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League of Nations Fiscal Committee: Report to the Council on the Work of the Third Session of the Committee C.415.M.171.1931.II.A.

CONTENTS.

                                         
Page 
Introduction 
I. Examination of International Conventions recently concluded and Municipal Laws recently enacted for the Prevention of Double Taxation and Tax Evasion 
II. Possibility of framing Plurilateral Conventions for the Avoidance of Double Taxation of Certain Categories of Income 
III. Fiscal Clauses to be embodied in the Draft Convention on the Treatment of Foreigners 
IV. Enquiry into the Apportionment of Profits 
V. Fiscal Régime applicable to Foreign Motor Vehicles 
VI. Taxation of Instruments of International Commerce (Bills of Exchange, Promissory Notes, Cheques, Bills of Lading, etc.) 
VII. Double Taxation in regard to the Turnover Tax 
VIII. Customs and Fiscal Duties on Newspapers and Periodicals 
IX. Principles enabling the Double Taxation of Authors' Rights and Patents to be avoided 
X. Definition of the Term “Autonomous Agent” 
XI. Draft Resolution proposed by Sir Percy Thompson 
XII. General Tables showing the Fiscal Systems of the Various Countries 
XIII. Preparation of International Conventions concluded under the Auspices of the League of Nations 
Appendices. 
I. Plurilateral Convention for the Prevention of the Double Taxation of Certain Categories of Income: 
1. Report by the Special Sub-Committee to the Fiscal Committee 
2. Draft Plurilateral Convention for the Prevention of the Double Taxation of Certain Categories of Income  10 
II. Draft Plurilateral Convention “A”, drawn up by the Committee  13 
III. Draft Plurilateral Convention “B”, drawn up by the Committee  15  




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INTRODUCTION.

The Fiscal Committee has the honour to submit to the Council the following report on the [?] of its third session, held at Geneva from May 29th to June 6th, 1931.

The following members of the Committee were present:

Professor Dr. Herbert DORN, Chairman,

Professor Th. S. ADAMS, assisted by M. ALVORD and Mr. RYAN,

M. BLAU,

Dr. Gino BOLAFFI,

M. BORDUGE,

Professor Dr. FLORÈS DE LÉMUS, assisted by Professor VINVALES,

Dr. MANTZAVINOS, assisted by M. SBAROUNIS,

Dr. SINNINGHE DAMSTÉ,

Sir Percy THOMPSON, K.B.E., C.B.

For the question of the plurilateral convention:

Mr. W. D. CAREY, corresponding member of the Irish Free State.

Representing the International Chamber of Commerce:

M. R. JULLIARD.

I. EXAMINATION OF INTERNATIONAL CONVENTIONS RECENTLY CONCLUDED AND MUNICIPAL LAWS RECENTLY ENACTED FOR THE PREVENTION OF DOUBLE TAXATION AND TAX EVASION.

On June 16th, 1930, France and Italy concluded a Convention for the avoidance of double taxation and the settlement of other fiscal questions (Collection of Agreements, Volume III, page 24). This Convention is based on the division of taxes into impersonal and personal taxes, the former being attributed in principle to the country of origin and the latter to the country of domicil. It contains the provisions of draft Convention Ia of 1928, more or less modified, but the modifications do not appear to change the general tendency of Draft Ia. Article 11, however, while reserving to each State the right to tax capital invested in the other State by its nationals, requires them to deduct in advance from the tax that levied by the debtor's country under the general rule. Articles 16–19 are concerned with tax evasion; the two States undertake to exchange information regarding the application of taxes on income, in accordance with Draft III of 1928. With reference to assistance in the collection of taxes, the two States undertake to consider the possibility (Article 19, paragraph 2).

A Convention of a general nature has lately (March 16th, 1931) been concluded between Finland and Sweden. It concerns all direct taxes imposed on income (net or gross) or property. No distinction is drawn between impersonal and personal taxes. In principle the taxes referred to will be collected by the country of the taxpayer's domicil. The exceptions in favour of the country of origin correspond to those in Article 2, paragraph 1 (therefore not including income from mortgages), and Articles 5 and 7 of draft Convention 1a. Article 10 reserves to the country of domicil the right to graduate the tax on the basis of the total income, including income taxable in the other country. In principle the Convention applies only to the nationals of the two countries; but in any particular case the competent authorities may extend it to others, and more especially to nationals of countries which have concluded Conventions for the avoidance of double taxation with the two States in question (Final Protocol, paragraph 1).

Mention must next be made of a Convention, of May 16th, 1931, between France and Belgium. This Convention relates to direct impersonal taxes and to certain registration fees. As far as concerns impersonal taxes, the Convention is based on the ideas embodied in Article 2, paragraph 1, and Articles 3, 4, 6, 7, 8 and 9 of draft Convention Ia of 1928. There is a special clause (Article 6) dealing with income from transferable securities, for which, in view of the peculiar provisions of the national legislation, a kind of deduction in advance is allowed. This is also the case in regard to the application of French law to Belgian companies liable for the tax on income derived from capital (Article 8).

Article 13 deals with the reduction of registration fees due by a company on account of the registration of an establishment in the other country. Article 16 provides for mutual assistance in the collection of taxes, on the lines of draft Convention IV of 1928.

In the matter of maritime shipping, agreements—all on the lines of Article 5, paragraph 4, of draft Convention 1a—have been concluded between Belgium and Denmark (August 11th, 1930, Collection, Volume III, page 32); Belgium and Ecuador (May 2nd, 1929, loc. cit., page 33); Belgium and Finland (August 9th, 1930, loc. cit., page 34); Belgium and France (October 7th, 1929, loc. cit., page 35); Belgium and Iceland (August 11th, 1930, loc. cit., page 36); Belgium and Norway (July 22nd, 1930, loc. cit., page 37); Belgium and Sweden (July 22nd, 1930, loc. cit., page 38); Canada and Denmark (June 18th, 1929, Exchange of Notes, loc. cit., page 41); France and Norway (June 2nd, 1930, Exchange of Notes, loc. cit., page 52); France and the Netherlands (February 15th–28th, 1930, Exchange of Notes, loc. cit., page 54); Canada and Norway (May 2nd, 1929, Exchange


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of Notes); Denmark and the Netherlands (November 8th, 1930); the Irish Free State and Norway (October 21st, 1930); the United States of America and Spain (April 10th, 1930, Exchange of Notes) Denmark and Finland (January 12th, 1931, Exchange of Notes); the United States of America and Greece (August 19th, 1929. Exchange of Notes); France and Greece (February 18th, 1929, Exchange of Notes).

