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Income Tax Conventions Implementation Act, 2001 (S.C. 2001, c. 30)

Act current to 2021-02-15 and last amended on 2004-07-03. Previous Versions

SCHEDULE 2(Section 9)

PART 1
Convention Between the Government of Canada and the Government of the Republic of Ecuador 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 Ecuador, 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.

  • 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 Ecuador: the income taxes imposed by the Government of Ecuador under the Internal Tax Regime Law (Ley de Régimen Tributario Interno), hereinafter referred to as “Ecuadorian 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;

    • (b) the term Ecuador means the Republic of Ecuador;

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

    • (d) 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;

    • (e) the term person includes an individual, an estate, a trust, a legal person 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 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;

    • (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 Ecuador, the Director General of the Internal Revenue Service;

    • (i) the term international traffic means any transport by a ship or aircraft operated by an enterprise of a Contracting State, except where the ship or aircraft is operated solely 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 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 the 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 incorporation, place of management or any other criterion of a similar nature; however, the term 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 State, 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 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 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 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 the person. In the absence of such agreement, the person shall not be entitled to claim any relief or exemption from tax provided by the Convention.

  • 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. 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, a workshop or an assembly plant; and

    • (e) 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 or construction or installation project and supervisory activities in connection therewith, but only if such site, project or activities last more than six months; and

    • (b) the furnishing of services, including consulting services, by an enterprise of a Contracting State through employees or other individuals engaged by the enterprise for such purposes in the other Contracting State, but only where such activities continue (for the same or a connected project) within that State for a period or periods aggregating more than 183 days within any twelve month period.

    For the purposes of computing the time period or periods in this paragraph, the duration of activities carried on by an enterprise shall include activities carried on by associated enterprises, within the meaning of Article 9, if the activities between the associated enterprises are connected.

  • 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 the preceding subparagraphs 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 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 related persons.

  • 3 In the determination of the profits of a permanent establishment, there shall be allowed as deductions those 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, provided that such expenses are deductible under the taxation law of that State.

  • 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 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 from the participation in a pool, a joint business or an international operating agency.

  • 4 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 amounts generated directly by the operation of ships or aircraft in international traffic provided that the interest is incidental to such 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, and

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

      by that enterprise provided that such charter or rental 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 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) 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 25 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 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 taxation law 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 Nothing in this Convention shall be construed as preventing a Contracting State from imposing on the alienation of immovable property situated in that State by a company carrying on a trade in immovable property or 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, except 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 a Contracting State as may be taxed by that State under the provisions of Article 6 or of paragraphs 1 or 4 of Article 13, and the profits, including any gains, attributable to a permanent establishment in a Contracting State in a year or previous years after deducting therefrom all taxes, other than the additional tax referred to herein, imposed on such profits in that 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 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) it is paid to the Government of the other Contracting State or to a political subdivision or local authority thereof or the Central Bank of that State;

    • (b) it is paid to a resident of Canada in respect of a loan made, guaranteed or insured, or a credit extended, guaranteed or insured by the Export Development Corporation; and

    • (c) it is paid to a resident of Ecuador in respect of a loan made, guaranteed or insured, or a credit extended, guaranteed or insured by an organization which is 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 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 taxation law of the State in which the income arises. However, the term interest does not include income dealt with in Article 8 or 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 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.

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

    • (a) 10 per cent of the gross amount of the royalties for the use of, or the right to use, industrial, commercial or scientific equipment;

    • (b) 15 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.

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 or had in the other Contracting State or of movable property pertaining to a fixed base that is or was 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 from 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 the Contracting State from the alienation of:

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

    • (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. For the purposes of this paragraph, the term immovable property does not include any property, other than rental property, in which the business of the company, partnership or trust is carried on.

  • 5 Gains derived 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 five years immediately preceding the alienation of the property.

  • 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.

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 shall be taxable only in that State unless such services are performed or were performed in the other Contracting State and

    • (a) the income is attributable to a fixed base which the individual has or had regularly available in that other State; or

    • (b) such individual is present or was present in that other State for a period or periods exceeding in the aggregate 183 days in any consecutive twelve month period.

    In such case, the income attributable to the services may be taxed in that other State in accordance with principles similar to those of Article 7 for determining the amount of business profits and attributing business profits to a permanent establishment.

  • 2 The term professional services includes especially independent scientific, literary, 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, salaries, wages and other 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, salaries, wages and other remuneration derived 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 salaries, wages and other remuneration are 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.

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 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 Ecuadorian 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, other than 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 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 the 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 extend that they will 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 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 in any other State shall be taxable only in the first-mentioned 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 paragraph 1 shall not apply to salaries, wages and 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, 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.

