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  ― 86[4406] ―

2. Model Bilateral Convention for the Prevention of the Double Taxation of Successions

Mexico Draft

Article I.

1. The present Convention, the purpose of which is to prevent the double taxation of successions, applies to all duties and taxes levied, by reason of death, on the estate, or on the transfer of, or the succession to, the estate, of a person who, at the time of his death, had his domicile in one of the two contracting States, whether or not he was a national of that State or the other State, and on the part of such estate that accrues to each heir or legatee.

2. The duties and taxes to which this Article refers are:

  • A. In the case of State A:
  • 1. .....
  • 2. .....
  • 3. .....
  • B. In the case of State B:
  • 1. .....
  • 2. .....
  • 3. .....

Article II.

Real property, personal property accessory thereto and rights relating to, or secured by, real property which are included in the estate of a person who, at the time of his death, had his domicile in one of the two contracting States shall be subject to the duties and taxes described in Article I only in the State in which such property is situated.




  ― 88[4408] ―

Article III.

Property appertaining to a commercial, industrial, mining, agricultural or other enterprise, including a maritime or an air navigation enterprise, left by a person who, at the time of his death, had his domicile in one of the contracting States shall be subject to the duties and taxes described in Article I in accordance with the following rules:

  • A. If the enterprise has a permanent establishment in one of the two States, the property shall be taxable only in that State;
  • B. If the enterprise has a permanent establishment in both States, the property shall be taxable in each State to the extent to which such property belongs or relates to the establishment situated in that State.

Article IV.

If a person who, at the time of his death, had his domicile in one of the contracting States leaves in the other contracting State property to which Articles II and III do not apply, the former State may apply the duties and taxes described in Article I of the present Convention to the entire estate, subject to the provisions of Article VI, and the latter State may apply such duties and taxes to the property situated in its territory, but only according to the rate which corresponds to the value of the latter property, without taking into account the property situated in the territory of the other State.

Article V.

For the purposes of determining the net value of the property subject to the duties and taxes to which this Convention refers, the debts of the deceased shall be deducted according to the following rules:

  • A. A debt secured by, or relating to, property to which Articles II and III apply shall be deducted from the value of the specific property by which it is secured, or to which it relates;



  •   ― 90[4410] ―
  • B. If a debt to which rule A applies exceeds the value of the property by which it is secured or to which it relates, it shall be deducted from the value of the other property left by the deceased in the same country;
  • C. If a debt to which rule A applies exceeds also the value of the property situated in the same country, the excess shall be deducted from the value of the property left by the deceased in the other country;
  • D. A general debt without specific guarantee will be deducted proportionately to the value of the property left by the deceased in each country.

Article VI.

The State in which the deceased, at the time of his death, had his domicile shall retain the right to tax the entire estate, whether situated in its territory or that of the other contracting State, but shall deduct from the duties and taxes it applies to the entire estate the lesser of the two following amounts:

  • A. The sum of the duties and taxes levied by the other contracting State on the property which is taxable in its territory according to the preceding Articles;
  • B. The sum which represents the same proportion in comparison with the duties and taxes due in the State of domicile as the property taxable in the other State in comparison with the entire taxable estate of the deceased.

Article VII.

As regards any special provisions which may be necessary for the application of the present Convention, more particularly in cases not expressly provided for, the competent authorities of the two contracting States may confer together and take the measures required in accordance with the spirit of this Convention.




  ― 92[4412] ―

Article VIII.

1. This Convention and the accompanying Protocol, which shall be considered to be an integral part of the Convention, shall be ratified and the instruments of ratification shall be exchanged at ………… as soon as possible.

2. This Convention and Protocol shall become effective on the first day of January 19… They shall continue effective for a period of three years from that date and indefinitely after that period. They may, however, be terminated by either of the contracting States at the end of the three-year period or at any time thereafter, provided that at least six months prior notice of termination has been given, the termination to become effective on the first day of January following the expiration of the six-month period.

Done in duplicate, at ………… this ………… day of ………… 19…

PROTOCOL

On proceeding to sign the Convention concluded this day between the contracting States regarding the Prevention of the Double Taxation of Successions, the undersigned Plenipotentiaries have made the following joint declaration, which shall form an integral part of the said Convention.

Article I.

1. For the purposes of the foregoing Convention, the domicile of a person, at the time of his death, is the place where he then had his permanent residence with the manifest intention of retaining it.

2. If the deceased, at the time of his death, had no such domicile and was a national of both contracting States, he shall be regarded as having had his domicile in the country in which his family, social and economic interests were centred.




  ― 94[4414] ―

Article II.

The question whether property is to be regarded as real or personal shall be settled in accordance with the laws of the State in which the property is situated.

Article III.

The situation of personal property accessory to real property and of rights relating to, or secured by, real property shall be determined in accordance with the laws of the State in which the real property concerned is situated.

Article IV.

1. The expression “commercial, industrial, mining, agricultural or other enterprise, including a maritime or an air navigation enterprise” and the expression “permanent establishment” have the same meaning for the purposes of the foregoing Convention as in Articles IV and V of the Protocol of the Model Bilateral Convention for the Prevention of the Double Taxation of Income.

2. In the case of an enterprise with a permanent establishment in each of the two contracting States, the apportionment of the assets and liabilities will be achieved through the application, by analogy, of the rules concerning the allocation of income that are expressed in Article VI of the Protocol of the Model Bilateral Convention for the Prevention of Double Taxation of Income.

Article V.

For the purpose of Article IV of the foregoing Convention, personal property hereinbelow mentioned shall be deemed to be situated:

  • A. At the place where the property is situated, in the case of:
    • (a) …………
    • (b) …………
    • (c) …………



  •   ― 96[4416] ―
  • B. At the place where the property is registered for transfer purposes, as in the case of:
    • (a) …………
    • (b) …………
    • (c) …………
  • C. At the domicile of the debtor, in the case of property transferable only by notification to the debtor or endorsement, as in the case of:
    • (a) …………
    • (b) …………>
    • (c) …………



  ― 98[4418] ―

Article VI.

The question whether a debt which is deductible according to Article V of the foregoing Convention is to be regarded as a bona fide debt shall be settled in accordance with the laws of the State in which such debt would be deducted.