With regard to exemption from taxes on road traffic, mention should first be made of the International Convention concluded at Geneva in March 1931, which is dealt with in paragraph V of this report.

Various agreements have also been concluded upon this subject between Norway and the Netherlands (October 9th, 1930) and between Belgium and the Netherlands (March 16th, 1931), both completely exempting foreign motor vehicles; between Denmark and the Netherlands (Collection, Volume III, page 76) and between Danzig and Germany (Collection, Volume III, page 76), these two providing only temporary exemption.

In the matter of municipal laws we may first mention a Swedish Royal Decree of 1928 whereby His Majesty may conclude conventions, or issue, subject to reciprocity, unilateral regulations for the prevention of double taxation on income and property (Collection, Volume III, page 73); a Swedish Law of September 28th, 1928, relating to communal income taxes (Collection, Volume III, page 74); there is also the Netherlands Law of June 14th, 1930 (Collection, Volume III, page 66), whereby very wide powers are reserved to the Crown and the Minister of Finance to remedy double taxation either by treaty or by unilateral enactment, and (see Article 3) not necessarily on condition of reciprocity. This law repealed a law of 1920 (Collection, Volume I, page 201), which was based on the same principles but covered fewer taxes (for instance, it did not apply to succession duties).

Lastly, there is a Yugoslav Law of February 8th, 1928, which exempts various classes of income (for instance, the income of companies) from income tax, when the taxpayer can prove that he pays a direct tax on the same income in another country.

The foregoing examination shows that the evil of double taxation is continuing to diminish. It should be noted in particular that, in the sphere of maritime navigation, very favourable results have again been obtained.

The Fiscal Committee expresses the hope that the idea of the necessity of international fiscal conventions once brought into existence will make increasing progress. The rapid and effective procedure which led to the International Convention of March 1931 on the taxation of foreign motor vehicles seems to it of happy augury in this respect.

II. POSSIBILITY OF FRAMING PLURILATERAL CONVENTIONS FOR THE AVOIDANCE OF DOUBLE TAXATION OF CERTAIN CATEGORIES OF INCOME.

In the report on the proceedings of its previous session the Fiscal Committee laid down certain principles on which an endeavour might be made to obtain the approval of a large number of countries with a view to a plurilateral convention (document C.340.M.140.1930.II.Chapter V).

It added, in order to make its point of view quite clear, that “the adoption of a plurilateral convention on the lines proposed would not completely prevent double taxation as between the contracting parties even in regard to the classes of income enumerated; but it would appreciably encourage the tendency to reduce double taxation by uniform legislation—a method which was obviously superior in important respects to that of decreasing double taxation by bilateral conventions”.

The Fiscal Committee appointed a Sub-Committee, consisting of Dr. SINNINGHE DAMSTE (Chairman), Dr. BOLAFFI, Mr. CAREY and M. CLAVIER, to submit at the Committee's next session a draft plurilateral Convention based on the proposals mentioned above. The Sub-Committee drew up on this basis a draft, which is reproduced below in Appendix I, at the same time as a report which indicates its attitude on the questions put to it by the Fiscal Committee.

At its present session the Fiscal Committee resumed the examination of the questions raised at its second session and of the draft and report of its Sub-Committee.

The Fiscal Committee unanimously agreed that the Sub-Committee's proposals, with the amendments made by the Committee (Draft A reproduced in Appendix II), might be taken as a basis for a plurilateral convention for the avoidance of double taxation as between certain countries; but it also noted that these proposals could not at present be accepted by other countries because the clauses of Draft A settled the position of both residents and non-residents, with the object of entirely preventing double taxation for both, so far as concerns the classes of income contemplated in the draft—an arrangement which would impose upon Governments, in respect of their own residents, obligations which they are not prepared to assume.

An attempt was made to find another solution which would enable these countries to accede to a type of plurilateral convention which would settle the position of non-residents only, leaving double taxation in existence to a certain extent. During the session a draft Convention (Draft B, see Appendix III) was drawn up on these lines.

The idea was also expressed that the text of the Draft Ia prepared by the Government experts in 1928, which has already permitted of the conclusion of numerous bilateral Conventions, might


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provide a useful basis for the elaboration of a plurilateral Convention between certain countries which may regard it as essential to make a distinction between impersonal and personal taxes.

Both new proposals (Drafts A and B) were discussed in the Committee. In view of the outcome of the discussion, the Committee does not feel that it can reach a final decision at present. It [?] seems necessary to reconsider whether there is any real possibility of an adequate number of accessions to either or both of these two types of convention.

In so doing, the Committee had in mind the responsibility it would assume in recommending a type of plurilateral convention, having regard to all the difficulties that have come to light in the course of the development of the question in the Fiscal Committee.

As long ago as 1922 four economists, M. Bruins, M. Einaudi, M. Seligman and Sir Josiah Stamp, were asked to investigate the possibility of a plurilateral convention in the following terms:

“Can any general principles be formulated as the basis for an international convention to remove the evil consequences of double taxation, or should conventions be made between particular countries, limited to their own immediate requirements? In the latter alternative, can such particular conventions be so framed as to be capable ultimately of being embodied in a general convention?” (See document F.19. Introduction.)

In 1927 the Committee of technical experts expressed its opinion on the question of a plurilateral convention. This opinion is embodied in their final report (document C.216.M.85.1927.II.) as follows:

“A question discussed at great length by the Committee was, whether the Conventions should be collective, that is, signed by as many States as possible, or whether they should be merely bilateral.

“It would certainly be desirable that the States should conclude collective conventions, or even a single convention embodying all the others. Nevertheless, the Committee did not feel justified in recommending the adoption of this course. In the matter of double taxation in particular, the fiscal systems of the various countries are so fundamentally different that it seems at present practically impossible to draft a collective convention, unless it were worded in such general terms as to be of no practical value.

“For this reason, the Committee preferred to draw up standard bilateral conventions. If these texts are used by Governments in concluding such conventions, a certain measure of uniformity will be introduced in international fiscal law and, at a later stage of the evolution of that law, a system of general conventions may be established which will make possible the unification and codification of the rules previously laid down.”

The same ideas are to be found in the report submitted by the General Meeting of Government Experts (document C.562.M.178.1928.II).

These were the conditions under which the experts succeeded in framing three different types of bilateral conventions.

The Fiscal Committee has since taken cognisance of a resolution of the International Chamber of Commerce, emphasising the desirability of concluding a general or plurilateral convention for the avoidance of international double taxation, even if this convention had to be confined to certain special points.

