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COMMENTARY ON Article 8

CONCERNING THE TAXATION OF PROFITS FROM SHIPPING, INLAND WATERWAYS TRANSPORT AND AIR TRANSPORT

Paragraph 11. The object of paragraph 1 concerning profits from the operation of ships or aircraft in international traffic is to secure that such profits will be taxed in one State alone. The provision is based on the principle that the taxing right shall be left to the Contracting State in which the place of effective management of the enterprise is situated. The term “international traffic” is defined in subparagraph e) of paragraph 1 of Article 3.(Amended on 11 April 1977 see History)

2. In certain circumstances the Contracting State in which the place of effective management is situated may not be the State of which an enterprise operating ships or aircraft is a resident, and some States therefore prefer to confer the exclusive taxing right on the State of residence. Such States are free to substitute a rule on the following lines:Profits of an enterprise of a Contracting State from the operation of ships or aircraft in international traffic shall be taxable only in that State.

(Replaced on 11 April 1977 see History)

3. Some other States, on the other hand, prefer to use a combination of the residence criterion and the place of effective management criterion by giving the primary right to tax to the State in which the place of effective management is situated while the State of residence eliminates double taxation in accordance with Article 23, so long as the former State is able to tax the total profits of the enterprise, and by giving the primary right to tax to the State of residence when the State of effective management is not able to tax total profits. States wishing to follow that principle are free to substitute a rule on the following lines:Profits of an enterprise of a Contracting State from the operation of ships or aircraft, other than those from transport by ships or aircraft operated solely between places in the other Contracting State, shall be taxable only in the first-mentioned State. However, where the place of effective management of the enterprise is situated in the other State and that other State imposes tax on the whole of the profits of the enterprise from the operation of ships or aircraft, the profits from the operation of ships or aircraft, other than those from transport by ships or aircraft operated solely between places in the first-mentioned State, may be taxed in that other State.

(Replaced on 11 April 1977 see History)

4. The profits covered consist in the first place of the profits directly obtained by the enterprise from the transportation of passengers or cargo by ships or aircraft (whether owned, leased or otherwise at the disposal of the enterprise) that it operates in international traffic. However, as international transport has evolved, shipping and air transport enterprises invariably carry on a large variety of activities to permit, facilitate or support their international traffic operations. The paragraph also covers profits from activities directly connected with such operations as well as profits from activities which are not directly connected with the operation of the enterprise’s ships or aircraft in international traffic as long as they are ancillary to such operation.(Amended on 15 July 2005 see History)

4.1 Any activity carried on primarily in connection with the transportation, by the enterprise, of passengers or cargo by ships or aircraft that it operates in international traffic should be considered to be directly connected with such transportation.(Added on 15 July 2005 see History)

4.2 Activities that the enterprise does not need to carry on for the purposes of its own operation of ships or aircraft in international traffic but which make a minor contribution relative to such operation and are so closely related to such operation that they should not be regarded as a separate business or source of income of the enterprise should be considered to be ancillary to the operation of ships and aircraft in international traffic.(Added on 15 July 2005 see History)

4.3 In light of these principles, the following paragraphs discuss the extent to which paragraph 1 applies with respect to some particular types of activities that may be carried on by an enterprise engaged in the operation of ships or aircraft in international traffic.(Added on 15 July 2005 see History)

5. Profits obtained by leasing a ship or aircraft on charter fully equipped, crewed and supplied must be treated like the profits from the carriage of passengers or cargo. Otherwise, a great deal of business of shipping or air transport would not come within the scope of the provision. However, Article 7, and not Article 8, applies to profits from leasing a ship or aircraft on a bare boat charter basis except when it is an ancillary activity of an enterprise engaged in the international operation of ships or aircraft.(Amended on 15 July 2005 see History)

6. Profits derived by an enterprise from the transportation of passengers or cargo otherwise than by ships or aircraft that it operates in international traffic are covered by the paragraph to the extent that such transportation is directly connected with the operation, by that enterprise, of ships or aircraft in international traffic or is an ancillary activity. One example would be that of an enterprise engaged in international transport that would have some of its passengers or cargo transported internationally by ships or aircraft operated by other enterprises, e.g. under code-sharing or slot-chartering arrangements or to take advantage of an earlier sailing. Another example would be that of an airline company that operates a bus service connecting a town with its airport primarily to provide access to and from that airport to the passengers of its international flights.(Replaced on 15 July 2005 see History)

7. A further example would be that of an enterprise that transports passengers or cargo by ships or aircraft operated in international traffic which undertakes to have those passengers or that cargo picked up in the country where the transport originates or transported or delivered in the country of destination by any mode of inland transportation operated by other enterprises. In such a case, any profits derived by the first enterprise from arranging such transportation by other enterprises are covered by the paragraph even though the profits derived by the other enterprises that provide such inland transportation would not be.(Replaced on 15 July 2005 see History)

8. An enterprise will frequently sell tickets on behalf of other transport enterprises at a location that it maintains primarily for purposes of selling tickets for transportation on ships or aircraft that it operates in international traffic. Such sales of tickets on behalf of other enterprises will either be directly connected with voyages aboard ships or aircraft that the enterprise operates (e.g. sale of a ticket issued by another enterprise for the domestic leg of an international voyage offered by the enterprise) or will be ancillary to its own sales. Profits derived by the first enterprise from selling such tickets are therefore covered by the paragraph.(Replaced on 15 July 2005 see History)

