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Protocol between the Government of Canada and the Government of the French Republic amending the Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital [1988] CATSer 28 (1 October 1988)

E102258 - CTS 1988 No. 12

PROTOCOL BETWEEN THE GOVERNMENT OF CANADA AND THE GOVERNMENT OF THE FRENCH REPUBLIC AMENDING THE CON­VENTION FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON IN­COME AND ON CAPITAL SIGNED MAY 2, 1975

The Government of Canada and the Government of the French Republic, desiring to conclude a Protocol amending the Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital signed at Paris on May 2, 1975 (hereinafter referred to as “the Convention”), have agreed as follows:

ARTICLE 1

1. There shall be added to Article 8 of the Convention a new paragraph 4, written as follows:

"4. For the purposes of this Convention, profits derived by an enterprise of a Contracting State from the operation of ships or aircraft in international traffic include profits from:

(a) the rental of ships or aircraft operated in international traffic;

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

(c) the rental of ships, aircraft or containers (including trailers and related equipment for the transport of containers) provided that such profits are incidental to profits referred to in paragraph 1, 4(a) or 4(b).”

2. There shall be added to Article 8 of the Convention a new paragraph 5, written as follows:

"5. Notwithstanding the provisions of paragraph 3 of Article 2, air transport enterprises of Canada whose aircraft embark or debark passengers or goods in French territory shall not be subject to the professional tax in France as long as air transport enterprises of France are not subject to a similar tax in Canada.”

ARTICLE 2

1. Paragraph 2 of Article 10 of the Convention shall be deleted and replaced by the following:

"2. However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident, and according to the laws of that State, but if the recipient is the beneficial owner of the dividends, the tax so charged shall not exceed:

(a) ten per cent of the gross amount of the dividends if the beneficial owner is a company (other than a partnership) which holds directly at least 10 per cent of the voting power of the company paying the dividends;

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

This paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.”

2. Paragraph 7 of Article 10 of the Convention shall be deleted and replaced by the following:

"7. Notwithstanding any provision of this Convention:

(a) a company which is a resident of France and which has a permanent establishment in Canada shall, in accordance with the provisions of Canadian law, remain subject to the additional tax on companies other than Canadian corporations, but the rate of such tax shall not exceed 10 per cent;

(b) a company which is a resident of Canada and which has a permanent establishment in France shall remain subject to the withholding tax in accordance with the provisions of French law, but the rate of such tax shall not exceed 10 per cent.”

ARTICLE 3

1. Paragraph 2 of Article 11 of the Convention shall be deleted and replaced by the following:

"2. However, such interest may also be taxed in the Contracting State in which it arises and according to the laws of that State, but if the recipient is the beneficial owner of the interest the tax so charged shall not exceed 10 per cent of the gross amount of the interest.”

2. Subparagraph (c) of paragraph 4 of Article 11 of the Convention shall be deleted and replaced by the following:

"(c) interest arising in Canada and paid to a resident of France shall be taxable only in France if it is related to a loan or a debt granted, guaranteed or assisted by any institution of that State acting within the framework of the public aid to external trade.”

Subparagraph (a) of paragraph 3 of Article 12 of the Convention shall be deleted and replaced by the following:

"(a) copyright royalties and other like payments in respect of the production or reproduction of any literary, dramatic, musical or artistic work (but not including royalties in respect of motion pictures and works on film, videotape or other means of reproduction for use in connection with television broadcasting) arising in a Contracting State and paid to a resident of the other Contracting State who is subject to tax thereon shall be taxable only in that other State;”

ARTICLE 5

1. There shall be added to paragraph 1 of Article 13 of the Convention a new subparagraph (d), written as follows:

"(d) For the purposes of subparagraphs (b) and (c) of this paragraph, the term “immovable property” includes the shares of a company the value of which shares is derived principally from immovable property or an interest in a partnership or trust the value of which is derived principally from immovable property, but does not include property, other than rental property, used in carrying on the activities of the company, partnership or trust.”

2. Paragraph 2 of Article 13 of the Convention shall be deleted and replaced by the following:

"2. Gains from the alienation of movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or of movable property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, including such gains from the alienation of such a permanent establishment (alone or with the whole enterprise) or of such fixed base, may be taxed in that other State. However, gains from the alienation of ships or aircraft operated in international traffic by an enterprise of a Contracting State, or of movable property pertaining to the operation of such ships or aircraft shall be taxable only in that State.”

3. Paragraph 4 of Article 13 of the Convention shall be deleted and replaced by the following:

"4. Where a resident of a Contracting State alienates, in the course of a corporate organization, amalgamation, division or reorganization, shares forming part of a substantial interest in the capital stock of a company which is a resident of the other Contracting State, and gains with respect to this alienation are, or will be, subject to a tax carryover under the domestic laws or regulations of the first-mentioned Contracting State, the other Contracting State may agree, within the framework of an agreement between the competent authorities, to defer the tax which would be payable in accordance with paragraph 3. The competent authorities determine in that agreement the terms and conditions of the deferral.”