Notwithstanding the difficulties indicated above, the Fiscal Committee endeavoured to find a solution for the problem of a plurilateral convention. At the same time it realised the necessity of making a thorough examination, so as to remove, as far as possible, any remaining doubts and to permit of the framing of draft plurilateral conventions which should be acceptable at all events to certain groups of countries.

As regards the two drafts referred to above, the essential ideas of the first are to be found in the Sub-Committee's report reproduced in Appendix I. Certain changes have been made, however, in the Sub-Committee's draft, chiefly with the object of making it quite clear that the exemptions provided for in the convention are compulsory. With reference to the essential ideas of the second, the Committee desires to reproduce below the views of those of its members who proposed this draft.

It is concealed by all that exemptions of the type provided for in Draft A are of a nature to avoid double taxation altogether. In form, Draft B is in the main intended to protect the residents of each of the contracting States from certain aspects of double taxation by enumerating and defining particular categories of income in respect of which these persons are to be immune from taxation in the country of origin while leaving other categories of income unaffected by the convention. Nevertheless, its authors consider that this Draft B is of greater practical importance and has a wider scope. The supporters of this draft consider that, when a country has, by signing a convention such as is found in that draft, secured for its residents relief from double taxation in regard to certain categories of income by limiting the right of foreign countries to tax its residents, that country will be more inclined to grant such relief to its own residents as will render them immune from double taxation in respect of other categories of income. Further, a preliminary condition of Draft B is agreement on the definite objects and on the limits of taxation at source or at origin, before deciding upon the exemption or relief measures necessary to be taken by any given country in order to protect its residents against all forms of double taxation.




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Lastly, Draft B, in Article 1, lays down in principle that the maximum relief granted to residents who are nationals shall also be granted to foreign residents where these are nationals of a contracting State.

The Committee is of the opinion that the proposals contained in this report may be used in the following manner.

A certain number of countries would be able to accept the first draft, others the second, others again Model Convention Ia of 1928. Even if the proposals led to no other result, it would be a step in the direction of avoiding double taxation. There is some hope, however, that certain countries will be able to sign two plurilateral conventions of different types simultaneously. In this way double taxation will be eliminated to an increasing extent, even though a single plurilateral convention may appear impracticable at present.

In order to ascertain whether such possibilities exist, and how great they may be, the Fiscal Committee in forwarding the report and its appendices to aid the members of the Committee, requests them to state whether they can accept one of the drafts referred to above, or two drafts of different types, and, if not, to offer observations supported by any amendments which might enable them to accept.

Although the question does not appear to it sufficiently ripe to warrant Government consultation, the Committee proposes that the present report be communicated to Governments for information.

III. FISCAL CLAUSES TO BE INSERTED IN THE DRAFT CONVENTION ON THE TREATMENT OF FOREIGNERS.

The Final Protocol of the First International Conference on the Treatment of Foreigners signed in Paris on December 5th, 1929, laying down the procedure for the preparation of the next Conference provides that, after having collected the observations and suggestions of Governments, the Secretariat shall ask the opinion of the advisory bodies of the League of Nations. The Fiscal Committee was thus called upon to give an opinion on the various questions coming within its competence.

Of the fiscal clauses to be found in the draft discussed in 1929, the majority were of a general fiscal character (e.g., equality of treatment for foreigners and of the goods of the contracting parties), while others, such as those to be found in former Article 13 were designed to prevent double taxation.

As regards the first-named category, the Fiscal Committee has appointed to examine the clauses in question a Sub-Committee composed of: M. BORDUGE, Chairman; M. BLAU, Dr. BOLAFFI, Professor FLORÈS DE LÉMUS, Sir Percy THOMPSON.

This Sub-Committee will be asked to give, on behalf of the Fiscal Committee, the opinion mentioned in the aforesaid protocol.

As regards the clauses designed to prevent double taxation, the Committee felt that they raised one of the most important questions that it had had to examine in connection with the framing of the plurilateral Convention—namely, the taxation of branches of foreign undertakings. The discussions which took place on this point showed, as already mentioned, that it was at present impossible to reach agreement in the matter. Such being the case, the Fiscal Committee thought that it would be inexpedient 'o insert in the future international Convention on the Treatment of Foreigners a clause similar to that of the old Article 13 of the Economic Committee's original draft.

IV. ENQUIRY INTO THE APPORTIONMENT OF PROFITS.

At its last session the Fiscal Committee made certain recommendations concerning the employment of the fund of $90,000 from the Rockefeller Foundation. It urged, in particular, that this fund should be used in the first place for the study of the question of the apportionment of profits, and it appointed a Sub-Committee to conduct the enquiry to be undertaken for this purpose and to take the necessary executive action.

The Sub-Committee entrusted this enquiry to Dr. Mitchell B. Carroll, a former Legal Adviser to the Treasury Department at Washington, who had been connected for some years with the work of the Government experts and the Fiscal Committee as assistant to Professor Adams. It was decided that Mr. Carroll should carry out enquiries on the spot in different countries before formulating general conclusions. The enquiry was begun in the five following countries: France, Germany, Great Britain, Spain and the United States. In each of these countries a special report was drawn up under Mr. Carroll's direction by one or more assistant experts, usually selected from the fiscal administration of that country. These reports start with a general survey of the fiscal laws applicable to the profits from undertakings in the countries in question, and this is followed by more definite replies to a questionnaire drawn up by the Secretariat.

Mr. Carroll has supplemented this work by a general report, in which he has endeavoured to indicate the principal rules of apportionment employed in those five countries; but he considered it impossible at this stage of the enquiry to reach final conclusions.




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The Sub Committee decided that the five reports, which constitute an important contribution to the enquiries relating to double taxation, should be published together with Mr. Carroll's report, which would serve as an introduction. It was also decided that the enquiry should be extended to other European and oversea countries, so as to cover the countries of greatest economic importance, or those whose legislation in the matter of apportionment presents special characteristics. The other countries will also be asked to furnish detailed information.

There is hence reason to hope that, before the Fiscal Committee's next session, Mr. Carroll will have collected the necessary data to enable him to formulate conclusions.

V. FISCAL RÉGIME APPLICABLE TO FOREIGN MOTOR VEHICLES.

The Fiscal Committee has noted with satisfaction the results obtained in regard to double taxation by the European Conference on Road Traffic which was held in Geneva, from March 16th to 30th, 1931. The Convention on the Taxation of Foreign Vehicles, as adopted by the Conference and signed by numerous States, reproduces, almost as it stands, the text prepared with the co-operation of the Fiscal Committee.

