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Protocol amending the Convention between Canada and the Kingdom of the Netherlands for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income, with Protocol [1994] CATSer 13 (30 July 1994)

E102394 - CTS 1994 No. 32

PROTOCOL AMENDING THE CONVENTION BETWEEN CANADA AND THE KINGDOM OF THE NETHERLANDS FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME, WITH PROTOCOL

The Government of Canada and the Government of the Kingdom of the Netherlands,

Desiring to amend the Convention between the Government of Canada and the Kingdom of the Netherlands for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, with Protocol, signed at The Hague on May 27, 1986 (hereinafter referred to as “the Convention”, respectively “the Protocol”),

Have agreed as follows:

ARTICLE I

Subparagraph g) of paragraph 1 of Article 3 shall be deleted and replaced by:

g) the term “international traffic” means any voyage of a ship or aircraft operated by an enterprise which has its place of effective management in one of the States to transport passengers or property except where the principal purpose of the voyage is to transport passengers or property between places within the other State.

In Article 10 the following amendments shall be made:

A. Paragraph 2 shall be deleted and replaced by:

2. However, such dividends may also be taxed in the 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) 5 per cent of the gross amount of the dividends if the beneficial owner is a company (other than a partnership), that holds directly or indirectly at least 25 per cent of the capital or at least 10 per cent of the voting power of the company paying the dividends;

b) notwithstanding subparagraph a), 10 per cent of the gross amount of the dividends if the dividends are paid by a non-resident owned investment corporation that is a resident of Canada to a beneficial owner that is a resident of the Netherlands and that holds directly or indirectly at least 25 per cent of the capital or at least 10 per cent of the voting power of the corporation paying the dividends; and

c) 15 per cent of the gross amount of the dividends in all other cases.

B. Immediately after paragraph 7 a new paragraph shall be inserted:

8. The provisions of paragraph 7 shall also apply with respect to earnings derived from the alienation of immovable property in one of the States by a company carrying on a trade in immovable property, whether or not it has a permanent establishment in that State, but only insofar as these earnings may be taxed in that State under the provisions of Article 6 or paragraph 1 of Article 13.

ARTICLE III

In Article 11 the following amendments shall be made:

A. In paragraph 2 “15 per cent” shall be deleted and replaced by: 10 per cent.

B. In subparagraph d) of paragraph 3 shall be deleted “States.” and replaced by: States; or.

C. Immediately after subparagraph d) of paragraph 3 shall be inserted a new subparagraph:

e) is paid to a person which was constituted and is operated exclusively to administer or provide benefits under one or more pension, retirement or other employee benefits plans provided that:

(i) such person is generally exempt from tax in the other State; and

(ii) the interest is not derived from carrying on a trade or a business or from a related person.

D. In paragraph 5 shall be deleted: “and whether or not carrying a right to participate in the debtor’s profits,”.

In Article 12 the following amendments shall be made:

A. In subparagraph d) of paragraph 3

(i) “film or videotape” shall be deleted and replaced by: film, videotape or other means of reproduction;

(ii) immediately after “television)” shall be inserted: , as well as payments for the use of, or the right to use, computer software;

B. In paragraph 4 “film or videotape” shall be deleted and replaced by: film, videotape or other means of reproduction.

ARTICLE V

In paragraph 6 of Article 13 “corporate organization” shall be deleted and replaced by: corporate or other organization.

ARTICLE VI

In subparagraph a) of paragraph 2 of Article 15 “in the calendar year concerned” shall be deleted and replaced by: in any twelve month period commencing or ending in the calendar year concerned.

ARTICLE VII

In Article 18 the following amendments shall be made:

A. In paragraph 1, immediately after “alienation of an annuity,” shall be inserted: and any pension and other payment paid under the provisions of a social security system,;

B. In paragraph 2 the following amendments shall be made:

(i) “pensions, annuities and other similar payments” shall be deleted and replaced by: periodic payments;

(ii) “the amount” shall be deleted and replaced by: the gross amount;

C. Paragraph 3 shall be deleted; paragraph 4 becomes paragraph 3;

D. Paragraph 5 shall be deleted; paragraph 6 becomes paragraph 4.

ARTICLE VIII

The following new paragraph shall be inserted immediately after paragraph 3 of Article 21:

4. 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 Canada.