Article VII.

A debt shall not be deducted from the value of inalienable property unless such property has been made inalienable by the will of the deceased.

Article VIII.

The foregoing Convention shall not affect such immunities as are at present, or may hereafter be, accorded to diplomatic, consular or foreign Government officials in virtue of the general rules of international law or the internal legislation of either of the contracting States. Where, by reason of such immunities, the estates left by such officials are not subject to the duties and taxes to which the present Convention applies in the State in which they exercise their functions, the State which they serve shall be entitled to levy such duties and taxes.




  ― 100[4420] ―

3. Model Bilateral Convention for the Establishment of Reciprocal Administrative Assistance for the Assessment and Collection of Direct Taxes

Mexico Draft.

Article I.

With a view of assuring, in the interest of Governments and taxpayers, an effective and fair application of the taxes to which apply the Conventions for the Prevention of Double Taxation of Income and Successions, concluded this day by the contracting States, each of the contracting States undertakes, subject to reciprocity, to furnish on special request such information in matters of taxation as the competent authorities of each State have at their disposal or are in a position to obtain under their own laws and as may be of use to the competent authorities of the other State in the assessment of the above-mentioned taxes and to lend assistance to the competent authorities of the other State in the collection of such taxes.

Article II.

The competent authorities of each of the contracting States shall be entitled to obtain through direct correspondence, from the competent authorities of the other contracting State, information concerning particular cases that is necessary for the assessment of the taxes to which the present Convention relates.




  ― 102[4422] ―

Article III.

In accordance with the preceding Article, the competent authorities of each contracting State shall transmit, in concrete cases on special request, to the competent authorities of the other State:

  • A. The name and address of any individual, partnership, corporation or other entity having an address in the territory of the other State and deriving from sources within the territory of the former State rents, dividends, interests, royalties, income from trusts, wages, salaries, pensions, annuities or other fixed or determinable periodical income, indicating the amount of such receipts in the case of each addressee;
  • B. An extract of the inventories received by the competent authorities in the case of property passing on the decease of persons that had an address in the territory of the other State or the nationality of that State;
  • C. Any particulars which the competent authorities may obtain from banks, insurance companies, or other financial institutions concerning assets and claims belonging to persons having an address in the territory of the other State;
  • D. Any particulars which the competent authorities may obtain from inventories in the case of property passing on death concerning debts contracted to, or property passing to, persons having an address in the territory of the other State.

Article IV.

1. The competent authorities of each of the contracting States shall be entitled to obtain, through direct correspondence, the assistance and support of the competent authorities of the other contracting State for the collection of the taxes to which the present Convention relates together with interest, costs, additions to taxes, and fines not being of a penal


  ― 104[4424] ―
character, according to the laws of the State applied to, in the case of taxes that are definitely due according to the laws of the applying State.

2. In the case of a request for the enforcement of a tax, revenue claims of each of the contracting States which have been finally determined shall be accepted for enforcement by the other contracting State and collected in that State in accordance with the laws applicable to the enforcement and collection of its own taxes.

3. The request shall be accompanied by such documents as are required by the laws of the applying State to establish that the taxes are definitely due.

4. If a revenue claim is not definitely due, the State applied to may, on the request of the other contracting State, take such measures of conservancy as are authorised by the revenue laws of the former State.

Article V.

Special requests for information and/or assistance for the enforcement of taxes under Articles II and IV of the present Convention may be refused in the following cases:

  • A. If they involve the obligation to obtain or supply information which is not procurable under the legislation of the State applied to or that of the applying State;
  • B. If they imply administrative or judicial action incompatible with the legislation and practice of either contracting State;
  • C. If compliance involves violation of a professional, industrial or trade secret;
  • D. If the request relates to a taxpayer who is a national of the State applied to;
  • E. If, in the opinion of the State applied to, compliance with the request may compromise its security or sovereign rights.



  ― 106[4426] ―

Article VI.

When the competent authorities of one of the contracting States have requested from the authorities of the other State information to which this Convention applies, they shall observe secrecy as regards such information, in the same way and to the same extent as is done in the State that supplies it, and the competent authorities of the former State shall apply to its officials the administrative and penal sanctions that correspond, under its own laws, to the violation of such secrecy.

Article VII.

The competent authorities of the two contracting States may prescribe regulations necessary to interpret and carry out the provisions of this Convention. With respect to the provisions of this Convention relating to exchange of information, service of documents and mutual assistance in the collection of taxes, such authorities may, by common agreement, prescribe rules concerning matters of procedure, forms of application and reply, conversion of currency, disposition of amounts collected, minimum amounts subject to collection and related matters.

Article VIII.

1. This Convention and the accompanying Protocol, which shall be considered to be an integral part of the Convention, shall be ratilied and the instruments of ratification shall be exchanged at ..... as soon as possible.

2. This Convention and Protocol shall become effective on the first day of January 19. .. They shall continue effective for a period of three years from that date and indefinitely after that period. They may, however, be terminated by either of the contracting States at the end of the three-year period or at any time thereafter, provided that at least six months prior notice of termination has been given, the termination to become effective on the first day of January following the expiration of the six-month period.

Done in duplicate, at ..... this ..... day of ..... 19. ..




  ― 108[4428] ―

Protocol

On proceeding to sign the Convention concluded this day for the Establishment of Reciprocal Administrative Assistance for the Assessment and Collection of Direct Taxes, the undersigned Plenipotentiaries, duly authorised by their respective Governments for the purpose, have made the following joint declaration, which shall form an integral part of the said Convention.

Article I.

As used in the foregoing Convention, the term “competent authorities” means the highest tax authorities of each of the contracting States or the duly authorised representatives of such authorities.

Article II.

Reciprocity is deemed to exist as regards requests under Article III of the foregoing Convention. In the matter of other requests, reciprocity shall be deemed to exist when the request is accompanied by a declaration by the competent authorities who make the application, officially confirming that any similar request would be complied with in accordance with the laws of the applicant State.

Article III.

Information communicated under Article II shall be in the official language of the State by which they are communicated.

Article IV.

1. Special requests for information shall specify: the authority making the request; the name, address and nationality of the person to whom the request relates; the taxation in respect of which the request is made and period or date in respect of which it is imposed.