Article 21
Other Income

Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Convention may be taxed in the State in which they arise and according to the law of that State. Where such income is income from an estate or trust, other than a trust to which contributions were deductible, the tax so charged shall, if 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. 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 laws 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 Ecuador on profits, income or gains arising in Ecuador shall be deducted from any Canadian tax payable in respect of such profits, income or gains;

    • (b) subject to the existing provisions of the laws of Canada regarding the allowance as a credit against Canadian tax of tax payable in a territory outside Canada and to any subsequent modification of those provisions — which shall not affect the general principle hereof — where a company which is a resident of Ecuador pays a dividend to a company which is a resident of Canada and which controls directly or indirectly at least 10 per cent of the voting power in the first-mentioned company, the credit shall take into account the tax payable in Ecuador by that first-mentioned company in respect of the profits out of which such dividend is paid; and

    • (c) 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 Ecuador, double taxation shall be avoided as follows:

    • (a) residents of Ecuador may credit against the Ecuadorian tax on income arising in Canada the income tax paid in Canada in an amount not exceeding the tax payable in Ecuador on such income; and

    • (b) subject to the provisions of Ecuadorian law, companies which are residents of Ecuador may also credit against the Ecuadorian tax the income tax paid in Canada on the profits out of which the dividends are paid.

  • 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 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 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.

  • 5 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 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 domestic 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. For this purpose, they may communicate with each other directly for the purpose of applying the Convention.

  • 5 If any difficulty or doubt arising as to the interpretation or application of the Convention cannot be resolved by the competent authorities pursuant to the preceding paragraphs of this Article, and the difficulty or doubt is the result of an assessment by one or both Contracting States, the case may, if both competent authorities and the taxpayer agree be submitted for arbitration provided that the taxpayer agrees in writing to be bound by the decision of the arbitration board. The decision of the arbitration board in a particular case shall be binding on both States with respect to that case. The procedure shall be established in an exchange of notes between the Contracting States.

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. 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 in respect of, or the determination of appeals in relation to the taxes in that State. 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 depositions and documents can be obtained under the laws and administrative practices of that other State with respect to its own taxes.

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 that 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 only 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 organisations, 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 Convention shall not apply to any company, trust, partnership or other entity 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, partnership or other entity 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, partnership and other entity, as the case may be, were beneficially owned by one or more individuals who were residents 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 4 of Article 24 or, failing agreement under that procedure, pursuant to any other procedure agreed to by both Contracting States.

  • 5 Contributions in a year in respect of services rendered in that year paid by, or on behalf of, an individual who is a resident of a Contracting State or who is temporarily present in that State to a pension plan that is recognised for tax purposes in the other Contracting State shall, during a period not exceeding in the aggregate 60 months, be treated in the same way for tax purposes in the first-mentioned State as a contribution paid to a pension plan that is recognised for tax purposes in that first-mentioned State, if

    • (a) such individual was contributing on a regular basis to the pension plan for a period ending immediately before that individual became a resident of or temporarily present in the first-mentioned State; and

    • (b) the competent authority of the first-mentioned State agrees that the pension plan generally corresponds to a pension plan recognised for tax purposes by that State.

    For the purposes of this paragraph, pension plan includes a pension plan created under the social security system in a Contracting State.

VI. FINAL PROVISIONS

Article 28
Entry Into Force

  • 1 The Governments of the Contracting States shall notify each other, through diplomatic channels, that the constitutional requirements for the entry into force of this Convention have been complied with.

  • 2 The Convention shall enter into force upon the date of the later of the notifications referred to in paragraph 1 and its provisions shall 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 next following that in which the Convention enters into force; 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 Convention enters into force.

Article 29
Termination

This Convention shall remain in force until terminated by one of the Contracting States. Either Contracting State may terminate the Convention, through diplomatic channels, by giving notice of termination at least six months before the end of any calendar year as from the fifth year following that in which the Convention enters into force. 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 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 Convention.

DONE in duplicate at Quito, this 28th day of June, 2001, in the English, French and Spanish languages, each version being equally authentic.

FOR THE GOVERNMENT OF CANADA

John G. Kneale

FOR THE GOVERNMENT OF THE REPUBLIC OF ECUADOR

Heinz Moeller Freile

PART 2
Protocol

At the moment of signing the Convention this day concluded between the Government of Canada and the Government of the Republic of Ecuador 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 The Convention shall not apply to the tax on Monetary Transactions (Impuesto a la Circulacóin de Capitales).

  • 2 With reference to subparagraph (b) of paragraph 2 of Article 12, in the event that pursuant to an agreement or convention concluded with a country that is a member of the Organisation for Economic Co-operation and Development, after the date of signature of the Convention, Ecuador agrees to a rate of tax on royalties referred to in that subparagraph (b) that is lower than 15 per cent, the following shall apply for the purposes of that subparagraph:

    • (a) to the extent that such lower rate applies to:

      • (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), 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 (but not including any such royalty provided in connection with a rental or franchise agreement),

      that lower rate shall automatically apply in similar circumstances.

    • (b) to the extent that such lower rate applies to other royalties referred to in that subparagraph, the greater of such lower rate and the rate of 10 per cent shall automatically apply in similar circumstances.

  • 3 With reference to paragraph 3 of Article 12, it is understood that the term royalties includes payments for the use of, or the right to use, rights of breeders of new varieties of plants.

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

DONE in duplicate at Quito, this 28th day of June, 2001, in the English, French and Spanish languages, each version being equally authentic.

FOR THE GOVERNMENT OF CANADA

John G. Kneale

FOR THE GOVERNMENT OF THE REPUBLIC OF ECUADOR

Heinz Moeller Freile

 
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