This Convention applies to motor touring-vehicles, to the exclusion of hired vehicles and taxi-cabs, which were also covered by the original draft. For vehicles travelling in countries other than that in which they were registered, it provides an exemption of ninety days per annum in each of those countries. For this purpose, a fiscal permit is being created which, like the triptych and the Customs passbook, will become an essential document for the international circulation of vehicles.

VI. TAXATION OF INSTRUMENTS OF INTERNATIONAL COMMERCE (BILLS OF EXCHANGE, PROMISSORY NOTES, CHEQUES, BILLS OF LADING, ETC.).

The International Conference for the Unification of Laws on Bills of Exchange, Promissory Notes and Cheques, which held its second session, devoted to the question of cheques, in March 1931, informed the Fiscal Committee that the following recommendation had been submitted by the International Chamber of Commerce:

“Promissory notes, bills of exchange, cheques and bills of lading should be made the subject of conventions to the effect that taxes should be collected on those documents only in one country, either that of issue or that of performance (payment in the case of bills of exchange and cheques, destination in the case of bills of lading).

“The apportionment or allocation of charges on a flat basis might, in particular cases, also be considered.”

The Conference fully approved this recommendation and added that, having been informed that certain countries did not collect any tax on bills of exchange and cheques, it considered that the [?] of this practice was highly desirable with a view to promoting and increasing the use of bills of exchange and cheques, and it adopted a recommendation to this effect.

The Fiscal Committee, being desirous of ascertaining whether fiscal charges (imposts, taxes, stamp duties, etc.) on the international instruments of commerce mentioned above may, owing to the superposition of national charges, be to some extent an impediment to the free operation of commercial exchanges, decided to undertake the study of this problem. It accordingly drew up a questionnaire, which will be sent by the Secretariat to all its regular and corresponding members. It also appointed a Sub-Committee, consisting of M. BLAU (Chairman), Professor ADAMS, M. BORDUGE [?], Professor FLORÈS DE LÉMUS and M. MANTZAVINOS, to collate the replies to this questionnaire and submit a report to the Committee at its next session. The International Chamber of Commerce will also be consulted.

VII. DOUBLE TAXATION IN REGARD TO THE TURNOVER TAX.

At the general meeting of Government experts held at Geneva in 1928, the point was raised whether measures designed to prevent double taxation should not also be extended to the turnover tax. A suggestion to that effect has since been made by the International Chamber of Commerce.

A first exchange of views on this problem took place in the Fiscal Committee, which considered that it presented a different aspect according to whether the turnover tax was levied directly on the


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income of the taxpayers or on the movement of goods or capital. The Committee decided to investigate the question and drew up for this purpose a questionnaire which will be sent by the Secretariat to all its regular and corresponding members.

The Sub-Committee appointed to examine the question of the taxation of instruments of international commerce (bills of exchange, cheques, etc.), whose members have already been enumerated, has been asked to collate the replies to this questionnaire and submit a report to the Fiscal Committee at its next session. The International Chamber of Commerce will also be consulted.

VIII. CUSTOMS AND FISCAL DUTIES ON NEWSPAPERS AND PERIODICALS.

The Joint Committee on the question of Customs and Fiscal Duties on Newspapers and Periodicals, to which the Fiscal Committee had delegated several of its members, held a first meeting on June 3rd, 1931, under the Chairmanship of M. BLAU, who submitted a report to the Fiscal Committee.

The Joint Committee found that the existing documentary material was inadequate and decided that the Secretariat of the Communications and Transit Organisation should send to the Governments, invited to the European Conference on the Transport of Newspapers and Periodicals held at Geneva from November 25th to 29th, 1929, a full and detailed questionnaire dealing with all duties, fees and taxes of every kind imposed on newspapers and periodicals. The same questionnaire will be sent by the Secretariat to the regular and corresponding members of the Fiscal Committee, who are nationals of non-European countries, as well as to the Press associations, with the request that they furnish the Secretariat with all available information as to the actual position in their respective countries.

On the basis of this information the Joint Committee will subsequently consider what measures it deems it expedient to propose.

IX. PRINCIPLES ENABLING THE DOUBLE TAXATION OF AUTHORS' RIGHTS AND PATENTS TO BE AVOIDED.

The principles laid down in this matter by the Fiscal Committee at its second session were re-examined and did not give rise to any observation. They had in the meantime received approval from various quarters, notably the International Chamber of Commerce at its Washington Congress.

The Fiscal Committee declared these principles adopted at second reading.

X. DEFINITION OF THE TERM “AUTONOMOUS AGENT”.

The Fiscal Committee had before it various observations, emanating in particular from the International Chamber of Commerce and the Hague Industrial Council, concerning the definition of the term “autonomous agent” as adopted by the Committee at second reading during its previous session.

These observations were examined first by a Sub-Committee consisting of Dr. BOLAFFI (Chairman), M. MANTZAVINOS and Dr. SINNINGHE DAMSTÉ, and then by the plenary meeting.

As a result of this investigation, the Committee noted that, for special reasons, certain countries might be led to adopt provisions exempting, not only business done by an independent agent, but also business done by agents of other kinds and of limited powers. (See, for instance, the Treaty of July 25th, 1928, between Germany and Sweden.) Nevertheless, the Committee considered that this fact did not affect the definition of “independent agent” given in its previous report and that there was no reason to modify it.

XI. DRAFT RESOLUTION PROPOSED BY SIR PERCY THOMPSON.

At the Fiscal Committee's second session a draft resolution was submitted by Sir Percy Thompson, the discussion of which was postponed until the present session.

In the meantime Sir Percy Thompson had made certain changes in the wording of his resolution, the final text of which reads as follows:

“That the prevalent view that a certain economic result—viz., the creation of an artificial barrier which impedes the free flow of capital into the channels in which it can be most


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usefully and profitably employed—is produced by double taxation is fallacious; that origin taxation is solely responsible for this economic result which would remain unaffected if all taxes based on residence were everywhere abolished and in consequence double taxation ceased to exist.”

The Committee noted the very interesting explanations furnished by Sir Percy Thompson. It considered that the question as expounded presented, in addition to a highly practical side, other aspects which fell rather within the field of theoretical economics. The Committee therefore thought it necessary that fuller preparation should be made for the discussion than was possible at the time. Sir Percy Thompson was accordingly requested to be good enough to submit to his colleagues a written statement setting forth the reasons which he had already given them verbally, to enable the members of the Committee to go more fully into the matter and be ready to discuss it at a later session.

XII. GENERAL TABLES SHOWING THE FISCAL SYSTEMS OF THE VARIOUS COUNTRIES.

The Committee noted with interest the work done by the New York State Tax Commission and the Corporation Trust Company, which have published tables summarising the systems of taxation of the various countries.