8.1 Advertising that the enterprise may do for other enterprises in magazines offered aboard ships or aircraft that it operates or at its business locations (e.g. ticket offices) is ancillary to its operation of these ships or aircraft and profits generated by such advertising fall within the paragraph.(Added on 15 July 2005 see History)

9. Containers are used extensively in international transport. Such containers frequently are also used in inland transport. Profits derived by an enterprise engaged in international transport from the lease of containers are usually either directly connected or ancillary to its operation of ships or aircraft in international traffic and in such cases fall within the scope of the paragraph. The same conclusion would apply with respect to profits derived by such an enterprise from the short-term storage of such containers (e.g. where the enterprise charges a customer for keeping a loaded container in a warehouse pending delivery) or from detention charges for the late return of containers.(Replaced on 15 July 2005 see History)

10. An enterprise that has assets or personnel in a foreign country for purposes of operating its ships or aircraft in international traffic may derive income from providing goods or services in that country to other transport enterprises. This would include (for example) the provision of goods and services by engineers, ground and equipment-maintenance staff, cargo handlers, catering staff and customer services personnel. Where the enterprise provides such goods to, or performs services for, other enterprises and such activities are directly connected or ancillary to the enterprise’s operation of ships or aircraft in international traffic, the profits from the provision of such goods or services to other enterprises will fall under the paragraph.(Replaced on 15 July 2005 see History)

10.1 For example, enterprises engaged in international transport may enter into pooling arrangements for the purposes of reducing the costs of maintaining facilities needed for the operation of their ships or aircraft in other countries. For instance, where an airline enterprise agrees, under an International Airlines Technical Pool agreement, to provide spare parts or maintenance services to other airlines landing at a particular location (which allows it to benefit from these services at other locations), activities carried on pursuant to that agreement will be ancillary to the operation of aircraft in international traffic.(Replaced on 15 July 2005 see History)

11. (Deleted on 15 July 2005 see History)

12. The paragraph does not apply to a shipbuilding yard operated in one country by a shipping enterprise having its place of effective management in another country.(Amended on 15 July 2005 see History)

13. (Renumbered on 15 July 2005 see History)

14. Investment income of shipping or air transport enterprises (e.g. income from stocks, bonds, shares or loans) is to be subjected to the treatment ordinarily applied to this class of income, except where the investment that generates the income is made as an integral part of the carrying on of the business of operating the ships or aircraft in international traffic in the Contracting State so that the investment may be considered to be directly connected with such operation. Thus, the paragraph would apply to interest income generated, for example, by the cash required in a Contracting State for the carrying on of that business or by bonds posted as security where this is required by law in order to carry on the business: in such cases, the investment is needed to allow the operation of the ships or aircraft at that location. The paragraph would not apply, however, to interest income derived in the course of the handling of cash-flow or other treasury activities for permanent establishments of the enterprise to which the income is not attributable or for associated enterprises, regardless of whether these are located within or outside that Contracting State, or for the head office (centralisation of treasury and investment activities), nor would it apply to interest income generated by the short-term investment of the profits generated by the local operation of the business where the funds invested are not required for that operation.(Amended on 15 July 2005 see History)

14.1 Enterprises engaged in the operation of ships or aircraft in international traffic may be required to acquire and use emissions permits and credits for that purpose (the nature of these permits and credits is explained in paragraph 75.1 of the Commentary on Article 7). Paragraph 1 applies to income derived by such enterprises with respect to such permits and credits where such income is an integral part of carrying on the business of operating ships or aircraft in international traffic,e.g.where permits are acquired for the purpose of operating ships or aircraft or where permits acquired for that purpose are subsequently traded when it is realised that they will not be needed.(Added on 15 July 2014 see History)

Paragraph 215. The rules with respect to the taxing right of the State of residence as set forth in paragraphs 2 and 3 above apply also to this paragraph of the Article.(Replaced on 11 April 1977 see History)

16. The object of this paragraph is to apply the same treatment to transport on rivers, canals and lakes as to shipping and air transport in international traffic. The provision applies not only to inland waterways transport between two or more countries, but also to inland waterways transport carried on by an enterprise of one country between two points in another country.(Renumbered on 11 April 1977 see History)

16.1 Paragraphs 4 to 14.1 above provide guidance with respect to the profits that may be considered to be derived from the operation of ships or aircraft in international traffic. The principles and examples included in these paragraphs are applicable, with the necessary adaptations, for purposes of determining which profits may be considered to be derived from the operation of boats engaged in inland waterways transport.(Amended on 15 July 2014 see History)

17. The provision does not prevent specific tax problems which may arise in connection with inland waterways transport, in particular between adjacent countries, from being settled specially by bilateral agreement.(Renumbered and amended on 11 April 1977 see History)

17.1 It may also be agreed bilaterally that profits from the operation of vessels engaged in fishing, dredging or hauling activities on the high seas be treated as income falling under this Article.(Renumbered on 15 July 2005 see History)

Enterprises not exclusively engaged in shipping, inland waterways transport or air transport18. It follows from the wording of paragraphs 1 and 2 that enterprises not exclusively engaged in shipping, inland waterways transport or air transport nevertheless come within the provisions of these paragraphs as regards profits arising to them from the operation of ships, boats or aircraft belonging to them.(Renumbered and amended on 11 April 1977 see History)

