previous years;

  • (b) all taxes chargeable in Canada on such profits, other than the additional tax referred to herein;

  • (c) the profits reinvested in Canada, provided that the amount of such deduction shall be determined in accordance with the existing provisions of the law of Canada regarding the computation of the allowance in respect of investment in property in Canada, and any subsequent modification of those provisions which shall not affect the general principle hereof; and

  • (d) five hundred thousand Canadian dollars ($500,000) less any amount deducted:

    • (i) by the company, or

    • (ii) by a person related thereto from the same or a similar business as that carried on by the company,

    under this subparagraph (d); for the purposes of this subparagraph (d), a company is related to another company if one company directly or indirectly controls the other, or both companies are directly controlled by the same person or persons, or if the two companies deal with each other not at arm’s length.

  The provisions of this paragraph shall also apply with respect to earnings from the alienation of immovable property in Canada by a company carrying on a trade in immovable property without a permanent establishment in Canada but only insofar as these earnings may be taxed in Canada in accordance with the provisions of Article 6 or paragraph 1 of Article 13.

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 10 per cent of the gross amount of the interest.

• 3 Notwithstanding the provisions of paragraph 2,

  • (a) interest arising in a Contracting State and paid in respect of indebtedness of the government of that Contracting State or of a political subdivision or local authority thereof shall, provided that the interest is beneficially owned by a resident of the other Contracting State, be taxable only in that other State;

  • (b) interest arising in Luxembourg and paid to a resident of Canada shall be taxable only in Canada if it is paid in respect of a loan made, guaranteed or insured, or a credit extended, guaranteed or insured by the Export Development Corporation; and

  • (c) interest arising in a Contracting State and paid to an organization that was constituted and is operated in the other Contracting State exclusively to administer or provide benefits under one or more pension, retirement or other employee benefit plans shall be exempt from tax in the first-mentioned State provided that:

    • (i) the organization is the beneficial owner of the interest and is generally exempt from tax in the other State, and

    • (ii) the interest is not derived from carrying on a trade or a business or from a related person.

• 4 Notwithstanding the provisions of paragraph 2, interest arising in a Contracting State and paid to a resident of the other Contracting State who is the beneficial owner thereof shall be taxable only in that other State if such interest:

  • (a) is a penalty charge for late payments; or

  • (b) is paid in connection with the sale on credit of any equipment or merchandise, except where the sale is made between persons not dealing with each other at arm’s length.

• 5 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, as well as income which is subjected to the same taxation treatment as income from money lent by the laws of the State in which the income arises. However, the term interest does not include income dealt with in Article 10.

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

• 8 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 10 per cent of the gross amount of the royalties.

• 3 Notwithstanding the provisions of paragraph 2,

  • (a) copyright royalties and other like payments in respect of the production or reproduction of any literary, dramatic, musical or other 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), and

  • (b) royalties for the use of, or the right to use, computer software or 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)

  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.

• 4 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, patent, trade mark, 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, and includes payments of any kind in respect of motion picture films and works on film or videotape or other means of reproduction for use in connection with television.

• 5 The provisions of paragraphs 1, 2 and 3 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 such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

• 6 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 the payer is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or fixed base in connection with which the obligation 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.

• 7 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 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 a fixed base may be taxed in that other State.

• 3 Gains derived by an enterprise of a Contracting State from the alienation of ships or aircraft operated in international traffic or movable property pertaining to the operation of such ships or aircraft, shall be taxable only in that State.

• 4 Gains derived by a resident of a Contracting State from the alienation of:

  • (a) shares (other than shares listed on an approved stock exchange in the other Contracting State) forming part of a substantial interest in the capital stock of a company the value of which shares is derived principally from immovable property situated in that other State; or

  • (b) an interest in a partnership, trust or estate, the value of which is derived principally from immovable property situated in that other State,

  may be taxed in that other State. For the purposes of this paragraph, the term “immovable property” does not include property (other than rental property) in which the business of the company, partnership, trust or estate was carried on; and a substantial interest exists when the resident and persons related thereto own 10 per cent or more of the shares of any class or the capital stock of a company.

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

• 6 Where a resident of a Contracting State alienates property in the course of a corporate or other organization, reorganization, amalgamation, division or similar transaction and profit, gain or income with respect to such alienation is not recognized for the purpose of taxation in that State, if requested to do so by the person who acquires the property, the competent authority of the other Contracting State may agree, subject to the terms and conditions satisfactory to such competent authority, to defer the recognition of the profit, gain or income with respect to such property for the purpose of taxation in that other State until such time and in such manner as may be stipulated in the agreement.