  ― 110[4430] ―

2. Requests for the service of documents shall specify, in addition to the particulars mentioned in the first paragraph of this Article: the address of the recipient; and the nature and purpose of the document for service.

3. Requests concerning the collection of taxes shall indicate, in addition to the information mentioned in the first paragraph of this Article: the amount of principal due and interest due and the date from which such interest begins to run; in the case of fiscal penalties, the nature and amount of such penalties; and any other information of a nature to facilitate or accelerate collection.

Article V.

Requests to which Article IV refers shall be formulated in the official language of the applicant State and accompanied by a translation in the official language of the State applied to.

Article VI.

The competent authorities of the State to which a request for the service of documents is made may limit their action in connection with the service of the document to merely handing it to the recipient, if the latter is willing to receive it.

Article VII.

If the competent authorities of the applicant State so desire, the document may be served in the form prescribed in similar cases by the internal law of the State applied to.

Article VIII.

Requests for collection must be accompanied by a copy or official extract of the final decision or order by the competent authorities concerning the revenue claim in question and by a statement from the competent authorities to the effect that the revenue claim is final.




  ― 112[4432] ―

Article IX.

No request for assistance for the collection of taxes shall be formulated when:

  • A. There is a presumption that the amount due is in fact recoverable in the interested State;
  • B. The amount due is less than . . . . .

Article X.

Assistance procedure shall be in the form for which the laws of the State applied to provide, as stipulated in the Convention. Nevertheless, any special forms of assistance not being incompatible with the laws of the State applied to may be adopted at the request of the applying State.

Article XI.

Revenue claims for collection shall not receive preference over either public or private claims in the State applied to.

Article XII.

The authorities of the State applied to shall take all such steps and employ all such means of action as they would be bound to take and employ in similar cases, when their own interests are involved, provided that no means of action shall be employed to which there is no corresponding means of action under the law of the applicant State. In doubtful cases, the competent authorities of the applicant State must certify that their national legislation empowers them to comply with a similar request from the State applied to.

Article XIII.

The competent authorities of the State applied to shall inform, without delay, the competent authorities of the applicant State as to the action taken on the request, whether such action is complete or incomplete.




  ― 114[4434] ―

Article XIV.

If a request cannot be complied with, the competent authorities of the State applied to shall advise the competent authorities of the applicant State of the reasons which prevent complying with the request, and shall transmit to such authorities all information which may have a bearing on the case.

Article XV.

The State applied to shall be responsible to the applying State for the sums collected on the latter's behalf by its officials or agents.

Article XVI.

Collection shall always take place in the currency of the State applied to. To that effect, the competent authorities of the State applied to shall convert the amount for collection into their own currency at the last rate quoted between the two contracting States.

Article XVII.

Amounts collected by the competent authorities of one State on behalf of the competent authorities of the other State shall be paid over immediately, after deduction of the costs under Article XVIII below, to the account of the Central Bank of the applying State with the Central Bank of the State applied to.

Article XVIII.

No fees or costs shall be charged for action taken on requests for assistance. This provision shall, however, not apply, in the absence of any agreement to the contrary, to emoluments paid to witnesses, experts, agents of execution and to legal and judicial fees incurred in connection with the service of a document or the enforcement of a revenue claim. The revenue authorities shall notify each other as required of the probable amount of such costs, fees or charges. When relating to the collection of a revenue claim, the amount of such costs, fees and


  ― 116[4436] ―
charges shall be retained from the amount collected by the competent authorities of the State applied to.

Article XIX.

The Convention shall not apply to measures of conservancy in respect to taxes that have not yet been assessed.

Article XX.

Over and above the measures of assistance for which the Convention provides, the competent revenue authorities of the two contracting States may concert together for the exchange of information other than that for which provision is made and also for the purpose of the assessment of the taxes to which the Convention relates.




  ― 59[4379] ―

1. Model Bilateral Convention for the Prevention of the Double Taxation of Income and Property

London Draft.

Article I.

1. The present Convention is designed to prevent double taxation in the case of the taxpayers of the contracting States, whether nationals or not, as regards the following taxes:

  • A. With reference to State A:
  • 1. .....;
  • 2. .....;
  • 3. .....
  • B. With reference to State B:
  • 1. .....;
  • 2. .....;
  • 3. .....

2. It is mutually agreed that the present Convention shall apply also to any other tax, or increase of tax, imposed by either contracting State subsequent to the date of signature of this Convention upon substantially the same bases as the taxes enumerated in the preceding paragraph of this Article.

Article II.

Income from real property shall be taxable in the State in which the property is situated.

Article III.

1. Income from mortgages on real property shall be taxable in the State where the property is situated.

2. Income from mortgages on sea and/or air vessels shall be taxable in the State where such vessels are registered.




  ― 61[4381] ―

Article IV.

1. Income derived from any industrial, commercial or agricultural enterprise and from any other gainful occupation shall be taxable in the State where the taxpayer has a permanent establishment.

2. If an enterprise in one State extends its activities to the other State without possessing a permanent establishment therein, the income derived from such activities shall be taxable only in the first State.

3. If an enterprise has a permanent establishment in each of the contracting States, each State shall tax only that part of the income which is produced in its territory.

Article V.

Income which an enterprise in one of the contracting States derives from the operation of ships or aircraft engaged in international transport is taxable only in the State in which the enterprise has its fiscal domicile.

Article VI.

1. Remuneration for labour or personal services shall be taxable in the contracting State in which such services are rendered.




  ― 63[4383] ―

2. A person having his fiscal domicile in one contracting State shall, however, be exempt from taxation in the other contracting State in respect of such remuneration if he is temporarily present within the latter State for a period or periods not exceeding a total of one hundred and eighty-three days during the taxable year, and shall remain taxable in the first State.

3. If a person remains in the second State more than one hundred and eighty-three days, he shall be taxable therein in respect of the remuneration he earned during his stay there, but shall not be taxable in respect of such remuneration in the first State.

4. Income derived by an accountant, an architect, an engineer, a lawyer, a physician or other person engaged on his own account in the practice of a profession shall be taxable in the contracting State in which the person has a permanent establishment at, or from, which he renders services.