19. If such an enterprise has in a foreign country permanent establishments exclusively concerned with the operation of its ships or aircraft, there is no reason to treat such establishments differently from the permanent establishments of enterprises engaged exclusively in shipping, inland waterways transport or air transport.(Renumbered and amended on 11 April 1977 see History)

20. Nor does any difficulty arise in applying the provisions of paragraphs 1 and 2 if the enterprise has in another State a permanent establishment which is not exclusively engaged in shipping, inland waterways transport or air transport. If its goods are carried in its own ships to a permanent establishment belonging to it in a foreign country, it is right to say that none of the profit obtained by the enterprise through acting as its own carrier can properly be taxed in the State where the permanent establishment is situated. The same must be true even if the permanent establishment maintains installations for operating the ships or aircraft (e.g. consignment wharves) or incurs other costs in connection with the carriage of the enterprise’s goods (e.g. staff costs). In this case, even though certain functions related to the operation of ships and aircraft in international traffic may be performed by the permanent establishment, the profits attributable to these functions are taxable exclusively in the State where the place of effective management of the enterprise is situated. Any expenses, or part thereof, incurred in performing such functions must be deducted in computing that part of the profit that is not taxable in the State where the permanent establishment is located and will not, therefore, reduce the part of the profits attributable to the permanent establishment which may be taxed in that State pursuant to Article 7.(Amended on 22 July 2010 see History)

21. Where ships or aircraft are operated in international traffic, the application of the Article to the profits arising from such operation will not be affected by the fact that the ships or aircraft are operated by a permanent establishment which is not the place of effective management of the whole enterprise; thus, even if such profits could be attributed to the permanent establishment under Article 7, they will only be taxable in the State in which the place of effective management of the enterprise is situated (a result that is confirmed by paragraph 4 of Article 7).(Amended on 22 July 2010 see History)

Paragraph 322. This paragraph deals with the particular case where the place of effective management of the enterprise is aboard a ship or a boat. In this case tax will only be charged by the State where the home harbour of the ship or boat is situated. It is provided that if the home harbour cannot be determined, tax will be charged only in the Contracting State of which the operator of the ship or boat is a resident.(Renumbered and amended on 11 April 1977 see History)

Paragraph 423. Various forms of international co-operation exist in shipping or air transport. In this field international co-operation is secured through pooling agreements or other conventions of a similar kind which lay down certain rules for apportioning the receipts (or profits) from the joint business.(Renumbered and amended on 11 April 1977 see History)

24. In order to clarify the taxation position of the participant in a pool, joint business or in an international operating agency and to cope with any difficulties which may arise the Contracting States may bilaterally add the following, if they find it necessary:...but only to so much of the profits so derived as is attributable to the participant in proportion to its share in the joint operation.

(Renumbered and amended on 11 April 1977 see History)

25. (Renumbered and amended on 31 March 1994 see History)

Observations on the Commentary26. (Renumbered and amended on 28 January 2003 see History)

27. (Deleted on 15 July 2005 see History)

28. GreeceandPortugalreserve their position as to the application of this Article to income from ancillary activities (see paragraphs 4 to 10.1).(Replaced on 15 July 2005 see History)

29. Germany,GreeceandTurkeyreserve their position as to the application of the Article to income from inland transportation of passengers or cargo and from container services (see paragraphs 4, 6, 7 and 9 above).(Amended on 15 July 2005 see History)

30. Greecewill apply Article 12 to payments from leasing a ship or aircraft on a bareboat charter basis.(Replaced on 21 September 1995 see History)

30.1 (Deleted on 15 July 2005 see History)

Reservations on the Article31. Canada,Hungary,MexicoandNew Zealandreserve the right to tax as profits from internal traffic, profits from the carriage of passengers or cargo taken on board at one place in a respective country for discharge at another place in the same country. New Zealand also reserves the right to tax as profits from internal traffic profits from other coastal and continental shelf activities.(Amended on 17 July 2008 see History)

32. Belgium,Canada,Greece,Mexico,Turkey, theUnited Kingdomand theUnited Statesreserve the right not to extend the scope of the Article to cover inland transportation in bilateral conventions (paragraph 2 of the Article).(Amended on 17 July 2008 see History)

33. Denmark,NorwayandSwedenreserve the right to insert special provisions regarding profits derived by the air transport consortium Scandinavian Airlines System (SAS).(Renumbered on 21 September 1995 see History)

34. (Deleted on 15 July 2005 see History)

35. In view of its particular situation in relation to shipping,Greecewill retain its freedom of action with regard to the provisions in the Convention relating to profits from the operation of ships in international traffic.(Renumbered on 21 September 1995 see History)

36. Mexicoreserves the right to tax at source profits derived from the provision of accommodation.(Added on 21 September 1995 see History)

37. (Deleted on 15 July 2005 see History)

38. Australiareserves the right to tax profits from the carriage of passengers or cargo taken on board at one place in Australia for discharge in Australia.(Amended on 22 July 2010 see History)

39. TheUnited Statesreserves the right to include within the scope of paragraph 1, income from the rental of ships and aircraft on a full basis, and on a bareboat basis if either the ships or aircraft are operated in international traffic by the lessee, or if the rental income is incidental to profits from the operation of ships or aircraft in international traffic. The United States also reserves the right to include within the scope of the paragraph, income from the use, maintenance or rental of containers used in international traffic.(Added on 29 April 2000 see History)