The members of the Committee signified their readiness to assist to the utmost of their ability in enlarging the scope of this work. As regards the details of the proposed co-operation, it would be desirable for the Corporation Trust Company to furnish the information required for the practical planning of the work.

XIII. PREPARATION OF INTERNATIONAL CONVENTIONS CONCLUDED UNDER THE AUSPICES OF THE LEAGUE OF NATIONS.

The Assembly resolution of October 3rd, 1930 (Section IV), lays down the preparatory procedure to be followed in principle in the case of all general conventions to be negotiated under the auspices of the League. The Fiscal Committee, in common with the other technical organisations of the League, is invited to examine this procedure in order that the Assembly at its next session may judge whether any changes should be made in it.

The Committee notes that, in the terms of the resolution itself, the rules of procedure which it lays down are open to modification and exceptions, particularly in cases where, in view of the nature of the questions for discussion or special circumstances, “the Assembly or the Council considers other methods to be more appropriate”.

The Committee feels bound to insist on the importance of this reservation, which, from its point of view, constitutes an essential safeguard. It may sometimes be desirable to conclude within a short period international conventions for limited purposes, which do not require any lengthy procedure of consultation. The case of the Convention on the Fiscal Treatment of Foreign Motor Vehicles, which was signed after preparatory work of barely eighteen months, shows that expeditions procedure may have satisfactory results. The Fiscal Committee accordingly considers that the possibility should be left open for it to have recourse to such procedure in case of need.

Appendix I. PLURILATERAL CONVENTION FOR THE PREVENTION OF THE DOUBLE TAXATION OF CERTAIN CATEGORIES OF INCOME.

1. REPORT BY THE SPECIAL SUB-COMMITTEE TO THE FISCAL COMMITTEE.

The Sub-Committee appointed by the Fiscal Committee at its second session to draw up a draft plurilateral convention for the prevention of the double taxation of certain categories of income, to which it seems possible to secure the accession of a considerable number of countries, held two sessions, the first at The Hague on August 21st and 22nd, 1930, and the second at Rome from February 24th to March 2nd, 1931. This Sub-Committee consisted of the following members:

Dr. Gino BOLAFFI, Director and Chief of Division at the Ministry of Finance, Rome.

Mr. W. D. CAREY, Revenue Commissioner at Dublin.

M. Ch. CLAVIER, Director-General of Taxes at Brussels.

Dr. SINNINGHE DAMSTÉ, Director-General of Taxes, The Hague.




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The Sub-Committee elected Dr. SINNINGHE DAMSTÉ as Chairman.

The Sub-Committee took as a base of its discussions the general proposals drawn up by the Fiscal Committee (document C.340.M.140.1930.II.§V).

After devoting its first session to a thorough examination of the principles contained in these proposals and drawing up a preliminary draft Convention, the Sub-Committee discussed at its second session the amended texts drawn up in the interval by M. Clavier and Mr. Carey.

The title of the draft indicates that the aim of the plurilateral Convention is to prevent the double taxation of certain categories of income, and the preamble adds that the Convention is based on the principle of reciprocity.

Article 1 makes it clear that the Convention does not concern all taxable persons but only those having their fiscal domicile in one of the contracting States and deriving certain forms of income, specified in the Convention, in whole or in part from one or more other contracting States.

By fiscal domicile the Convention understands the place of a natural person's normal residence, in other words his permanent home. In the case of juristic persons the fiscal domicile is the place of their real centre of management.note Any special cases will be settled by the application of Article 17 in consideration of the facts and of the domestic legislation of each State.

Although the terms of reference given to it by the Fiscal Committee were quite wide, the Sub-Committee thought it advisable to confine itself in the draft Convention to the categories of income referred to in the Fiscal Committee's proposals, with the exception that it added interest derived from mortgages. This income as well as that derived from immovable property is taxable only in the State in which such property is situated. Income derived from mortgages on ships is taxable only in the State in which the ships are registered. The Sub-Committee considered that the ships themselves could not be included in the immovable property referred to in Article 2.

Article 4 is one of the most important in the Convention; it refers to the income of industrial, commercial or agricultural enterprises which possess permanent establishments in two or more contracting States. The Fiscal Committee restricted its proposal No. 4 on this question to companies, leaving it to the Sub-Committee to define what was meant by a company. The Sub-Committee considered that this term should be interpreted as widely as possible and should apply, not only to joint-stock companies, but to legally constituted companies composed of persons having a legal status distinct from that of partners. On the other hand, Article 4 does not apply to natural persons.

The text of Article 4 is based on previous drafts and on the principles laid down last May by the Fiscal Committee.

Nevertheless, in order to obtain the accession of States which at present levy a tax on the whole of a company's profits, even if part of those profits is derived from permanent establishments situated abroad, the first paragraph of Article 4 was drafted in such a way as to recognise this practice, but subject to a clause (Article 15) permitting the company concerned to obtain a refund of that part of its contribution which constitutes a double taxation.

The Fiscal Committee asked the Sub-Committee to consider whether it would be desirable to add to the article concerning companies 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.”

After discussion, the Sub-Committee considered that this addition might lead to considerable difficulties and decided to reject it.

Article 5 reproduces the text previously adopted with regard to the income derived from maritime shipping or air navigation enterprises, except that it has been confined to companies with a view to concordance with Article 4, and that it has been stated that companies are taxable at the place of their real centre of management.

As regards interest on public loans (Article 6), which is not taxable in the State of fiscal domicile of the creditors, the interest on loans issued before the entry into force of the Convention has been left out of account, so as not to affect acquired rights.

Articles 7, 8 and 9 refer respectively to: (a) the earnings of frontier workers; (b) authors' rights and income from patents; (c) life annuities, which are to be taxable only in the State of fiscal domicile of the beneficiaries.

As regards authors' rights, it has been thought advisable for the sake of simplicity to condense the text adopted previously.

In Articles 10 and 11 rules have been laid down regarding the special régime applicable to: (a) the salaries of officials serving abroad; (b) public pensions. Both these sources of income will be taxable only in the State which pays them.

The Sub-Committee thought that it would be well to insert in the Convention an article reproducing a clause in draft Convention I a referring to the personal tax on natural persons having a fiscal domicile in two or more contracting States. In such cases the tax will be apportioned in these States according to the length of stay in each country as compared with the total length of stay in all the countries concerned during the fiscal year. Relief will be conditional on the submission of a claim in the form and within the time-limits fixed. If necessary, the relief will be given by way of repayment, so that the contracting parties will not have to modify their national legislations.




