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V. POSSIBILITY OF CONCLUDING MULTILATERAL CONVENTIONS FOR THE AVOIDANCE OF DOUBLE TAXATION ON POINTS ON WHICH A SUFFICIENT NUMBER OF COUNTRIES SEEM TO BE IN AGREEMENT.

The Fiscal Committee has accepted the following proposals which it believes might be adopted by a considerable number of States if carefully formulated.

The adoption of a multilateral convention on the proposed lines would not wholly prevent double taxation among the contracting States even on the classes of income enumerated, but it would materially encourage the movement to reduce double taxation by uniform law—a method which in important respects is obviously superior to the method of reducing double taxation through the instrumentality of bilateral conventions.

The Fiscal Committee has appointed a Sub-Committee consisting of Dr. BOLAFFI, Mr. CAREY, M. CLAVIER and Dr. SINNINGHE DAMSTÉ with instructions to submit at the next meeting of the Fiscal Committee a draft multilateral convention based upon the following general proposals and embodying such other measures to reduce international double taxation as are likely, in the opinion of the Sub-Committee, to secure the acquiescence of a considerable number of countries:

Proposal 1. — That the following classes of income shall be taxable only in the State of fiscal domicile of the recipient or creditor of such income:

  • (a) Annuities;
  • (b) Authors' royalties or rights;
  • (c) Interest on (public ?) debt (except from mortgages) issued after a future date to be agreed on;
  • (d) Wages of workers living on one side of a frontier and working on the other.

Proposal 2. — That salaries of officials and public employees who are serving abroad and public pensions shall be taxable only in the State which pays such salaries or pensions.

Proposal 3. — Immovable property (land and houses) shall be taxable only in the country in which they are situated.

Proposal 4. — The profit derived by a company from the operation of industrial, commercial or agricultural undertakings shall not be taxable in a country other than that in which the real centre of management of the company is situated unless the company has one or more permanent establishments in such other country.

Branches, mines and oilfields, fixed plants, factories, workshops, agencies, warehouses, offices and depots shall be regarded as permanent establishments. The fact that an undertaking has business dealings with a foreign country through a bona fide agent of independent status (broker, commission agent, etc.) shall not be held to mean that the undertaking in question has a permanent establishment in that country.

Nevertheless, income from maritime shipping and air navigation concerns shall be taxable only in the State in which the real centre of management is situated.

The Sub-Committee will have to consider, in connection with this proposal:

  • (a) Whether the term “company” should be defined.
  • (b) Whether it would be desirable to add the following proposal:
  • “Should the undertaking possess permanent establishments in two or more countries, each of those countries may tax the portion of the income produced in its territory. The competent administrations of the two contracting States shall come to an arrangement as to the basis for apportionment.”



  •   ― 9[4211] ―
  • (c) Whether it would be desirable also to add the following proposal:
  • “The fact that an undertaking has business dealings with a foreign country through a local company, the stock of which it owns in whole or in part, should not be held to mean that the undertaking in question has a permanent establishment in that country.”
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