40. TheSlovak Republicreserves the right to tax under Article 12profits from the leasing of ships, aircraft and containers.(Added on 28 January 2003 see History)

41. Irelandreserves the right to include within the scope of the Article income from the rental of ships or aircraft on a bareboat basis if either the ships or aircraft are operated in international traffic by the lessee or if the rental income is incidental to profits from the operation of ships or aircraft in international traffic.(Added on 28 January 2003 see History)

42. Turkeyreserves the right to broaden the scope of the Article to cover transport by road vehicle and to make a corresponding change to the definition of “international traffic” in Article 3.(Amended on 15 July 2014 see History)

43. Chile,EstoniaandSloveniareserve the right not to extend the scope of the Article to cover inland waterways transportation in bilateral conventions and to make corresponding modifications to paragraph 3 ofArticles 13, 15 and 22.(Amended on 15 July 2014 see History)

Paragraph 1Amended when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977. In the 1963 Draft Convention (adopted by the OECD Council on 30 July 1963) and until the adoption of the 1977 Model Convention, paragraph 1 read as follows:“1. The object of paragraph 1 concerning profits from the operation of ships or aircraft in international traffic is to secure that such profits will be taxed in one State alone. Operation in international traffic means any operation of ships or aircraft which extends over more than one country, whatever the number of places of call in a particular country. The provision is based on the principle that the taxing power shall be left to the Contracting State in which the place of effective management of the enterprise is situated. This makes it unnecessary to devise detailed rules,e.g.for defining the profits covered, this being rather a question of application for which general principles of interpretation must be taken into account. It seems useful, however, to give a few examples and comments to clarify the question.”

Paragraph 2Replaced when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977. At that time, paragraph 2 of the 1963 Draft Convention was renumbered as paragraph 4 (see history of paragraph 4) and a new paragraph 2 was added.

Paragraph 3Replaced when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977. At that time, paragraph 3 of the 1963 Draft Convention (adopted by the OECD Council on 30 July 1963), was amended and renumbered as paragraph 5 (see history of paragraph 5) and a new paragraph 3 was added.

Paragraph 4Amended on 15 July 2005 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. In the 1977 Model Convention and until 15 July 2005, paragraph 4 read as follows:“4. The profits covered consist in the first place of the profits obtained by the enterprise from the carriage of passengers or cargo. With this definition, however, the provision would be unduly restrictive, in view of the development of shipping and air transport, and for practical considerations also. The provision therefore covers other classes of profits as well,i.e.those which by reason of their nature or their close relationship with the profits directly obtained from transport may all be placed in a single category. Some of these classes of profits are mentioned in the following paragraphs.”

Paragraph 4 of the 1977 Model Convention corresponded to paragraph 2 of the 1963 Draft Convention. Paragraph 4 of the 1963 Draft Convention was renumbered as paragraph 7 (see history of paragraph 7) and paragraph 2 was renumbered as paragraph 4 when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977.

Paragraph 4.1Added on 15 July 2005 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005.

Paragraph 4.2Added on 15 July 2005 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005.

Paragraph 4.3Added on 15 July 2005 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005.

Paragraph 5Amended on 15 July 2005 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 31 March 1994 and until 15 July 2005, paragraph 5 read as follows:“5. Profits obtained by leasing a ship or aircraft on charter fully equipped, manned and supplied must be treated like the profits from the carriage of passengers or cargo. Otherwise, a great deal of business of shipping or air transport would not come within the scope of the provision. However, Article 7, and not Article 8, applies to profits from leasing a ship or aircraft on a bare boat charter basis except when it is an occasional source of income for an enterprise engaged in the international operation of ships or aircraft.”

Paragraph 5 was previously amended on 31 March 1994 by the report entitled “1994 Update to the Model Tax Convention”, adopted by the OECD Council on 31 March 1994. In the 1977 Model Convention and until 31 March 1994, paragraph 5 read as follows:“5. Profits obtained by leasing a ship or aircraft on charter fully equipped, manned and supplied must be treated like the profits from the carriage of passengers or cargo. Otherwise, a great deal of business of shipping or air transport would not come within the scope of the provision. The Article does not apply to profits from leasing a ship or aircraft on a bare boat charter basis except when it is an occasional source of income for an enterprise engaged in the international operation of ships or aircraft.”

Paragraph 5 of the 1977 Model Convention corresponded to paragraph 3 of the 1963 Draft Convention. Paragraph 5 of the 1963 Draft Convention was amended and renumbered as paragraph 8 (see history of paragraph 8) when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977. At the same time, paragraph 3 of the 1963 Draft Convention was amended and renumbered as paragraph 5 of the 1977 Model Convention. In the 1963 Draft Convention (adopted by the OECD Council on 30 July 1963) and until the adoption of the 1977 Model Convention, paragraph 3 read as follows:“3. Profits obtained by leasing a ship or an aircraft on charter fully equipped, manned and supplied must be treated like the profits from the carriage of passengers or cargo. Otherwise, a great deal of business of shipping or air transport would not come within the scope of the provision. The Article does not, however, apply to profits from a bare boat charter.”

Paragraph 6Replaced on 15 July 2005 when paragraph 6 was deleted and a new paragraph 6 was added by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. In the 1977 Model Convention and until 15 July 2005, paragraph 6 read as follows:“6. The principle that the taxing right should be left to one Contracting State alone makes it unnecessary to devise detailed rules,e.g.for defining the profits covered, this being rather a question of applying general principles of interpretation.”