• 7 The provisions of paragraph 5 shall not affect the right of either of the Contracting States to levy, according to its law, a tax on gains from the alienation of any property derived by an individual who is a resident of the other Contracting State and has been a resident of the first-mentioned State at any time during the six years immediately preceding the alienation of the property.

• 8 Where an individual who ceases to be a resident of a Contracting State, and immediately thereafter becomes a resident of the other Contracting State, is treated for the purposes of taxation in the first-mentioned State as having alienated a property and is taxed in that State by reason thereof, the individual may elect to be treated for purposes of taxation in the other State as if the individual had, immediately before becoming a resident of that State, sold and repurchased the property for an amount equal to its fair market value at that time. However, this provision shall not apply to property any gain from which arising, immediately before the individual became a resident of that other State, may be taxed in that other State nor to immovable property situated in a third State.

Article 14
Independent Personal Services

• 1 Income derived by an individual who is a resident of a Contracting State in respect of professional or similar services of an independent character shall be taxable only in that State unless the individual has a fixed base regularly available in the other Contracting State for the purpose of performing the services. If the individual has or had such a fixed base, the income may be taxed in the other State but only so much of it as is attributable to that fixed base.

• 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 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 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 abroad a ship or aircraft operated by an enterprise of a Contracting State in international traffic may be taxed in that State.

Article 16
Director’s Fees

Directors’ fees and other similar payments derived by a resident of a Contracting State in that resident’s 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.

Article 17
Artistes and Sportspersons

• 1 Notwithstanding the provisions of Articles 7, 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 that resident’s 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 that individual’s capacity as such accrues not to the entertainer or sportsperson personally 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.

• 3 The provisions of paragraph 2 shall not apply if this is established that neither the entertainer or the sportsperson nor persons related thereto, participate directly or indirectly in the profits of the person referred to in that paragraph.

Article 18
Pensions and Annuities

• 1 Pensions and annuities 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 pensions and annuities may also be taxed in the State in which they arise and according to the law of that State.

• 3 Notwithstanding anything in this Convention:

  • (a) pensions paid by, or out of funds created by, the Luxembourg 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 Luxembourg;

  • (b) 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 war) arising in Canada shall not be taxable in Luxembourg so long as they are not subject to Canadian Tax;

  • (c) benefits and annuities received from Luxembourg from the accident insurance association and from the office of war damage as compensation for bodily injury shall not be taxable in Canada so long as they are not subject to Luxembourg tax;

  • (d) alimony and other similar payments arising in a Contracting State and paid to a resident of the other Contracting State who is subject to tax therein in respect thereof, shall be taxable only in that other State but the amount taxable in that other State shall not exceed the amount that would be taxable in the first-mentioned State if the recipient were a resident thereof;

  • (e) benefits under the social security legislation in a Contracting State paid to a resident of the other Contracting State shall be taxable only in the first-mentioned State.

Article 19
Government Service

• 1

  • (a) Salaries, wages and other similar remuneration, other than a pension, 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 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 The provisions of paragraph 1 shall not apply to salaries, wages 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 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 that individual’s education or training receives for the purpose of his that individual’s 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 except that if such income is derived from sources within the other Contracting State, it may also be taxed in that other State. However, in the case of income from an estate or trust, other than a trust to which contributions were deductible, the tax so charged shall, provided that the income is taxable in the Contracting State in which the recipient resides, not exceed 15 per cent of the gross amount of the income.

• 2 The provisions of paragraph 1 shall not apply to income, other than income from immovable property, 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.

Article 22

IV. Taxation of Capital
Capital

• 1 Capital represented by immovable property 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 by an enterprise of a Contracting State in international traffic and by movable property pertaining to the operation of such ships and aircraft, shall be taxable only in that State.

