1. Taxation on Business ProfitsWhere an enterprise of one of the two countries has in the other country a permanent establishment (such as a branch, including the furnishing of services by an enterprise through personnel over a certain period of time) through which the enterprise carries on business, only the profits attributable to the permanent establishment may be taxed in that other country. The profits attributable to a permanent establishment will be calculated by comprehensively recognizing internal dealings between its head office and branches and by strictly applying the arm’s length principle.
2. Taxation on Investment IncomeTaxation on investment income (dividends, interest and royalties) in the source country will be subjected to the maximum rates or exempted as follows:
|Dividends||Exempted (beneficially owned by recognised pension funds)|
5% (holding at least 20% of the voting power for 6 months)
|Interest||Exempted (beneficially owned by the Governments, paid and beneficially owned by financial institutions, and beneficially owned by recognised pension funds etc.)|
3. Taxation on Gains from Alienation of SharesGains from the alienation of shares representing at least 10 per cent of the capital of a company may be taxed in the source country subjected to the maximum rate at the 10 per cent. However, gains derived from changes of ownership that would directly result from a corporate reorganisation of that company or gains derived by recognised pension funds will be exempted from tax.
4. Prevention of Abuse of the ConventionIn order to prevent abuse of benefits under this Convention, residents who satisfy specified conditions, such as qualified persons, may exclusively be entitled to the benefits with respect to taxation on investment income and capital gains. In addition, any benefit under this Convention will not be granted if it is reasonable to conclude that obtaining such a benefit was one of the principal purposes of any transaction, or if the income is attributable to a permanent establishment in a third country and does not satisfy specified conditions.
5. Mutual Agreement ProcedureTaxation not in accordance with the provisions of this Convention may be resolved by mutual agreement between the tax authorities of the two countries