ARTICLE IX

The following new Article shall be inserted immediately after Article 21:

OTHER INCOME

1. Subject to the provisions of paragraph 2, items of income of a resident of one of the States, wherever arising, not dealt with in the foregoing Articles of this Convention shall be taxable only in that State.

2. However, if such income is derived by a resident of one of the States from sources in the other State, such income may also be taxed in the State in which it arises, and according to the law of that State, but the tax so charged shall not exceed 25 per cent of the gross amount of such income.

ARTICLE X

In Article 22 the following amendment shall be made:

A. In paragraph 2 “paragraph 4 and subparagraph a) of paragraph 5 of Article 18” shall be deleted and replaced by: paragraph 3 of Article 18;

B. In paragraph 3 shall be deleted “and paragraph 2 of Article 21” and replaced by: , paragraph 2 of Article 21 and paragraph 2 of Article 21A.

ARTICLE XI

Article 23 shall be deleted and replaced by the following:

OFFSHORE ACTIVITIES

1. The provisions of this Article shall apply notwithstanding any other provisions of this Convention. However, this Article shall not apply where offshore activities of a person constitute for that person a permanent establishment under the provisions of Article 5 or a fixed base under the provisions of Article 14.

2. In this Article the term “offshore activities” means activities which are carried on offshore in connection with the exploration or exploitation of the seabed and its subsoil and their natural resources, situated in one of the States.

3. An enterprise of one of the States which carries on offshore activities in the other State shall, subject to paragraph 4, be deemed to be carrying on, in respect of those activities, business in that other State through a permanent establishment situated therein, unless the offshore activities in question are carried on in the other State for a period or periods not exceeding in the aggregate 30 days in any twelve month period.

For the purposes of this paragraph:

a) where an enterprise carrying on offshore activities in the other State is associated with another enterprise and that other enterprise continues, as part of the same project, substantially similar offshore activities to those that are or were being carried on by the first-mentioned enterprise, and the afore-mentioned activities carried on by both enterprises - when added together - exceed a period of 30 days, then each enterprise shall be deemed to be carrying on its activities for a period exceeding 30 days in any twelve month period;

b) an enterprise shall be regarded as associated with another enterprise if one holds directly or indirectly at least one third of the capital of the other enterprise or if a person holds directly or indirectly at least one third of the capital of both enterprises.

4. However, for the purposes of paragraph 3 the term “offshore activities” shall be deemed not to include:

a) one or any combination of the activities mentioned in paragraph 4 of Article 5;

b) towing or anchor handling by ships primarily designed for that purpose and any other activities performed by such ships;

c) the transport of supplies or personnel by ships or aircraft in international traffic.

5. A resident of one of the States who carries on offshore activities in the other State, which consist of professional services or other activities of an independent character, shall be deemed to be performing those activities from a fixed base in the other State if the offshore activities in question last for a continuous period of 30 days or more.

6. Salaries, wages and other similar remuneration derived by a resident of one of the States in respect of an employment connected with offshore activities carried on through a permanent establishment in the other State may, to the extent that the employment is exercised offshore in that other State, be taxed in that other State.

7. Where documentary evidence is produced that tax has been paid in Canada on the items of income which may be taxed in Canada according to Article 7 and Article 14 in connection with respectively paragraph 3 and paragraph 5, and to paragraph 6, the Netherlands shall allow a reduction of its tax which shall be computed in conformity with the rules laid down in paragraph 2 of Article 22.

ARTICLE XII

The following new paragraph shall be added to Article 25:

5. If any difficulty or doubt arising as to the interpretation or application of the Convention cannot be resolved by the competent authorities it may, if both competent authorities agree, be submitted for arbitration. The procedures for arbitration shall be established between the competent authorities.