  ― 10[4234] ―

Another method of apportioning the tax might be adopted, in particular, if the taxable person did not reside [?] during the fiscal year in a country but has a fiscal domicile therein. Article 12 afted [?] on these lines.

Articles 13 to 15 contain measures to avoid double taxation when the State of fiscal domicile [?] an impersonal or personal tax on income which under the Convention is taxable solely in [?] State of [?] or when the latter levies a tax on income which under the Convention is taxable ly [?] in the State of the taxpayer's fiscal domicile.

In the former case the proportion of relief will be equal to the proportion between this income and the local taxable income, so that the rate applied will be maintained. In other words the relief will be determined by the application of a rule of three. It may not, however, exceed the amount of tax paid in the country of origin of the income.

In this letter case the tax paid in the country of origin will simply be refunded.

The method of refunding may also be followed in the first case mentioned above.

Article 16 reproduces the terms of Article 13 of Draft Ia.

Articles 17 and following refer to the arbitration clause. The Sub-Committee decided to submit to the Fiscal Committee without modification the articles unofficially drawn up by M. Barandon [?], as the matter can more profitably be discussed from a technical point of view at Geneva where the services of the Legal Section of the Secretariat will be available.

The Sub-Committee considered that signatory States might have difficulties in introducing into their domestic legislation certain provisions of the Convention for the Prevention of Double Taxation. Thus the question atose [?] whether the accession of the signatory States to all the articles of the Convention [?] should be compalsory or whether they should be left free to accede to specific articles only. The latter method would have the advantage of allowing a very wide Convention to be drawn up, embracing practically all cases of double taxation, and of making it easy for all countries to accede in principle to such a Convention, which despite reservations by the different countries on particular points would none the less remain an ideal to be aimed at by all. After careful consideration, however, the Sub-Committee thought such a Convention would call for [?] sacrifices from the different countries and that, if left free to limit their accession, the majority would be tempted to avail themselves of this freedom with the result that the Convention would provisionally fail in its object. The Sub-Committee therefore refused to adopt the principle of an optional accession to the different articles of the Convention. It admitted of one exception, however. The discussions had shown that Article 15 deals with the relief granted by a country in which the real centre of management of an industrial, commercial or agricultural company is ted [?] in respect of profits earned by that company in a country in which it has a permanent establishment. The discussion had shown that this article was regarded by most of the members is essential to the success of the Convention. If, however, under present conditions certain cou [?] had serious difficulties in consenting to the sacrifices imposed on them by Article 15, it was thought that they should temporarily be given the option of postponing their accession to this article. The Fiscal Committee will have to judge whether the meaning of the word “temporarily” should be further defined.note

2. DRAFT PLURILATERAL CONVENTION FOR THE PREVENTION OF THE DOUBLE TAXATION OF CERTAIN CATEGORIES OF INCOME.

With a view to preventing double taxation in the matter of direct impersonal or personal taxation levied on certain categories of income, the High Contracting Parties have, subject to reciprocity, agreed to the following provisions:

Article 1.

Taxable persons and entities having their fiscal domicile in the territory of one of the contracting States and detiving, in whole or in part, from the territory of one or more of the other contracting States any of the forms of income to which this Convention relates, shall, in so far as such income is concerned, be accorded the special treatment defined in the following articles.

For the purposes of the present Convention, the fiscal domicile of a natural person is the place of his normal residence, in other words, his permanent home, while the fiscal domicile of a juristic person is its real centre of management.

Article 2.

Income from immovable property which corresponds to the actual or presumed rental value of such property, and all other income derived from such property which cannot be regarded as income derived from industrial, commercial or agricultural enterprises, shall be taxable only in the State in which the property is situate.

Article 3.

Income derived from mortgages on the property referred to in Article 2 shall be taxable only in the State in which that property is situate.




  ― 11[4235] ―

Income derived from mortgages secured on ships shall be taxable only in the State in which the ships are registered.

Article 4.

Without prejudice to the foregoing provisions, and subject to the application of Article 15note a company (or other association having a legal existence of its own) operating one or more industrial, commercial or agricultural enterprises shall be taxable in respect of the income from such enterprises only in the State of its fiscal domicile, provided, however, that, if such company (or association) possesses [?] in one or more other countries one or more permanent establishments, that portion of the income derived from each State shall be taxable therein.

The competent authorities of the countries concerned shall come to an agreement, if necessary, regarding the methods of apportionment.

For the purposes of the present article, the following shall be regarded as permanent establishments: branches, mines and oilfields, fixed installations, factories, workshops, agencies, warehouses, offices and depots.

The fact that a company (or association) has business dealings with a foreign country through an agent of genuinely independent status (broker, commission agent, etc.) shall not be held to mean that it has a permanent establishment in that country.

Article 5.

As an exception to the end of the first paragraph of Article 4, a company (or other association having a legal existence of its own) operating one or more maritime shipping or air navigation enterprises shall be taxable in respect of the income derived from such enterprises only at its real centre of management.

Article 6.

Income from public loans shall be taxable only in the State of the fiscal domicile of the creditors. This provision does not refer to income from loans issued prior to the entry into force of the present Convention.

Article 7.

The earnings of workers living on one side of a frontier and working on the other shall be taxable only in the State of those workers' fiscal domicile.

Article 8.

Authors' rights and income from patents shall be taxable only in the State of fiscal domicile of beneficiaries. If, however, they are collected by persons to whom these rights have been assigned for a consideration, or fall on any other grounds into the category of industrial or commercial income, they shall be taxable as such under the conditions laid down in Article 4.

Article 9.

Life annuities shall be taxable only in the State of fiscal domicile of the annuitants.

Article 10.

The salary of an official or public servant who is serving abroad shall be taxable only in the State liable for payment of such salary.

Article 11.

A public pension shall be taxable only in the State liable for payment of such pension.

Article 12.

When a taxable natural person has a fiscal domicile in the territory of two or more of the contracting States, he may claim that the impersonal or personal tax on the income referred to in Articles 6 to 9 shall be apportioned according to the length of his stay in each as compared with the total length of his stay in all those countries during the financial year. The appropriate relief shall, when necessary, be given by way of repayment.

The countries concerned may, if they think fit, adopt some method of apportioning the tax other than that indicated in the previous paragraph, in particular when the taxpayer has not resided during the fiscal year in a country in which he has a fiscal domicile.