Paragraph 6 of the 1963 Draft Convention was replaced when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977. At that time, paragraph 6 of the 1963 Draft Convention was amended and renumbered as paragraph 11 (see history of paragraph 11) and a new paragraph 6 was added.

Paragraph 7Replaced on 15 July 2005 when paragraph 7 was deleted and a new paragraph 7 was added by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. In the 1977 Model Convention and until 15 July 2005, paragraph 7 read as follows:“7. Shipping and air transport enterprises — particularly the latter — often engage in additional activities more or less closely connected with the direct operation of ships and aircraft. Although it would be out of the question to list here all the auxiliary activities which could properly be brought under the provision, nevertheless a few examples may usefully be given.”

Paragraph 7 of the 1977 Model Convention corresponded to paragraph 4 of the 1963 Draft Convention. Paragraph 7 of the 1963 Draft Convention was renumbered as paragraph 12 (see history of paragraph 12) and paragraph 4 was renumbered as paragraph 7 when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977.

Paragraph 8Replaced on 15 July 2005 when paragraph 8 was deleted and a new paragraph 8 was added by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. In the 1977 Model Convention and until 15 July 2005, paragraph 8 read as follows:“8. The provision applies,inter alia, to the following activities:the sale of passage tickets on behalf of other enterprises;

the operation of a bus service connecting a town with its airport;

advertising and commercial propaganda;

transportation of goods by truck connecting a depot with a port or airport.”

Paragraph 8 of the 1977 Model Convention corresponded to paragraph 5 of the 1963 Draft Convention. Paragraph 8 of the 1963 Draft Convention was amended and renumbered as paragraph 14 (see history of paragraph 14) when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977. At the same time, paragraph 5 of the 1963 Draft Convention was amended and renumbered as paragraph 8 of the 1977 Model Convention. In the 1963 Draft Convention (adopted by the OECD Council on 30 July 1963) and until the adoption of the 1977 Model Convention, paragraph 5 read as follows:“5. The provision covers, inter alia, the following activities:the sale of passage tickets on behalf of other enterprises;

the operation of a bus service connecting a town with its airport;

advertising and commercial propaganda.”

Paragraph 8.1Added on 15 July 2005 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005.

Paragraph 9Replaced on 15 July 2005 when paragraph 9 was deleted and a new paragraph 9 was added by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. In the 1977 Model Convention and until 15 July 2005, paragraph 9 read as follows:“9. If an enterprise engaged in international transport undertakes to see to it that, in connection with such transport, goods are delivered directly to the consignee in the other Contracting State, such inland transportation is considered to fall within the scope of the international operation of ships or aircraft and, therefore, is covered by the provisions of this Article.”

Paragraph 9 of the 1963 Draft Convention was replaced when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977. At that time, paragraph 9 of the 1963 Draft Convention was amended and renumbered as paragraph 23 (see history of paragraph 23) and a new paragraph 9 was added.

Paragraph 10Replaced on 15 July 2005 when paragraph 10 was deleted and a new paragraph 10 was added by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. In the 1977 Model Convention and until 15 July 2005, paragraph 10 read as follows:“10. Recently, “containerisation” has come to play an increasing role in the field of international transport. Such containers frequently are also used in inland transport. Profits derived by an enterprise engaged in international transport from the lease of containers which is supplementary or incidental to its international operation of ships or aircraft fall within the scope of this Article.”

Paragraph 10 of the 1963 Draft Convention was replaced when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977. At that time, paragraph 10 of the 1963 Draft Convention was amended and renumbered as paragraph 24 (see history of paragraph 24) and a new paragraph 10 was added.

Paragraph 10.1Replaced on 15 July 2005 when paragraph 10.1 was deleted and a new paragraph 10.1 was added by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 29 April 2000 and until 15 July 2005, paragraph 10.1 read as follows:“10.1 Another case would be that of a transport enterprise that would be required to have assets or personnel in a foreign country for purposes of operating its ships or aircraft in international traffic and that would derive income from providing goods or services in that country to other transport enterprises. This would include (for example) the provision of goods and services by engineers, ground staff, cargo handlers, catering staff and customer services personnel. Since the income so derived would not be related to the operation of ships or aircraft by the enterprise itself, that income would normally not fall within the scope of Article 8. Where, however, the enterprise provides goods to, or performs services for, another person that are supplementary or incidental to its operation of ships or aircraft in international traffic, the profits from the provision of such goods or services will fall under Article 8. Although the same considerations apply to a pool, joint business or international operating agency for the purposes of paragraph 4, what is required in that case is to examine how closely the activity is connected with the international transport activities of the pool, joint business or international operating agency as opposed to the activities of the individual enterprises participating in such arrangements.”

Paragraph 10.1 was added on 29 April 2000 by the report entitled “The 2000 Update to the Model Tax Convention”, adopted by the OECD Committee on Fiscal Affairs on 29 April 2000.

Paragraph 11Deleted on 15 July 2005 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. In the 1977 Model Convention and until 15 July 2005, paragraph 11 read as follows:“11. On the other hand, the provision does not cover a clearly separate activity such as the keeping of a hotel as a separate business; the profits from such an establishment are in any case easily determinable. In certain cases, however, circumstances are such that the provision must apply even to a hotel businesse.g. the keeping of a hotel for no other purpose than to provide transit passengers with night accommodation, the cost of such a service being included in the price of the passage ticket. In such a case, the hotel can be regarded as a kind of waiting room.”