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

Article 23

V. Methods for Prevention of Double Taxation
Elimination of Double Taxation

• 1 In the case of Canada, double taxation shall be avoided as follows:

  • (a) subject to the existing provisions of the law of Canada regarding the deduction from tax payable in Canada of tax paid in a territory outside Canada and to any subsequent modification of those provisions — which shall not affect the general principle hereof — and unless a greater deduction of relief is provided under the laws of Canada, tax payable in Luxembourg on profits, income or gains arising in Luxembourg shall be deducted from any Canadian tax payable in respect of such profits, income or gains;

  • (b) where, in accordance with any provision of the Convention, income derived or capital owned by a resident of Canada is exempt from tax in Canada, Canada may nevertheless, in calculating the amount of tax on other income or capital, take into account the exempted income or capital.

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

  • (a) where a resident of Luxembourg derives income or owns capital which, in accordance with the provisions of this Convention, may be taxed in Canada, Luxembourg shall, subject to the provisions of subparagraph (b), exempt such income or capital from tax, but may, in calculating the amount of tax on the remaining income or capital of such resident, apply the rate of tax which would have been applicable if the exempted income or capital had not been so exempted;

  • (b) where a resident of Luxembourg derives income which, in accordance with the provisions of Articles 10, 11, 12, 13 paragraphs 4 and 7, 18 and 21, may be taxed in Canada, Luxembourg shall allow as a deduction from the tax on the income of that resident an amount equal to the tax paid in Canada. Such deduction shall not, however, exceed that part of the income tax, as computed before the deduction is given, which is attributable to the income derived from Canada;

  • (c) notwithstanding subparagraph (b), dividends distributed by a company resident in Canada, and subject in that State to the corporation tax, to a company resident in Luxembourg which has directly controlled at least 10 per cent of the capital of the first-mentioned company since the beginning of its fiscal year shall be subject to the tax treatment provided for under subparagraph (a). The shares in the Canadian company referred to above shall, under the same conditions, be exempt from the Luxembourg capital tax.

• 3 For the purposes of this Article, profits, income or gains of a resident of a Contracting State shall be deemed to arise from sources in the other Contracting State if they may be taxed in that other Contracting State in accordance with this Convention.

Article 24

VI. Special Provisions
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 are or may be subjected. This provision shall, notwithstanding the provisions of Article 1, also apply to individuals who are not residents of one or both of the Contracting States.

• 2 The taxation of 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.

• 3 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, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of a third State, are or may be subjected.

• 4 In this Article, the term taxation means taxes which are the subject of this Convention.

Article 25
Mutual Agreement Procedure

• 1 Where a person considers that the actions of one or both of the Contracting States result or will result for that person in taxation not in accordance with the provisions of this Convention, that person may, irrespective of the remedies provided by the domestic law of those States, address to the competent authority of the Contracting State of which that person is a resident or, if that person’s case comes under paragraph 1 of Article 24, to that of the Contracting State of which that person is a national, an application in writing stating the grounds for claiming the revision of such taxation. To be admissible, the said application must be submitted within two years from the first notification of the action which gives rise to taxation not in accordance with the Convention.

• 2 The competent authority referred to in paragraph 1 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 not in accordance with the Convention.

• 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 In particular, the competent authorities of the Contracting States may consult together to endeavour to agree:

  • (a) to the same attribution of profits to an enterprise of a Contracting State and to its permanent establishment situated in the other Contracting State;

  • (b) to the same allocation of profits between associated enterprises as provided for in Article 9;

  • (c) to the method of avoiding double taxation in the case of an estate or trust.

• 5 The competent authorities of the Contracting States may communicate with each other directly for the purpose of applying the provisions of the Convention.

Article 26
Exchange of Information

• 1 The competent authorities of the Contracting States shall exchange such information as is relevant 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 or prosecution 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:

  • (a) to carry out administrative measures at variance with the laws or the 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).

• 3 If information is requested by a Contracting State in accordance with this Article, the other Contracting State shall endeavour to obtain the information to which the request relates in the same way as if its own taxation were involved even though the other State does not, at that time, need such information. If specifically requested by the competent authority of a Contracting State, the competent authority of the other Contracting State shall endeavour to provide information under this Article in the form requested, such as depositions of witnesses and copies of unedited original documents (including books, papers, statements, records, accounts or writings), to the same extent such information can be obtained under the laws and administrative practices of that other State with respect to its own taxes.

Article 27
Members of Diplomatic Missions and Consular Posts

• 1 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.

• 2 Notwithstanding Article 4, an individual who is a member of a diplomatic mission, consular post or permanent mission of a Contracting State which is situated in the other Contracting State or in a third State shall be deemed for the purposes of the Convention to be a resident of the sending State if that individual is liable in the sending State to the same obligations in relation to tax on total income as are residents of that sending State.