ARTICLE XIII

Article II of the Protocol shall be deleted and replaced by:

II. With reference to Articles 3, 5 and 8

The landing site or sites situated in one of the States regularly used in the transportation by ships of goods or passengers exclusively between places in one of the States, shall, for the enterprise operating such ships, constitute a permanent establishment in that State.

ARTICLE XIV

The following new Article shall be inserted immediately after Article II of the Protocol:

IIA. With reference to Article 4

It is understood that the term “resident of one of the States” also includes:

a) the Government of that State or a political subdivision or local authority thereof or any agency or instrumentality of any such Government, subdivision or authority;

b) trust, company or other organization constituted and operated exclusively to administer or provide benefits under one or more funds or plans established to provide pension, retirement or other employee benefits that is generally exempt from tax in one of the States and is a resident of that State according to the laws of that State;

c) a trust, company or other organization that is operated exclusively for religious, charitable, scientific, educational, or public purposes and that is generally exempt from tax in one of the States and that is a resident of that State according to the laws of that State.

ARTICLE XV

The following new Article shall be inserted immediately after Article V of the Protocol:

VA. With reference to Articles 5, 6, 7, 14 and 23

It is understood that exploration and exploitation rights of natural resources shall be regarded as immovable property situated in the State the seabed and subsoil of which they are related to, and that these rights shall be deemed to pertain to the property of a permanent establishment in that State. Furthermore, it is understood that the aforementioned rights include rights to interests in, or to the benefits of, assets to be produced by such exploration or exploitation.

ARTICLE XVI

Article XI of the Protocol shall be deleted and replaced by:

XI. With reference to Articles 15 and 16

It is understood that the terms “salary, wages and other similar remuneration” and “directors’ fees or other remuneration” include all income from an employment or office.

ARTICLE XVII

1. This Protocol shall enter into force on the thirtieth day after the latter of the dates on which the respective Governments have notified each other in writing that the formalities constitutionally required in their respective States have been complied with, and its provisions shall have effect:

a) in the case of the Netherlands,

(i) for tax withheld at the source on pensions and other payments described in Article 18 of the Convention as amended by Article VII of this Protocol, to amounts paid on or after the first day of January in the calendar year following that in which the Protocol has entered into force;

(ii) for all other taxes, for taxable years and periods beginning on or after the first day of January 1993;

b) in the case of Canada,

(i) for tax withheld at the source with respect to amounts paid on or after the first day of January 1993, except that the reference in subparagraph a) of paragraph 2 of Article 10 of the Convention, as amended by this Protocol, to “5 per cent” shall be read, in its application to amounts paid after that first day, after:

(A) 1992 and before 1994, as “9 per cent”;

(B) 1993 and before 1995, as “8 per cent”;

(C) 1994 and before 1996, as “7 per cent”;

(D) 1995 and before 1997, as “6 per cent”;

(ii) for other taxes, with respect to taxable years beginning on or after the first day of January 1993, except that the reference in paragraph 7 of Article 10 of the Convention to subparagraph a) of paragraph 2 shall be read, in its application to taxable years beginning on or after that first day and ending after:

(A) 1992 and before 1994, as “9 per cent”;

(B) 1993 and before 1995, as “8 per cent”;

(C) 1994 and before 1996, as “7 per cent”;

(D) 1995 and before 1997, as “6 per cent”.

2. Where any greater relief from tax would have been afforded by any provision of the Convention than under the Convention as amended by this Protocol, any such provision shall continue to have effect up to and including the taxable year in which this Protocol enters into force.

3. It is understood that the term “paid” shall have the meaning which it has under the law of the State in which the payment arises.

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

DONE at The Hague this 4 March 1993, in duplicate, in the English, Netherlands and French languages, each version being equally authentic.

FOR THE GOVERNMENT OF CANADA

Otto Jelinek

FOR THE GOVERNMENT OF THE KINGDOM OF THE NETHERLANDS

Marius Van Amelsvoort