The claim referred to in the first paragraph must be presented in the form prescribed by the competent authorities of each country, accompanied by vouchers, within six months after the close of the financial year, provided, however, that the time allowed for making the claim shall not be less than six months from the date of the notification to the taxpayer of the latest assessment.

Article 13.

When the State of fiscal domicile of a recipient of the income referred to in Articles 2, 3, 10 and 11 has charged tax on any such income, the interested party may claim partial relief.




  ― 12[4936] ―

The proportion of this relief shall be equal to the proportion between this income and the total income chargeable, but it may not exceed the amount of the tax payable on that income in the State of origin. The appropriate relief shall, where necessary, be given by way of repayment.

The last paragraph of Article 12 shall apply in this case; the interested party must produce the official documents certifying that the tax has been paid in the State in which the income originates.note

Article 14.

If the State of origin of the income referred to in Articles 6 to 9 has levied a tax on such income, the interested party may claim a refund, provided he proves that the income has been taxed in the State of his fiscal domicile.

The last paragraph of Article 12 shall apply to claims under the present Article.note

Article 15.note

If, in the case provided for at the end of the first paragraph of Article 4, the State of fiscal domicile of a company has levied a tax on the income of its permanent establishments situated in the territory of other contracting States, that company may claim partial relief from the tax. The last two paragraphs of Article 13, and also the second paragraph of Article 4, shall apply on this case.

Article 16.

As regards any special provisions which may be necessary for the application of the present Convention, more particularly in cases not expressly provided for, but generally covered by the Convention, the financial administrations of the contracting parties shall confer together, and shall take the necessary steps in accordance with the spirit of this Convention.

Article 17.

Should a dispute arise between two or more of the contracting parties as to the interpretation or application of the provisions of the present Convention, and should such dispute not prove capable of settlement either direct between the parties or by any other method of friendly arrangement, the parties may, if they are all agreed, submit their dispute to such technical body as the Council of the League of Nations may appoint for the purpose.

This body will give an opinion after hearing the parties and, if necessary, arranging a meeting between them. The opinion must be delivered within … months of the date on which the dispute has been referred to the said body.

The High Contracting Parties may agree, prior to the opening of such procedure, to accept the opinion given by this body.

Article 18.

Should the parties to the dispute decide not to ask for the opinion mentioned in the previous articles, or should they fail to agree upon this course, or, again, should they not agree to accept the opinion, the dispute shall be submitted for decision to the Permanent Court of International Justice unless the parties agree, under the conditions hereinafter stipulated, to have recourse to an arbitral tribunal.

Article 19.

If, in the case provided for in the previous article, the parties agree to have recourse to an arbitral tribunal, they shall draw up a special agreement determining the subject of the dispute, the arbitrators and the procedure to be followed.

Article 20.

If no agreement is reached between the parties as to the special agreement referred to in the previous article, or if they fail to appoint arbitrators, each party to the dispute shall, after a previous


  ― 13[4937] ―
notice of … months, have the right to bring it direct before the Permanent Court of International Justice by means of a requisition.

Article 21.

Neither the opening of the procedure before the technical body referred to in Article 17 nor the opinion which it delivers shall in any case involve the suspension of the measures complained of; the same rule shall apply in the event of proceedings before an arbitral tribunal or the Permanent Court of International Justice unless the Court decides otherwise under Article 41 of its Statute.

TEXTS TO BE INSERTED IN THE PROTOCOL OF THE CONVENTION.

A. The adoption of the present Convention by two States which have previously concluded a bilateral Convention for the prevention of double taxation shall not involve the replacement or amendment of the provisions of that bilateral Convention so long as it remains in force.

B. Since the advantages of this Convention are accorded subject to reciprocity, they cannot be claimed from any contracting party, in virtue of the most-favoured-nation clause, by a State not a party to this Convention.

C. In acceding to the present Convention, each of the High Contracting Parties shall have the right temporarily to reserve its accession to Article 15; in that case, the other High Contracting Parties shall not be bound to apply the provisions of Article 15 to taxpayers having their fiscal domicile in the country or countries which have made that reservation.

Appendix II.

DRAFT PLURILATERAL CONVENTION “A” FOR THE PREVENTION OF THE DOUBLE TAXATION OF CERTAIN CATEGORIES OF INCOME.

With a view to preventing double taxation in the matter of direct taxation levied on certain categories of income, the High Contracting Parties have, subject to reciprocity, agreed to the following provisions:

Article 1.

Taxable persons and entities having their fiscal domicile in the territory of one of the contracting States and deriving, in whole or in part, from the territory of one or more of the other contracting States any of the forms of income to which this Convention relates, shall, in so far as such income is concerned, be accorded the special treatment defined in the following articles.

For the purposes of the present Convention, the fiscal domicile of a natural person is considered to be the place of his normal residence, in other words, his permanent home, while the fiscal domicile of a juristic person is considered to be its real centre of management.

Article 2.

Income from immovable property which corresponds to the actual or presumed rental value of such property, and all other income derived from such property which cannot be regarded as income derived from industrial, commercial or agricultural enterprises, shall be taxable only in the State in which the property is situate.

Article 3.

Income derived from mortgages on the property referred to in Article 2 shall be taxable only in the State in which that property is situate.

Income derived from mortgages secured on ships shall be taxable only in the State in which the ships are registered.

Article 4.

Without prejudice to the foregoing provisions, the income of industrial, commercial or agricultural enterprises shall only be taxable in the States in which they have permanent establishments, each of these States being authorised to tax the profit derived from the permanent establishments situated in its territory. Nevertheless, the present Convention does not affect the right the contracting States may have to tax the income derived by enterprises domiciled in their territory from activities carried on in the territory of non-contracting States.

The competent authorities of the countries in which permanent establishments are situated shall come to an agreement, if necessary, regarding the methods of apportionment, so as to confine the taxation of each State to the profits earned in the territory of that State.




  ― 14[4938] ―

For the purposes of the present article, the following shall be regarded as permanent establishments; real centres of management, branches, mines and oilfields, permanent installations, factories, workshops, agencies, warehouses, offices and depots.

The fact that an enterprise (or association) has business dealings with a foreign country through an agent of genuinely independent status (broker, commission agent, etc.) shall not be held to mean that it has a permanent establishment in that country.

Article 5.

As an exception to the first paragraph of Article 4, a maritime shipping or air navigation enterprise shall be taxable only at its real centre of management.

Article 6.

Income from public loans shall be taxable only in the State of the fiscal domicile of the creditors. This provision does not refer to income from loans issued prior to the entry into force of the present Convention.

Article 7.

The income of the liberal professions shall be taxable only in the States in which they are regularly exercised.

Article 8.