ARTICLE 6

Paragraph 2 of Article 15 of the Convention shall be deleted and replaced by the following:

"2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if:

(a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in any twelve-month period; and

(b) the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State; and

(c) the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State.”

ARTICLE 7

There shall be added to Article 21 of the Convention a new paragraph 3, written as follows:

"3. For the purposes of this Article, a trust does not include an arrangement whereby the contributions made to the trust are deductible for the purposes of taxation in a Contracting State.”

ARTICLE 8

Paragraph 1 of Article 28 of the Convention is completed by adding the following:

“... as well as to the Territorial Authority of Saint-Pierre-et-Miquelon.”

ARTICLE 9

1. Paragraph 2 of Article 29 of the Convention shall be deleted and replaced as the following:

"2. An individual who is a resident of a Contracting State and maintains one or several abodes in the territory of the other Contracting State shall not be subject in that other State to an income tax according to an imputed income based on the rental value of that or those abodes.”

2. There shall be added to Article 29 of the Convention a new paragraph 4, written as follows:

"4. Although a permanent establishment in a Contracting State of an enterprise of the other Contracting State cannot be deemed to be a resident of the first-mentioned Contracting State within the meaning of Article 4, it is understood that a permanent establishment situated in Canada of a bank or financial and credit institution whose head office is in France may, with respect to interest arising in France, benefit from the tax exemptions or reductions provided for in paragraphs 2, 3 and 4 of Article II and, where appropriate, from the tax credit referred to in Article 23, when the debt-claim in respect of which such interest is paid is connected with such permanent establishment and relates to its normal activity.”

3. There shall be added to Article 29 of the Convention a new paragraph 5, written as follows:

"5. Contributions in a year in respect of services rendered in that year paid by, or on behalf of, an individual who is a resident of one of the Contracting States or who is temporarily present in that State, to a pension plan that is recognized for tax purposes in the other Contracting State shall, during a period not exceeding in the aggregate 60 months, be treated in the same way for tax purposes in the first-mentioned State as a contribution paid to a pension plan (that is, in the case of Canada, not an employee benefit plan) that is recognized for tax purposes in that first-mentioned State, provided that:

(a) such individual was contributing to the pension plan before he became a resident of or temporarily present in the first-mentioned State; and

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

For the purposes of this paragraph, “pension plan” includes a pension plan created under a public social security system.”

4. There shall be added to Article 29 of the Convention a new paragraph 6, written as follows:

"6. For the purposes of paragraph 212(l)(b) of the Canadian Income Tax Act, it is understood that a French bank directly owned by the French government is deemed to deal at arm’s length with any other enterprise owned or controlled by the French government other than one controlled by the bank. The competent authorities of the Contracting States may, by mutual agreement, extend the application of this provision to other French enterprises directly owned by the French government and to other provisions of the Canadian Income Tax Act where appropriate.”

5. There shall be added to Article 29 of the Convention a new paragraph 7, written as follows:

"7. France and the provinces of Canada may conclude arrangements concerning any fiscal legislation within provincial jurisdiction insofar as those arrangements are not inconsistent with the provisions of this Convention.”

ARTICLE 10

1. Each of the Contracting States shall notify to the other the completion of the procedure required in its case for the bringing into force of this Protocol. This Protocol shall enter into force on the first day of the second month following the day on which the later of these notifications is received.

2. The provisions of this Protocol shall apply:

(a) in Canada:

(i) in respect of tax withheld at the source on amounts paid or credited to non-residents on or after the day on which the Protocol enters into force, and

(ii) in respect of other taxes, in the case of companies, for any financial year beginning on or after the day in which the Protocol enters into force, and in other cases, for any taxation year beginning on or after the day on which the Protocol enters into force;

(b) in France:

(i) for the withholding tax and the prepayment relating to any amounts payable on or after the day on which the Protocol enters into force;

(ii) in respect of the corporation tax, for any financial year beginning on or after the day on which the Protocol enters into force; and

(iii) in respect of the income tax, for any taxation year beginning on or after the day on which the Protocol enters into force;

(c) in respect of paragraph 2 of Article 3 of this Protocol, to loans or debts granted, guaranteed or assisted on or after the day the Protocol enters into force;

(d) in respect of paragraph 4 of Article 9 of this Protocol, to amounts paid or credited to non-residents on or after January 1, 1982;

(e) in respect of paragraph 5 of Article 9 of this Protocol, on or after November 25, 1986.

ARTICLE 11

This Protocol shall remain in force as long as the Taxation Convention of May 2, 1975 between Canada and France remains in force.

IN WITNESS WHEREOF, the undersigned, duly authorized thereto, have signed this Protocol.

DONE in duplicate at Ottawa this 16th day of January 1987, in the French and English languages, each version being equally authentic.

Joe Clark

FOR THE GOVERNMENT OF CANADA

Jean Bernard Raimond

FOR THE GOVERNMENT OF THE FRENCH REPUBLIC