5. If any person described in the preceding paragraph has a permanent establishment in both contracting States, he shall be taxable in each State only on the income for services rendered therein.

Article VII.

Salaries, wages, pensions and other remuneration paid by the Government, political subdivisions and governmental agencies of one of the contracting States to nationals of such State in respect of the performance of diplomatic, consular or other governmental functions in the other State, shall be taxable only in the first State, provided that these functions are included within the normal field of governmental functions and are not connected with the carrying on of a trade or business on behalf of the State, its subdivisions and its agencies.

Article VIII.

1. Dividends and other income from shares in a company and shares of profits accruing to limited liability partners in


  ― 65[4385] ―
a limited liability partnership shall be taxable only in the contracting State where the company or limited liability partnership has its fiscal domicile.

2. Notwithstanding the provisions of paragraph 1, dividends paid by a company which has its fiscal domicile in one contracting State to a company which has its fiscal domicile in the other contracting State and has a dominant participation in the management or capital of the company paying the dividends shall be exempt from tax in the former State.

3. Dividends paid by, or undistributed profits of, a company which has its fiscal domicile in one contracting State shall not be subjected to any tax by the other contracting State by reason of the fact that the dividends or undistributed profits represent, in whole or in part, income derived from the territory of that other State.

Article IX.

1. Interest on bonds, securities, notes, debentures or on any other form of indebtedness shall be taxable only in the State where the creditor has his fiscal domicile.

2. The State of the debtor is, however, entitled to tax such interest by means of deduction or withholding at source.

3. The tax withheld at source under paragraph 2 of this Article shall in no case exceed … % of the taxed interest.

Article X.

1. Royalties from immovable property or in respect of the operation of a mine, a quarry or other natural resource shall be taxable only in the contracting State in which such property, mine, quarry or other natural resource is situated.

2. Royalties derived from one of the contracting States by an individual, corporation or other entity of the other contracting State in consideration for the right to use a patent, a secret process or formula, a trade-mark or other analogous right, shall not be taxable in the former State.

3. If, however, royalties are paid by an enterprise of one contracting State to another enterprise of the other contracting


  ― 67[4387] ―
State which has a dominant participation in its management or capital, or vice versa, or when both enterprises are owned or controlled by the same interests, the royalties shall be subject to taxation in the State where the right in consideration of which they are paid is exploited, subject to deduction from the gross amount of such royalties of all expenses and charges, including depreciation, relative to such rights and royalties.

4. Royalties derived from one of the contracting States by an individual, corporation or other entity of the other contracting State, in consideration for the right to use an artistic, scientific or other cultural work or publication shall not be taxable in the former State.

Article XI.

Private pensions and life annuities shall be taxable only in the State where the recipient has his fiscal domicile.

Article XII.

1. Gains derived from the sale or exchange of real property shall be taxable only in the country in which the property is situated.

2. Gains derived from the sale or exchange of assets other than real property, appertaining to an industrial, commercial or agricultural enterprise or to any other independent occupation, shall be taxable according to the provisions of Articles IV and V.

3. Gains derived from the sale or exchange of any capital assets other than those mentioned in the preceding paragraphs of the present Article shall be taxable only in the State where the recipient has his fiscal domicile.

Article XIII.

The State where the taxpayer has his fiscal domicile shall retain the right to tax the entire income of the taxpayer whether derived from its territory or from that of the other contracting State, but shall deduct from its tax on such entire


  ― 69[4389] ―
income the lesser of the following amounts:

  • A. The tax collected by the other contracting State on the income which is taxable in its territory according to the preceding Articles;
  • B. The amount which represents the same proportion of the tax of the State of fiscal domicile on the entire net income of the taxpayer as the net income taxable in the other State bears to the entire net income.

Article XIV.

In the case of a taxpayer with a fiscal domicile in both contracting States, the tax, the collection of which under this Convention depends on fiscal domicile, shall be imposed in each of the contracting States in proportion to the period of stay during the taxable year or according to a proportion to be agreed by the competent administrations.

Article XV.

The provisions of the preceding Articles shall be applicable, [?]mulatis mutandis, to taxes on property, capital or increment of wealth whether such taxes are permanent or are levied once only.

Article XVI.

A taxpayer having his fiscal domicile in one of the contracting States shall not be subject in the other contracting State, in respect of income he derives from that State, to higher or other taxes than the taxes applicable in respect of the same income to a taxpayer having his fiscal domicile in the latter State, or having the nationality of that State.

Article XVII.

1. When a taxpayer shows proof that the action of the tax administration of one of the contracting States has resulted in double taxation, he shall be entitled to lodge a claim with the tax administration of the State in which he has his fiscal domicile or of which he is a national.




  ― 71[4391] ―

2. Should the claim be admitted, the competent tax administration of that State shall consult directly with the competent authority of the other State, with a view to reaching an agreement for an equitable avoidance of double taxation.

Article XVIII.

The provisions of the present Convention shall not be construed to restrict in any manner any exemption, deduction, credit, allowance, advantage and right of administrative or judicial appeal accorded to a taxpayer by the laws of either of the contracting States.

Article XIX.

As regards any special provisions which may be necessary for the application of the present Convention, more particularly in cases not expressly provided for, and in the event of substantial changes in the tax laws of either of the contracting States, the competent authorities of the two contracting States shall confer together and take the measures required in accordance with the spirit of the present Convention.

Article XX.

1. This Convention and the accompanying Protocol, which shall be considered to be an integral part of the Convention, shall be ratified and the instruments of ratification shall be exchanged at ..... as soon as possible.

2. This Convention and Protocol shall become effective on the first day of January 19… They shall continue effective for a period of three years from that date and indefinitely after that period. They may, however, be terminated by either of the contracting States at the end of the three-year period or at any time thereafter, provided that at least six months prior notice of termination has been given, the termination to become effective on the first day of January following the expiration of the six-month period.

Done in duplicate, at ..... this ..... day of ....., 19 .....




  ― 73[4393] ―

Protocol

On proceeding to sign the Convention for the Prevention of Double Taxation of Income concluded this day between ..... and ..... the undersigned Plenipotentiaries have agreed the following provisions, which shall form an integral part of the said Convention.

Article I.

