Canada–Azerbaijan Tax Convention Act, 2004 (S.C. 2005, c. 8, s. 6)

PROTOCOL TO THE CONVENTION BETWEEN THE GOVERNMENT OF CANADA AND THE GOVERNMENT OF THE REPUBLIC OF AZERBAIJAN FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND ON CAPITAL

At the moment of signing the Convention between the Government of Canada and the Government of the Republic of Azerbaijan for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital, the undersigned have agreed that the following provisions shall form an integral part of the Convention.

• 1 With reference to paragraph 5 of Article 5, it is understood that a person, who is authorized to negotiate in a Contracting State all elements and details of a contract in a way binding on an enterprise, can be said to exercise this authority in that State, even if the contract is signed by another person in the State in which the enterprise is situated.

• 2 It is agreed that nothing in the Convention shall be construed as preventing a Contracting State from imposing on the income of a company attributable to a permanent establishment in that State, or the income attributable to the alienation of immovable property situated in that State by a company carrying on a trade in immovable property, a tax in addition to the tax that would be chargeable on the income of a company that is a national of that State, except that any additional tax so imposed shall not exceed 10 per cent of the amount of such income that has not been subjected to such additional tax in previous taxation years. For the purpose of this provision, the term “income” means the income attributable to the alienation of such immovable property situated in a Contracting State as may be taxed by that State under the provisions of Article 6 or of paragraph 1 of Article 13, and the profits, including any gains, attributable to a permanent establishment in a Contracting State in a year and previous years, after deducting therefrom all taxes, other than the additional tax referred to herein, imposed on such profits in that State.

• 3 With reference to paragraph 4 of Article 11, it is agreed that, in the case of Canada, the term “interest” shall not include income from debt-claims carrying a right to participate in the debtor’s profits but shall include income which is subjected to the same taxation treatment as income from money lent by the laws of Canada.

• 4 With reference to Article 13, where an individual who ceases to be a resident of a Contracting State, and immediately thereafter becomes a resident of the other Contracting State, is treated for the purposes of taxation in the first-mentioned State as having alienated a property and is taxed in that State by reason thereof, the individual may elect to be treated for purposes of taxation in the other State as if the individual had, immediately before becoming a resident of that State, sold and repurchased the property for an amount equal to its fair market value at that time.

• 5 With reference to Article 18, it is agreed that the following rules apply.

  • (a) Pensions arising in a Contracting State and paid to a resident of the other Contracting State may be also be taxed in the State in which they arise and according to the law of that State, but in the case of periodic pension payments (including payments under the social security legislation of a Contracting State), the tax so charged shall not exceed 15 per cent of the gross amount of such periodic pension payments paid to the recipient in the calendar year concerned that exceeds twelve thousand Canadian dollars or its equivalent in Azerbaijanian manat.

  • (b) Notwithstanding anything in this Convention, war pensions and allowances (including pensions and allowances paid to war veterans or paid as a consequence of damages or injuries suffered as a consequence of a war) arising in a Contracting State and paid to a resident of the other Contracting State shall be exempt from tax in that other State to the extent that they would be exempt from tax if received by a resident of the first-mentioned State.

• 6 Irrespective of the fact that a Contracting State is or may become a signatory to the General Agreement on Trade in Services (GATS) or to other international agreements, the Contracting States shall, in their tax relations, be governed by the provisions of the Convention.

• 7 Nothing in the Convention shall be construed as preventing a Contracting State from imposing a tax on amounts included in the income of a resident of that State with respect to a partnership, trust, or company, in which that resident has an interest.

• 8 The Convention shall not apply to any company, trust or other entity that is a resident of a Contracting State and is beneficially owned or controlled, directly or indirectly, by one or more persons who are not residents of that State, if the amount of the tax imposed on the income or capital of the company, trust or other entity by that State is substantially lower than the amount that would be imposed by that State if all of the shares of the capital stock of the company or all of the interests in the trust or other entity, as the case may be, were beneficially owned by one or more individuals who were residents of that State.

• 9 The provisions of the Convention shall not be construed to restrict in any manner any exemption, allowance, credit or other deduction accorded by the laws of a Contracting State in the determination of the tax imposed by that State.

IN WITNESS WHEREOF the undersigned, being duly authorized thereto by their respective Governments, have signed this Protocol.

DONE in duplicate at Baku, this 7th day of September 2004, in the English, French and Azerbaijanian, languages, each text being equally authentic.

FOR THE GOVERNMENT OF CANADA

FOR THE GOVERNMENT OF THE REPUBLIC OF AZERBAIJAN