Paragraph 11 of the 1977 Model Convention corresponded to paragraph 6 of the 1963 Draft Convention. Paragraph 11 of the 1963 Draft Convention was amended and renumbered as paragraph 16 (see history of paragraph 16) and the heading preceding paragraph 11 was moved immediately before paragraph 15 when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977. At the same time, paragraph 6 of the 1963 Draft Convention was amended and renumbered as paragraph 11 of the 1977 Model Convention. In the 1963 Draft Convention (adopted by the OECD Council on 30 July 1963) and until the adoption of the 1977 Model Convention, paragraph 6 read as follows:“6. On the other hand, the provision does not cover a clearly separate activity, such as the keeping of a hotel as a separate business. The profits from such an establishment are in any case easily determinable. In certain cases, however, circumstances are such that the provision must apply even to a hotel business,e.g.the keeping of a hotel for no other purpose than to provide transit passengers with night accommodation, the cost of such a service being included in the price of the passage ticket. In such a case, the hotel is simply a kind of waiting room.”

Paragraph 12Amended on 15 July 2005 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. In the 1977 Model Convention and until 15 July 2005, paragraph 12 read as follows:“12. There is another activity which is excluded from the field of application of the provision, namely a shipbuilding yard operated in one country by a shipping enterprise having its place of effective management in another country.”

Paragraph 12 of the 1977 Model Convention corresponded to paragraph 7 of the 1963 Draft Convention. Paragraph 12 of the 1963 Draft Convention was amended and renumbered as paragraph 17 (see history of paragraph 17) and paragraph 7 of the 1963 Draft Convention (adopted by the OECD Council on 30 July 1963), was renumbered as paragraph 12 when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977.

Paragraph 13Renumbered as paragraph 17.1 (see history of paragraph 17.1) on 15 July 2005 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005.

Paragraph 14Amended on 15 July 2005 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 29 April 2000 and until 15 July 2005, paragraph 14 read as follows:“14. Investment income of shipping, inland waterways or air transport enterprises (e.g.income from stocks, bonds, shares or loans) is to be subjected to the treatment ordinarily applied to this class of income, except where the investment that generates the income is made as an integral part of the carrying on of the business of operating the ships or aircraft in international traffic in the Contracting State. Thus, the Article would apply to interest income generated, for example, by the cash required in a Contracting State for the carrying on of that business or by bonds posted as security where this is required by law in order to carry on the business; it would not apply, however, to interest income derived in the course of the handling of cash-flow or other treasury activities for permanent establishments of the enterprise to which the income is not attributable or for associated enterprises, regardless of whether these are located within or outside that Contracting State, or for the head office (centralisation of treasury and investment activities), nor would it apply to interest income generated by the short-term investment of the profits generated by the local operation of the business where the funds invested are not required for that operation.”

Paragraph 14 was previously amended on 29 April 2000 by the report entitled “The 2000 Update to the Model Tax Convention”, adopted by the OECD Committee on Fiscal Affairs on 29 April 2000. In the 1977 Model Convention and until 29 April 2000, paragraph 14 read as follows:“14. Investment income of shipping, inland waterways or air transport enterprises (e.g.income from stocks, bonds, shares or loans) is to be subjected to the treatment ordinarily applied to this class of income.”

Paragraph 14 of the 1977 Model Convention corresponded to paragraph 8 of the 1963 Draft Convention. Paragraph 14 of the 1963 Draft Convention was amended and renumbered as paragraph 19 (see history of paragraph 19) when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977. At the same time, paragraph 8 of the 1963 Draft Convention was amended and renumbered as paragraph 14 of the 1977 Model Convention. In the 1963 Draft Convention (adopted by the OECD Council on 30 July 1963) and until the adoption of the 1977 Model Convention, paragraph 8 read as follows:“8. Investment income of shipping, inland waterways or air transport enterprises (income from stocks, bonds, shares and loans is to be subjected to the treatment ordinarily applied to this class of income in general).”

Paragraph 14.1Added on 15 July 2014 by the report entitled “The 2014 Update to the Model Tax Convention” adopted by the Council on 15 July 2014, on the basis of another report entitled “Tax treaty issues related to emissions permits/credits” (adopted by the OECD Committee on Fiscal Affairs on 26 June 2014).

Paragraph 15Replaced when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977. At the same time, paragraph 15 of the 1963 Draft Convention was amended and renumbered as paragraph 20 (see history of paragraph 20), the heading preceding paragraph 11 was moved immediately before paragraph 15 and a new paragraph 15 was added.

Paragraph 16Corresponds to paragraph 11 of the 1963 Draft Convention, adopted by the OECD Council on 30 July 1963. Paragraph 16 of the 1963 Draft Convention was amended and renumbered as paragraph 21 (see history of paragraph 21) and paragraph 11 was renumbered as paragraph 16 when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977.