The terms “taxpayer of a contracting State” and “enterprise of a contracting State” mean a taxpayer or an enterprise whose fiscal domicile is in the said State.

Article II.

1. For the purpose of the foregoing Convention, the term “fiscal domicile” means, in the case of an individual or of an enterprise belonging to an individual, the place where the individual has his normal residence, the term “residence” being understood to mean permanent home.

2. Should a taxpayer possess a residence in both the contracting States, the competent administration shall determine, by common agreement, the place of his main residence, which shall be considered as his fiscal domicile. In order to determine, as between several residences, the main residence, the competent administration will take into account elements such as the duration, regularity, frequency of stays, the place where the family of the taxpayer is usually present, the proximity to the place where the party concerned carries out his occupation.

3. In the case of a taxpayer having a residence in both of the contracting States of which either can be considered as his main residence, Article XIX of the Convention shall apply.

4. The fiscal domicile of a partnership, company and any other legal entity or de facto body shall be the State in which its real centre of management is situated.




  ― 75[4395] ―

Article III.

Differences which arise concerning the nature of real property shall be settled in accordance with the legislation of the territory where the property is situated.

Article IV.

The term “enterprise” includes any kind of enterprise whether it belongs to an individual, a partnership, a company or any other legal entity or de facto body.

Article V.

1. The term “permanent establishment” includes head offices, branches, mines and oil-wells, plantations, factories, workshops, warehouses, offices, agencies, installations, professional premises and other fixed places of business having a productive character.

2. A building site (chantier de construction) constitutes a “permanent establishment” when it is destined to be used for a year at least or has been in existence for a year.

3. The fact that an enterprise established in one of the contracting States has business dealings in another contracting State through an agent of genuinely independent status (broker, commission agent, etc.) shall not be held to mean that the enterprise has a permanent establishment in the latter State.

4. When an enterprise of one of the contracting States regularly has business relations in the other State through an agent established there who is authorised to act on its behalf, it shall be deemed to have a permanent establishment in that State.

A permanent establishment shall, for instance, be deemed to exist when the agent:

  • A. Is a duly accredited agent (fondé de pouvoir) and habitually enters into contracts for the enterprise for which he works; or



  •   ― 77[4397] ―
  • B. Is bound by an employment contract and habitually transacts business on behalf of the enterprise in return for remuneration from the enterprise; or
  • C. Is habitually in possession, for the purpose of sale, of a depot or stock of goods belonging to the enterprise.

5. As evidence of an employment contract under the terms of B above may be taken, moreover, the fact that the administrative expenses of the agent, in particular the rent of premises, are paid by the enterprise.

6. The fact that a broker places his services at the disposal of an enterprise in order to bring it into touch with customers does not in itself imply the existence of a permanent establishment for the enterprise, even if his work for the enterprise is, to a certain extent, continuous or is carried on at regular periods, and even if the goods sold have been temporarily placed in a warehouse. Similarly, the fact that a commission agent (commissionnaire) acts in his own name for one or more enterprises and receives a normal rate of commission does not constitute a permanent establishment for any such enterprise, even if the goods sold have been temporarily placed in a warehouse.

7. A permanent establishment shall not be deemed to exist in the case of commercial travellers not coming under any of the preceding categories.

8. The fact that a parent company, the fiscal domicile of which is one of the contracting States, has a subsidiary in the other State does not mean that the parent company has a permanent establishment in that State, regardless of the fiscal obligations of the subsidiary toward the State in which it is situated.

Article VI.

The allocation of the income of the enterprises mentioned in Article IV of the Convention shall be effected in the following manner:

1. In respect of industrial, commercial and agricultural enterprises in general and for other independent activities:




  ― 79[4399] ―
  • A. If an enterprise with its fiscal domicile in one contracting State has a permanent establishment in the other contracting State, there shall be attributed to each permanent establishment the net business income which it might be expected to derive, if it were an independent enterprise engaged in the same or similar activities, under the same or similar conditions. Such net income will, in principle, be determined on the basis of the separate accounts pertaining to such establishment. According to the provisions of the Convention, such income shall be taxed in accordance with the legislation and agreements of the State in which such establishment is situated.
  • B. The fiscal authorities of the contracting States shall, when necessary, in execution of the preceding section, rectify the accounts produced, especially to correct errors or omissions, or to re-establish the prices or remunerations entered in the books at the value which would prevail between independent persons dealing at arm's length. If the accounts of the permanent establishment in one contracting State are rectified as a result of such verification, a corresponding rectification shall be made in the accounts of the establishment in the other contracting State with which the dealings in question have been effected.
  • C. If an establishment does not produce an accounting showing its own operations, or if the accounting produced does not correspond to the normal usages of the trade in the country where the establishment is situated, or if the rectifications provided for in the preceding section cannot be effected, or if the taxpayer agrees, the fiscal authorities may determine, in a presumptive manner, the business income by applying a percentage to the gross receipts of that establishment. This percentage is fixed in accordance with the nature of the transactions in which the establishment is engaged and by comparison with the results obtained by similar enterprises operating in the country. Where the activities of the permanent establishment are in the


      ― 81[4401] ―
    the nature of those of a genuinely independent commission agent or broker, the income may be determined on the basis of the customary commission received for such services.
  • D. If the methods of determination described in the preceding sections are found to be inapplicable, the net business income of the permanent establishment may be determined by a computation based on the total income derived by the enterprise from the activities in which such establishment has participated. This determination is made by applying to the total income coefficients based on a comparison of gross receipts, assets, number of hours worked or other appropriate factors, provided such factors are so selected as to ensure results approaching as closely as possible those which would be reflected by a separate accounting.

2. In determining the net income on the basis of the separate accounting of a permanent establishment, a properly apportioned part of the general expenses of the head office of the enterprise may be deducted.

3. In respect of banking and financial enterprises, the allocation of the income shall be effected in conformity with the principles laid down in paragraph 1 of the present Article, provided that, when a permanent establishment of the enterprise is in the position of a creditor or debtor in relation to another permanent establishment of the enterprise, the following provisions shall apply:

  • A. If a permanent establishment in one State (creditor establishment) supplies funds, whether in the form of an advance, loan, overdraft, deposit, or otherwise, to a permanent establishment in the second State (debtor establishment), interest shall be deemed to accrue as income to the creditor establishment and as a deduction from gross income to the debtor establishment for tax purposes, and it shall be computed at the inter-bank rate for similar transactions in the currency used;



  •   ― 83[4403] ―
  • B. The interest corresponding to the permanent capital allotted to the debtor establishment, whether in the form of an advance, loan, overdraft, deposit or otherwise, shall be, however, excluded from the interest accruing as income to the creditor establishment and deductible from gross income by the debtor establishment.