• 3 The Convention shall not apply to International Organizations, to organs or officials thereof and to persons who are members of a diplomatic mission, consular post or permanent mission of a third State or group of States, being present in a Contracting State and who are not liable in either Contracting State to the same obligations in relation to tax on their total income as are residents thereof.

Article 28
Miscellaneous Rules

• 1 The provisions of this Convention shall not be construed to restrict in any manner any exemption, allowance, credit or other deduction now or hereafter accorded by the laws of a Contracting State in the determination of the tax imposed by that State.

• 2 Nothing in the Convention shall be construed as preventing a Contracting State from imposing a tax on amounts included in the income of a resident of that State with respect to a partnership, trust, or controlled foreign affiliate, in which that resident has an interest.

• 3 The Convention shall not apply to holding companies within the meaning of the special Luxembourg laws (currently the Act of July 31, 1929 and the Grand Duchy Order of December 17, 1938) or any other similar law enacted in Luxembourg after the signature of the Convention, nor to companies subjected to similar fiscal laws in Luxembourg. It shall not apply either to income derived by a resident of Canada from such holding companies nor to shares or other rights in the capital of such companies owned by such person.

• 4 For the purposes of paragraph 3 of Article XXII (Consultation) of the General Agreement on Trade in Services, the Contracting States agree that, notwithstanding that paragraph, any dispute between them as to whether a measure falls within the scope of this Convention may be brought before the Council for Trade in Services, as provided by that paragraph, only with the consent of both Contracting States. Any doubt as to the interpretation of this paragraph shall be resolved under paragraph 3 of Article 25 or, failing agreement under that procedure, pursuant to any other procedure agreed to by both Contracting States.

Article 29

VII. Final Provisions
Entry into Force

• 1 This Convention shall be ratified and the instruments of ratification shall be exchanged 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 respect of tax withheld at the source on amounts paid or credited to non-residents on or after the first day of January in the calendar year next following that in which the exchange of instruments of ratification takes place; and

  • (b) in respect of other taxes for taxation years beginning on or after the first day of January in the calendar year next following that in which the exchange of instruments of ratification takes place.

• 3 The provisions of the Convention between Canada and the Grand Duchy of Luxembourg for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and on Capital signed at Luxembourg on the 17th day of January, 1989, shall cease to have effect with respect to taxes to which this Convention applies in accordance with the provisions of paragraph 2.

Article 30
Termination

This Convention shall continue in effect indefinitely but either Contracting State may, on or before June 30 in any calendar year after the year of the exchange of instruments of ratification, give to the other Contracting State a notice of termination in writing through diplomatic channels. In such event, the Convention shall cease to have effect:

• (a) in respect of tax withheld at the source on amounts paid or credited to non-residents on or after the first day of January in the calendar year next following that in which the notice is given; and

• (b) in respect of other taxes for taxation years beginning on or after the first day of January in the calendar year next following that in which the notice is given.

IN WITNESS WHEREOF the undersigned, duly authorized to that effect, have signed this Convention.

DONE in duplicate at Luxembourg, this 10th day of September 1999, in the English and French languages, each version being equally authentic.

PART 2
Protocol Amending the Convention Between the Government of Canada and the Government of the Grand Duchy of Luxembourg for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and on Capital, Done at Luxembourg on 10 September 1999

THE GOVERNMENT OF CANADA AND THE GOVERNMENT OF THE GRAND DUCHY OF LUXEMBOURG,

DESIRING to amend the Convention between the Government of Canada and the Government of the Grand Duchy of Luxembourg for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital, done at Luxembourg on 10 September 1999 (hereinafter referred to as the “Convention”),

Have agreed as follows:

Article I

The text of Article 26 of the Convention is deleted and replaced by the following:

• “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 concerning taxes of every kind and description imposed by or on behalf of the Contracting States, insofar as the taxation thereunder is not contrary to this Convention. 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 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, the determination of appeals in relation to taxes, 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. Notwithstanding the foregoing, information received by a Contracting State may be used for other purposes when such information may be used for such other purposes under the laws of both States and the competent authority of the supplying State authorises such use.

• 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, trust, foundation, nominee or person acting in an agency or a fiduciary capacity or because it relates to ownership interests in a person.”