Paragraph 16.1Amended on 15 July 2014, by replacing the cross reference to paragraph “14” with “14.1”, by the Report entitled “The 2014 Update to the Model Tax Convention”, adopted by the Council of the OECD on 15 July 2014, on the basis of another report entitled “Tax treaty issues related to emissions permits/credits” (adopted by the OECD Committee on Fiscal Affairs on 26 June 2014). After 15 July 2005 and until 15 July 2014, paragraph 16.1 read as follows:“16.1 Paragraphs 4 to 14.1 above provide guidance with respect to the profits that may be considered to be derived from the operation of ships or aircraft in international traffic. The principles and examples included in these paragraphs are applicable, with the necessary adaptations, for purposes of determining which profits may be considered to be derived from the operation of boats engaged in inland waterways transport.”

Paragraph 16.1 was added on 15 July 2005 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005.

Paragraph 17Corresponds to paragraph 12 of the 1963 Draft Convention, adopted by the OECD Council on 30 July 1963. Paragraph 17 of the 1963 Draft Convention was amended and renumbered as paragraph 22 (see history of paragraph 22) when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977. At the same time, paragraph 12 of the 1963 Draft Convention was amended and renumbered as paragraph 17 of the 1977 Model Convention. In the 1963 Draft Convention (adopted by the OECD Council on 30 July 1963) and until the adoption of the 1977 Model Convention, paragraph 12 read as follows:“12. The provision does not prevent specific taxation problems which may arise in connection with inland waterways transport, in particular between adjacent countries, from being settled specially by bilateral agreement.”

Paragraph 17.1Corresponds to paragraph 13 of the 1977 Model Convention as it read before 15 July 2005. On that date paragraph 13 of the 1977 Model Convention was renumbered as paragraph 17.1 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005.

Paragraph 13 of the 1963 Draft Convention was replaced when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977. At that time, paragraph 13 of the 1963 Draft Convention was amended and renumbered as paragraph 18 (see history of paragraph 18) and a new paragraph 13 was added. At the same time, the heading preceding paragraph 13 was moved with it.

Paragraph 18Corresponds to paragraph 13 of the 1963 Draft Convention. On that date paragraph 13 of the 1963 Draft Convention was amended and renumbered as paragraph 18 and the preceding heading was moved with it when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977. In the 1963 Draft Convention (adopted by the OECD Council on 30 July 1963) and until the adoption of the 1977 Model Convention, paragraph 13 read as follows:“13. It follows from the wording of paragraphs 1 and 2 of the Article that enterprises not exclusively engaged in shipping, inland waterways transport or air transport nevertheless come within the provisions of these paragraphs as regards profits arising to them from the operation of ships, boats or aircraft belonging to them.”

Paragraph 19Corresponds to paragraph 14 of the 1963 Draft Convention. Paragraph 14 of the 1963 Draft Convention was amended and renumbered as paragraph 19 when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977. In the 1963 Draft Convention (adopted by the OECD Council on 30 July 1963) and until the adoption of the 1977 Model Convention, paragraph 14 read as follows:“14. If such an enterprise possesses in a foreign country permanent establishments exclusively concerned with the operation of its ships or aircraft, there is no reason to treat such establishments differently from the permanent establishments of enterprises engaged exclusively in shipping, inland waterways or air transport.”

Paragraph 20Amended on 22 July 2010 by the report entitled “The 2010 Update to the Model Tax Convention”, adopted by the OECD Council on 22 July 2010. In the 1977 Model Convention and until 22 July 2010, paragraph 20 read as follows:“20. Nor does any difficulty arise in applying the provisions of paragraphs 1 and 2 if the enterprise has in another State a permanent establishment which is not exclusively engaged in shipping, inland waterways transport or air transport. If its goods are carried in its own ships to a permanent establishment belonging to it in a foreign country, it is right to say that none of the profit obtained by the enterprise through acting as its own carrier can properly be attributed to the permanent establishment. The same must be true even if the permanent establishment maintains installations for operating the ships or aircraft (e.g.consignment wharves) or incurs other costs in connection with the carriage of the enterprise’s goods (e.g.staff costs). In this case, the permanent establishment’s expenditure in respect of the operation of the ships, boats or aircraft should be attributed not to the permanent establishment but to the enterprise itself, since none of the profit obtained through the carrying benefits the permanent establishment.”

Paragraph 20 of the 1977 Model Convention corresponded to paragraph 15 of the 1963 Draft Convention. Paragraph 15 of the 1963 Draft Convention was amended and renumbered as paragraph 20 when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977. In the 1963 Draft Convention (adopted by the OECD Council on 30 July 1963) and until the adoption of the 1977 Model Convention, paragraph 15 read as follows:“15. Nor does any difficulty arise in applying the provisions of paragraphs 1 and 2 if the enterprise possesses in another State a permanent establishment which is not exclusively engaged in a shipping, inland waterways transport or air transport. For if its goods are carried in its own ships to a permanent establishment belonging to it in a foreign country, it is right to say that none of the profit obtained by the enterprise through acting as its own carrier can properly be attributed to the permanent establishment. The same must be true even if the permanent establishment maintains installations for operating the ships or aircraft (e.g.consignment wharves) or incurs other costs in connection with the carriage of the enterprise’s goods (e.g.staff costs). In this case, the permanent establishment’s expenditure in respect of the operation of the ships, boats or aircraft should be attributed not to the permanent establishment but to the enterprise itself, since none of the profit obtained through the carrying benefits the permanent establishment.”