4. The net income of insurance enterprises shall be determined in conformity with the principles laid down in paragraph 1 of the present Article. If, however, these principles are not applicable in a given case, the net taxable income of a permanent establishment belonging to an insurance enterprise may be assessed, either by applying, to the gross premiums received as a result of the activity of the permanent establishment, coefficients computed on the basis of the total income of a representative national enterprise of the particular category of insurance concerned, or by apportioning the income according to the ratio existing between the gross premiums relating to the permanent establishment and the total gross premiums received by the enterprise.

5. In cases where the foregoing rules do not result in a fair allocation of income, the competent authorities may consult to agree upon a method that will prevent double taxation.

Article VII.

When an enterprise of one contracting State has a dominant participation in the management or capital of an enterprise of another contracting State, or when both enterprises are owned or controlled by the same interests, and, as the result of such situation, there exist in their commercial or financial relations conditions different from those which would have existed between independent enterprises, any item of profit or loss which should normally have appeared in the accounts of one enterprise, but which has been, in this manner, diverted to the other enterprise, shall be entered in the accounts of such former enterprise.




  ― 85[4405] ―

Article VIII.

The provisions of Article IV of the Convention shall not apply to pedlars, inland shipping, touring shows and other similar occupations, which shall be taxable in accordance with the legislation of the country where these occupations are carried on and concerning which the competent administrations may, if necessary, agree special provisions.

Article IX.

Students and apprentices from one contracting State residing in the other contracting State exclusively for the purpose of study or for acquiring business experience shall not be taxable by the latter State in respect of remittances received by them from within the former State for the purpose of their maintenance or studies.




  ― 87[4407] ―

2. Model Bilateral Convention for the Prevention of the Double Taxation of Estates and Successions

London Draft.

Article I.

The present Convention, the purpose of which is to prevent the double taxation of estates and successions, applies to the following duties and taxes:

  • A. In the case of State A:
  • 1. .....;
  • 2. .....;
  • 3. .....
  • B. In the case of State B:
  • 1. .....;
  • 2. .....;
  • 3. .....

Article II.

Real property, personal property accessory thereto and rights relating to, or secured by, real property which are included in the estate of a person who, at the time of his death, had his domicile in one of the two contracting States shall be subject to the duties and taxes described in Article I only in the State in which such property is situated.




  ― 89[4409] ―

Article III.

Property appertaining to a commercial, industrial, mining, agricultural or other enterprise, including a maritime or an air navigation enterprise, left by a person who, at the time of his death, had his domicile in one of the contracting States shall be subject to the duties and taxes described in Article I in accordance with the following rules:

  • A. If the enterprise has a permanent establishment in one of the two States, the property shall be taxable only in that State;
  • B. If the enterprise has a permanent establishment in both States, the property shall be taxable in each State to the extent to which such property belongs or relates to the establishment situated in that State.

Article IV.

Personal property not coming within the purview of the provisions of Articles II and III left by a person who, at the time of his death, had his fiscal domicile in one of the contracting States, shall be subject to the duties and taxes described in Article I only in the State in which such property was situated at the time of death.

Article V.

For the purposes of determining the net value of the property subject to the duties and taxes to which this Convention refers, the debts of the deceased shall be deducted according to the following rules:

  • A. A debt secured by, or relating to, property to which Articles II and III apply shall be deducted from the value of the specific property by which it is secured, or to which it relates;



  •   ― 91[4411] ―
  • B. If a debt to which rule A applies exceeds the value of the property by which it is secured or to which it relates, it shall be deducted from the value of the other property left by the deceased in the same country;
  • C. If a debt to which rule A applies exceeds also the value of the property situated in the same country, the excess shall be deducted from the value of the property left by the deceased in the other country;
  • D. A general debt without specific guarantee will be deducted proportionately to the value of the property left by the deceased in each country.

Article VI.

The State in which the deceased, at the time of his death, had his domicile shall retain the right to tax the entire estate, whether situated in its territory or that of the other contracting State, excluding property described in Article II, but shall deduct from the duties and taxes it applies to the entire estate the lesser of the two following amounts:

  • A. The sum of the duties and taxes collected by the other contracting State on the property which is taxable in its territory according to the preceding Articles;
  • B. The amount which represents the same proportion of the duties and taxes of the State of domicile on the entire taxable estate of the deceased as the net property taxable in the other State bears to the entire net estate.

Article VII.

As regards any special provisions which may be necessary for the application of the present Convention, more particularly in cases not expressly provided for, the competent authorities of the two contracting States may confer together and take the measures required in accordance with the spirit of this Convention.




  ― 93[4413] ―

Article VIII.

1. This Convention and the accompanying Protocol, which shall be considered to be an integral part of the Convention, shall be ratified and the instruments of ratification shall be exchanged at ………… as soon as possible.

2. This Convention and Protocol shall become effective on the first day of January 19… They shall continue effective for a period of three years from that date and indefinitely after that period. They may, however, be terminated by either of the contracting States at the end of the three-year period or at any time thereafter, provided that at least six months prior notice of termination has been given, the termination to become effective on the first day of January following the expiration of the six-month period.

Done in duplicate, at ………… this ………… day of ………… 19…

PROTOCOL

On proceeding to sign the Convention concluded this day between the contracting States regarding the Prevention of the Double Taxation of Successions, the undersigned Plenipotentiaries have made the following joint declaration, which shall form an integral part of the said Convention.

Article I.

1. For the purposes of the foregoing Convention, the domicile of a person, at the time of his death, is the place where he then had his permanent residence with the manifest intention of retaining it.

2. If the deceased, at the time of his death, had no such domicile and was a national of both contracting States, he shall be regarded as having had his domicile in the country in which his family, social and economic interests were centred.




  ― 95[4415] ―

Article II.