Article II

• 1 The Contracting States shall notify each other in writing, through diplomatic channels, of the completion of their respective procedures which are necessary for the entry into force of this Protocol.

• 2 This Protocol shall enter into force on the date of the later of the notifications referred to in paragraph 1. The provisions of this Protocol shall have effect for taxable periods beginning on or after 1 January of the calendar year next following the year of the entry into force of this Protocol, and, where there is no taxable period, for all charges to tax arising on or after 1 January of the calendar year next following the year of the entry into force of this Protocol.

IN WITNESS WHEREOF, the undersigned, duly authorized thereto by their respective governments, have signed this Protocol.

DONE in duplicate at Montreal on this 8th day of May 2012, in the English and French languages, each version being equally authentic.

PART 3
Agreement

Luxembourg, 8 May 2012

Excellency,

I have the honour to refer to the Convention between the Government of the Grand Duchy of Luxembourg and the Government of Canada for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital, done at Luxembourg on 10 September 1999, as amended by the Protocol signed today, (hereinafter referred to as the “Convention”) and to propose on behalf of the Government of the Grand Duchy of Luxembourg the following understanding:

• (1) The competent authority of the requested State shall provide, at the request of the competent authority of the applicant State, information for the purposes referred to in Article 26 of the Convention.

• (2) The competent authority of the applicant State shall provide the following information to the competent authority of the requested State when making a request for information under the Convention to demonstrate the foreseeable relevance of the information requested to the administration and enforcement of the tax laws of the applicant State:

  • (a) the identity of the person under examination or investigation;

  • (b) a description of the information sought including its nature and the form in which the applicant State wishes to receive the information from the requested State;

  • (c) the tax purpose for which the information is sought;

  • (d) the grounds for believing that the information requested is held in the requested State or is in the possession or control of a person within the jurisdiction of the requested State;

  • (e) to the extent known, the name and address of any person believed to be in possession of the requested information;

  • (f) a statement that the applicant State has pursued all means available in its own territory to obtain the information, except those that would give rise to disproportionate difficulties.

If the foregoing understanding meets with the approval of the Government of Canada, I have the further honour to propose that this Note and your affirmative Note in reply shall constitute an agreement between our Governments which shall become an integral part of the Convention on the date of entry into force of the Protocol.

Please accept, your Excellency, the assurances of my highest consideration.

Brussels, 11 May 2012

Note No. 5789

Excellency,

I have the honour to acknowledge the receipt of Your Excellency’s note dated 8 may 2012, which reads as follows:

“Excellency,

I have the honour to refer to the Convention between the Government of the Grand Duchy of Luxembourg and the Government of Canada for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital, done at Luxembourg on 10 September 1999, as amended by the Protocol signed today, (hereinafter referred to as the “Convention”) and to propose on behalf of the Government of the Grand Duchy of Luxembourg the following understanding:

• (1) The competent authority of the requested State shall provide, at the request of the competent authority of the applicant State, information for the purposes referred to in Article 26 of the Convention.

• (2) The competent authority of the applicant State shall provide the following information to the competent authority of the requested State when making a request for information under the Convention to demonstrate the foreseeable relevance of the information requested to the administration and enforcement of the tax laws of the applicant State:

  • (a) the identity of the person under examination or investigation;

  • (b) a description of the information sought including its nature and the form in which the applicant State wishes to receive the information from the requested State;

  • (c) the tax purpose for which the information is sought;

  • (d) the grounds for believing that the information requested is held in the requested State or is in the possession or control of a person within the jurisdiction of the requested State;

  • (e) to the extent known, the name and address of any person believed to be in possession of the requested information;

  • (f) a statement that the applicant State has pursued all means available in its own territory to obtain the information, except those that would give rise to disproportionate difficulties.

If the foregoing understanding meets with the approval of the Government of Canada, I have the further honour to propose that this Note and your affirmative Note in reply shall constitute an agreement between our Governments which shall become an integral part of the Convention on the date of entry into force of the Protocol.

Please accept, your Excellency, the assurances of my highest consideration.”

I have the further honour to confirm, on behalf of the Government of Canada, that the understanding contained in Your Excellency’s Note is acceptable to the Government of Canada and to confirm that Your Excellency’s Note and this reply shall constitute an agreement between our Governments which shall become an integral part of the Convention on the date of entry into force of the Protocol.

Accept, Your Excellency, the expression of my highest consideration.