The earnings of workers living on one side of a frontier and working on the other shall be taxable only in the State of those workers' fiscal domicile.

Article 9.

Authors' rights and income from patents shall be taxable only in the State of fiscal domicile of the beneficiaries. If, however, they are collected by persons to whom these rights have been assigned for a consideration, or fall on any other grounds into the category of industrial or commercial income, they shall be taxable as such under the conditions laid down in Article 4.

Article 10.

Life annuities shall be taxable only in the State of fiscal domicile of the annuitants.

Article 11.

The salary of an official or public servant who is serving abroad shall be taxable only in the State liable for payment of such salary. The same applies to scholarships awarded for studies abroad.

Article 12.

A public pension shall be taxable only in the State liable for payment of such pension.

Article 13.

When a taxable natural person has a fiscal domicile in the territory of two or more of the contracting States, he may claim that the impersonal or personal tax on the income referred to in Articles 6 to 10 shall be apportioned according to the length of his stay in each as compared with the total length of his stay in all those countries during the financial year. The appropriate relief shall be given either by way of exemption or by way of a rebate involving, if necessary, a [?].

The countries concerned may, if they think fit, adopt some method of apportioning the tax other than that indicated in the previous paragraph, in particular when the taxpayer has not resided during the fiscal year in a country in which he has a fiscal domicile.

The claim referred to in the first paragraph must be presented in the form prescribed by the competent authorities of each country, accompanied by vouchers, within six months after the close of the financial year, provided, however, that the time allowed for making the claim shall not be less than six months from the date of the notification to the taxpayer of the latest assessment.

Article 14.

The relief provided for in Articles 2, 3, 11 and 12 from the taxation of the country of the fiscal domicile of the recipient of the income shall be given either by way of exemption or by way of a rebate involving, if necessary, a refund of tax, and the following provisions shall have effect in relation to any item of income to which these articles refer:

  • (a) The exemption of any such item of income from taxation in the country of domicile of the recipient shall not operate to reduce the rate of personal tax payable in that country.
  • (b) The country of domicile shall be deemed to have discharged its obligations under the said articles if it recoups the taxpayer to the extent of the full tax borne in the country of origin.



  •   ― 15[4939] ―
  • (c) The rules laid down in the last paragraph of Article 13 shall apply to claims under the present article; the interested party must produce the official documents certifying that the tax has been paid in the State in which the income originates

Article 15.

The relief resulting from the application of Article 4 shall be given either by way of exemption or by way of a rebate involving, if necessary, a refund of tax.

The rules laid down in the second paragraph of Article 14 shall apply.

Article 16.

The relief provided for by Articles 6 to 10 from the taxation of the country in which the income arises shall be given either by way of exemption or by way of a rebate involving, if necessary, a refund of tax.

The rules laid down in the last paragraph of Article 13 shall apply.

Article 17.

As regards any special provisions which may be necessary for the application of the present Convention, more particularly in cases not expressly provided for, but generally covered by the Convention, the financial administrations of the High Contracting Parties shall confer together, and shall take the necessary steps in accordance with the spirit of this Convention.

(Here follow the articles establishing an arbitral procedure. See Articles 17–21 of the Sub-Committee's Draft, Appendix I B.)

Appendix III. DRAFT PLURILATERAL CONVENTION “B”.

The High Contracting Parties have, subject to reciprocity, agreed to the following provisions:

Article 1.

Each of the High Contracting Parties reserves the right to tax taxable persons and entities having their fiscal domicile in its territory in respect of the whole of their income irrespective of origin.

Each of the High Contracting Parties undertakes, when applying the first paragraph of the present article, not to treat persons and entities of the nationality of one of the other High Contracting Parties less favourably than it treats its own nationals of the nationals of any foreign State.

For the purposes of the present Convention the fiscal domicile of a natural person shall be taken to mean the place of his normal residence, in other words, his permanent home, and the fiscal domicile of a juristic person shall be taken to mean its real centre of management.

Article 2.

Each of the High Contracting Parties reserves the right to tax natural and juristic persons not domicilied in its territory in respect of income which it regards as originating in that territory subject to the exceptions laid down in Article 3.

Article 3.

Article 2 shall not apply to the following:

  • (a) Income from maritime or air navigation undertakings;
  • (b) Income from industrial, commercial or agricultural undertakings not included under paragraph (a) of this article in so far as it is not derived from a permanent establishment situated in the country;
  • (c) Income from public loans issued after the present Convention goes into effect prior to the entry into force of the present Convention;
  • (d) The earnings of workers living on one side of the frontier and working on the other;
  • (e) Authors' rights and income from patents. If, however, they are collected by persons to whom these rights have been assigned for a consideration, or fall on any other grounds into the category of industrial or commercial income, they shall be treated under the rule laid down in paragraph (b) above;
  • (f) Life annuities.



  ― 16[4940] ―

Article 4.

For the purposes of applying Article 3 (b) the following shall be regarded as permanent establishments: branches, mines and oilfields, plants, factories, workshops, agencies, warehouses, offices and depots.

The fact that an undertaking has business dealings with a foreign country through an agent of genuinely independent status (broker, commission agent, etc.) shall not be held to mean that it has a permanent establishment in that country.

The contracting parties undertake to instruct their competent authorities to come to an agreement, if necessary, regarding the methods of apportionment.

Article 5.

When a taxable natural person has a fiscal domicile in the territory of two or more of the contracting States, he may claim that the tax shall be apportioned according to the length of his stay in each as compared with the total length of his stay in all those countries during the financial year. The appropriate relief shall, when necessary, be given by way of repayment.

The countries concerned may, if they think fit, adopt some method of apportioning the tax other than that indicated in the previous paragraph, in particular when the taxpayer has not resided during the fiscal year in a country in which he has a fiscal domicile.

The claim referred to in the first paragraph must be presented in the form prescribed by the competent authorities of each country, accompanied by vouchers, within six months after the close of the financial year, provided, however, that the time allowed for making the claim shall not be less than six months from the date of the notification to the taxpayer of the latest assessment.

Article 6.

The High Contracting Parties reserve the right to apply the exceptions provided for in Article 3 by way of appropriate relief. For such case relief shall only be accorded on condition of its being established that the income in question has been taxed in the State of fiscal domicile. The last paragraph of Article 5 shall be applicable to the claim provided for in the present article.

Article 7.

As regards any special provisions which may be necessary for the application of the present Convention, more particularly in cases not expressly provided for, but generally covered by the Convention, the financial administrations of the High Contracting Parties shall confer together and shall take the necessary steps in accordance with the spirit of this Convention.

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