The question whether property is to be regarded as real or personal shall be settled in accordance with the laws of the State in which the property is situated.

Article III.

The situation of personal property accessory to real property and of rights relating to, or secured by, real property shall be determined in accordance with the laws of the State in which the real property concerned is situated.

Article IV.

1. The expression “commercial, industrial, mining, agricultural or other enterprise, including a maritime or an air navigation enterprise” and the expression “permanent establishment” have the same meaning for the purposes of the foregoing Convention as in Articles IV and V of the Protocol of the Model Bilateral Convention for the Prevention of the Double Taxation of Income.

2. In the case of an enterprise with a permanent establishment in each of the two contracting States, the apportionment of the assets and liabilities will be achieved through the application, by analogy, of the rules concerning the allocation of income that are expressed in Article VI of the Protocol of the Model Bilateral Convention for the Prevention of Double Taxation of Income.

Article V.

The situation of personal property to which the provisions of Article IV of the Convention apply shall be determined in accordance with the following rules:

  • A. Rights or interests (otherwise than by way of security) in or over tangible movable property other than such property for which specific provision is hereinafter made shall be deemed to be situated at the place where such property was physically located at the time of death;



  •   ― 97[4417] ―
  • B. Rights or interests (other than by way of security) in or over bank or currency notes, other forms of currency, negotiable bills of exchange and negotiable promissory notes shall be deemed to be situated at the place where such notes, currency or documents are located at the time of death;
  • C. Rights or interests (otherwise than by way of security) in or over property described under A and B above which are in transit at the time of death shall be deemed to be located at the place of destination;
  • D. Debts secured or unsecured, other than the forms of indebtedness for which specific provision is made herein, shall be deemed to be situated at the place where the deceased had his domicile at the time of death;
  • E. Shares and similar interests and participations in a company or limited liability partnership shall be deemed to be situated in the territory of the State in which or under the laws of which the corporation or partnership was organised;
  • F. Sums payable under an insurance policy on the life of the deceased shall be deemed to be situated at the place where the deceased had his domicile at the time of death;
  • G. Ships and aircraft and shares in the property thereof shall be deemed to be situated at the place where the ship or aircraft was registered at the time of the death of the deceased:
  • H. Goodwill as a business or professional asset shall be deemed to be situated at the place where the business or profession to which it appertains was carried on at the time of death;
  • I. Patents, trade-marks, designs shall be deemed to be situated at the place where they were registered at the time of death;



  •   ― 99[4419] ―
  • J. Copyrights, franchises and rights or licenses to use any copyrighted material, patent, trade-mark or design shall be deemed to be situated at the place where such rights were exercisable at the time of death;
  • K. Rights or causes of action ex delicto shall be deemed to be situated at the place where such rights or causes of action arose;
  • L. Judgment debts shall be deemed to be situated at the place where the judgment is recorded.

Article VI.

The question whether a debt which is deductible according to Article V of the foregoing Convention is to be regarded as a bona fide debt shall be settled in accordance with the laws of the State in which such debt would be deducted.

Article VII.

The foregoing Convention shall not affect such immunities as are at present, or may hereafter be, accorded to diplomatic, consular or foreign Government officials in virtue of the general rules of international law or the internal legislation of either of the contracting States. Where, by reason of such immunities, the estates left by such officials are not subject to the duties and taxes to which the present Convention applies in the State in which they exercise their functions, the State which they serve shall be entitled to levy such duties and taxes.




  ― 101[4421] ―

3. Model Bilateral Convention for the Establishment of Reciprocal Administrative Assistance for the Assessment and Collection of Taxes on Income, Property, Estates and Successions

London Draft.

Article I.

With a view of assuring, in the interest of Governments and taxpayers, an effective and fair application of the taxes to which apply the Conventions for the Prevention of Double Taxation of Income and Estates and Successions, concluded this day by the contracting States, each of the contracting States undertakes, subject to reciprocity, to furnish on special request such information in matters of taxation as the competent authorities of each State have at their disposal or are in a position to obtain under their own revenue laws and as may be of use to the competent authorities of the other State in the assessment of the above-mentioned taxes and to lend assistance to the competent authorities of the other State in the collection of such taxes.

Article II.

The competent authorities of each of the contracting States shall be entitled to obtain through direct correspondence, from the competent authorities of the other contracting State, information concerning particular cases that is necessary for the assessment of the taxes to which the present Convention relates.




  ― 103[4423] ―

Article III.

In accordance with the preceding Article, the competent authorities of each contracting State shall transmit, in the ordinary course as soon as possible after the expiration of each calendar (or fiscal) year, to the competent authorities of the other State:

  • A. The name and address of any individual, partnership, corporation or other entity having an address in the territory of the other State and deriving from sources within the territory of the former State rents, dividends, interest, royalties, income from trusts, wages, salaries, pensions, annuities or other fixed or determinable periodical income, indicating the amount of such receipts in the case of each addressee;
  • B. An extract of the inventories received by the competent authorities in the case of property passing on the decease of persons that had an address in the territory of the other State or the nationality of that State;
  • C. Any particulars which the competent authorities may obtain from banks, insurance companies, or other financial institutions concerning assets and claims belonging to persons having an address in the territory of the other State;
  • D. Any particulars which the competent authorities may obtain from inventories in the case of property passing on death concerning debts contracted to, or property passing to, persons having an address in the territory of the other State.

Article IV.

1. The competent authorities of each of the contracting States shall be entitled to obtain, through direct correspondence, the assistance and support of the competent authorities of the other contracting State for the collection of the taxes to which the present Convention relates together with interest, costs, additions to taxes, and fines not being


  ― 105[4425] ―
of a penal character, according to the laws of the State applied to, in the case of taxes that are definitely due according to the laws of the applying State.

2. In the case of a request for the enforcement of a tax, revenue claims of each of the contracting States which have been finally determined shall be accepted for enforcement by the other contracting State and collected in that State in accordance with the laws applicable to the enforcement and collection of its own taxes.

3. The request shall be accompanied by such documents as are required by the laws of the applying State to establish that the taxes are definitely due.

4. If a revenue claim is not definitely due, the State applied to may, on the request of the other contracting State, take such measures of conservancy as are authorised by the revenue laws of the former State for the enforcement of its own taxes.

Article V.

Special requests for information and/or assistance for the enforcement of taxes under Articles II and IV of the present Convention may be refused in the following cases:

  • A. If they involve the obligation to obtain or supply information which is not procurable under the legislation of the State applied to or that of the applying State;
  • B. If they imply administrative or judicial action incompatible with the legislation and practice of either contracting State;
  • C. If compliance involves violation of a professional, industrial or trade secret;
  • D. If the request relates to a taxpayer who is a national of the State applied to;
  • E. If, in the opinion of the State applied to, compliance with the request may compromise its security or sovereign rights.



  ― 107[4427] ―

Article VI.

When the competent authorities of one of the contracting States have requested from the authorities of the other State information to which this Convention applies, they shall observe secrecy as regards such information, in the same way and to the same extent as is done in the State that supplies it, and the competent authorities of the former State shall apply to its officials the administrative and penal sanctions that correspond, under its own laws, to the violation of such secrecy.

Article VII.

The competent authorities of the two contracting States may prescribe regulations necessary to interpret and carry out the provisions of this Convention. With respect to the provisions of this Convention relating to exchange of information, service of documents and mutual assistance in the collection of taxes and evidence of reciprocity, such authorities may, by common agreement, prescribe rules concerning matters of procedure, forms of application and reply, conversion of currency, disposition of amounts collected, minimum amounts subject to collection and related matters.

Article VIII.

1. This Convention and the accompanying Protocol, which shall be considered to be an integral part of the Convention, shall be ratified and the instruments of ratification shall be exchanged at ..... as soon as possible.

2. This Convention and Protocol shall become effective on the first day of January 19. .. They shall continue effective for a period of three years from that date and indefinitely after that period. They may, however, be terminated by either of the contracting States at the end of the three-year period or at any time thereafter, provided that at least six months prior notice of termination has been given, the termination to become effective on the first day of January following the expiration of the six-month period.

Done in duplicate, at ..... this ..... day of ..... 19. ..




  ― 109[4429] ―

Protocol

On proceeding to sign the Convention concluded this day for the Establishment of Reciprocal Administrative Assistance for the Assessment and Collection of Taxes on Income, Property, Estates and Successions, the undersigned Plenipotentiaries, duly authorised by their respective Governments for the purpose, have made the following joint declaration, which shall form an integral part of the said Convention.

Article I.

As used in the foregoing Convention, the term “competent authorities” means the highest tax authorities of each of the contracting States or the duly authorised representatives of such authorities.

Article II.

Reciprocity is deemed to exist as regards requests under Article III of the foregoing Convention. In the matter of other requests, reciprocity shall be deemed to exist when the request is accompanied by a declaration by the competent authorities who make the application, officially confirming that any similar request would be complied with in accordance with the laws of the applicant State.

Article III.

1. Special requests for information shall specify: the authority making the request; the name, address and nationality of the person to whom the request relates; the taxation in respect of which the request is made and period or date in respect of which it is imposed.




  ― 111[4431] ―

2. Requests for the service of documents shall specify, in addition to the particulars mentioned in the first paragraph of this Article: the address of the recipient; and the nature and purpose of the document for service.

3. Requests concerning the collection of taxes shall indicate, in addition to the information mentioned in the first paragraph of this Article: the amount of principal due and interest due and the date from which such interest begins to run; in the case of fiscal penalties, the nature and amount of such penalties; and any other information of a nature to facilitate or accelerate collection.

Article IV.

The competent authorities of the State to which a request for the service of documents is made may limit their action in connection with the service of the document to merely handing it to the recipient, if the latter is willing to receive it.

Article V.

If the competent authorities of the applicant State so desire, the document may be served in the form prescribed in similar cases by the internal law of the State applied to.

Article VI.

Requests for collection must be accompanied by a copy or official extract of the final decision or order by the competent authorities concerning the revenue claim in question and by a statement from the competent authorities to the effect that the revenue claim is final.




  ― 113[4433] ―

Article VII.

No request for assistance for the collection of taxes shall be formulated when:

  • A. There is a presumption that the amount due is in fact recoverable in the interested State;
  • B. The amount due is less than . . . . .

Article VIII.

Assistance procedure shall be in the form for which the laws of the State applied to provide, as stipulated in the Convention. Nevertheless, any special forms of assistance not being incompatible with the laws of the State applied to may be adopted at the request of the applying State.

Article IX.

Revenue claims for collection shall not receive preference over either public or private claims in the State applied to.

Article X.

The authorities of the State applied to shall take all such steps and employ all such means of action as they would be bound to take and employ in similar cases, when their own interests are involved, provided that no means of action shall be employed to which there is no corresponding means of action under the law of the applicant State. In doubtful cases, the competent authorities of the applicant State must certify that their national legislation empowers them to comply with a similar request from the State applied to.

Article XI.

The competent authorities of the State applied to shall inform, without delay, the competent authorities of the applicant State as to the action taken on the request, whether such action is complete or incomplete.




  ― 115[4435] ―

Article XII.

The State applied to shall be responsible to the applying State for the sums collected on the latter's behalf by its officials or agents.

Article XIII.

Collection shall always take place in the currency of the State applied to. To that effect, the competent authorities of the State applied to shall convert the amount for collection into their own currency at the rate of exchange prevailing at the date that the request is received.

Article XIV.

Amounts collected by the competent authorities of one State on behalf of the competent authorities of the other State shall be paid over immediately, after deduction of the costs under Article XV below, to the account of the Central Bank of the applicant State with the Central Bank of the State applied to.

Article XV.

No fees or costs shall be charged for action taken on requests for assistance. This provision shall, however, not apply, in the absence of any agreement to the contrary, to emoluments paid to witnesses, experts, agents of execution and to legal and judicial fees incurred in connection with the service of a document or the enforcement of a revenue claim. The revenue authorities shall notify each other as required of the probable amount of such costs, fees or charges. When relating to the collection of a revenue claim, the amount of


  ― 117[4437] ―
such costs, fees and charges shall be retained from the amount collected by the competent authorities of the State applied to.

Article XVI.

The Convention shall not apply to measures of conservancy in respect to taxes that have not yet been assessed.

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