Paragraph 21Amended on 22 July 2010 by the report entitled “The 2010 Update to the Model Tax Convention”, adopted by the OECD Council on 22 July 2010. After 29 April 2000 and until 22 July 2010, paragraph 21 read as follows:“21. Where ships or aircraft are operated in international traffic, the application of the Article to the profits arising from such operation will not be affected by the fact that the ships or aircraft are operated by a permanent establishment which is not the place of effective management of the whole enterprise (for example, ships or aircraft put into service by the permanent establishment or figuring on the balance sheet of the permanent establishment).”

Paragraph 21 was replaced on 29 April 2000 when it was deleted and a new paragraph 21 was added by the report entitled “The 2000 Update to the Model Tax Convention”, adopted by the OECD Committee on Fiscal Affairs on 29 April 2000. In the 1977 Model Convention and until it was deleted on 29 April 2000, paragraph 21 read as follows:“21. Where the enterprise’s ships or aircraft are operated by a permanent establishment which is not the place of effective management of the whole enterprise (e.g.ships or aircraft put into service by the permanent establishment and figuring on its balance sheet), then the effective management for the purposes of paragraphs 1 and 2 must be considered, as regards the operation of the ships or aircraft, as being in the Contracting State in which the permanent establishment is situated.”

Paragraph 21 of the 1977 Model Convention corresponded to paragraph 16 of the 1963 Draft Convention. Paragraph 16 of the 1963 Draft Convention was amended and renumbered as paragraph 21 when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977. In the 1963 Draft Convention (adopted by the OECD Council on 30 July 1963) and until the adoption of the 1977 Model Convention, paragraph 16 read as follows:“16. In cases — which are probably purely theoretical — where the enterprise’s ships or aircraft are operated by a permanent establishment which is not the place of effective management of the whole enterprise (e.g.ships or aircraft put into service by the permanent establishment and figuring on its balance sheet), then the effective management for the purposes of paragraphs 1 and 2 must be considered, as regards the operation of the ships or aircraft, as being in the Contracting State in which the permanent establishment is situated.”

Paragraph 22Corresponds to paragraph 17 of the 1963 Draft Convention. Paragraph 17 of the 1963 Draft Convention was amended and renumbered as paragraph 22 and the preceding heading was moved with it when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977. In the 1963 Draft Convention (adopted by the OECD Council on 30 July 1963) and until the adoption of the 1977 Model Convention, paragraph 17 read as follows:“17. This paragraph deals with the particular case where the place of effective management of the enterprise is aboard a ship or a boat. In this case tax will only be charged by the State where the home harbour of the ship or boat is situated. It is provided that if the home harbour cannot be determined, tax will only be charged by the Contracting State of which the operator of the ship or boat is a resident.”

Paragraph 23Corresponds to paragraph 9 of the 1963 Draft Convention. Paragraph 9 of the 1963 Draft Convention was amended and renumbered as paragraph 23 and the heading preceding paragraph 23 was added when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977. In the 1963 Draft Convention (adopted by the OECD Council on 30 July 1963) and until the adoption of the 1977 Model Convention, paragraph 9 read as follows:“9. Since the Second World War, various forms of international co-operation have come into existence, particularly in air transport. In this field international co-operation is secured through pooling agreements or other Conventions of a similar kind which lay down certain rules for apportioning the receipts (or profits) from the joint business.”

Paragraph 24Corresponds to paragraph 10 of the 1963 Draft Convention. Paragraph 10 of the 1963 Draft Convention was amended and renumbered as paragraph 24 when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977. In the 1963 Draft Convention (adopted by the OECD Council on 30 July 1963) and until the adoption of the 1977 Model Convention, paragraph 10 read as follows:“10. Generally speaking, participation in a pool, in a joint business or in an international operating agency does not appear to offer any special difficulties. If the provision recommended is applicable to any enterprise engaged in shipping, inland waterways transport or air transport, it follows that it must also extend to profits obtained through the type of co-operation described above; indeed, such an interpretation results directly from the text of the provision.”

Paragraph 25Renumbered as paragraph 34 (see history of paragraph 35) and amended on 31 March 1994 by the report entitled “1994 Update to the Model Tax Convention”, adopted by the OECD Council on 31 March 1994. At the same time, the heading preceding paragraph 25 was deleted (see history of paragraph 35).

Paragraph 26Renumbered as paragraph 42 (see history of paragraph 42) and amended on 28 January 2003 by the report entitled “The 2002 Update to the Model Tax Convention” adopted by the OECD Council on 28 January 2003.

Paragraph 27Deleted on 15 July 2005 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 23 July 1992 and until 15 July 2005, paragraph 27 read as follows:“27. PortugalandTurkeyreserve the right, in the course of negotiations for concluding conventions with other member countries, to propose that the part of inland transport (cf. paragraph 9 above) carried out by means other than that employed for international transport be excluded from the scope of the Article, whether or not the means of transport belong to the transporting enterprise.”

Paragraph 27 was amended on 23 July 1992, by deleting Spain from the list of countries making the observation, by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992. In the 1977 Model Convention and until 23 July 1992, paragraph 27 read as follows:“27. Portugal,SpainandTurkeyreserve the right, in the course of negotiations for concluding conventions with other member countries, to propose that the part of inland transport (cf. paragraph 9 above) carried out by means other than that employed for international transport be excluded from the scope of the Article, whether or not the means of transport belong to the transporting enterprise.”

Paragraph 27 was added when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977.

Paragraph 28Replaced on 15 July 2005 when paragraph 28 was deleted and a new paragraph 28 was added by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 23 July 1992 and until 15 July 2005, paragraph 28 read as follows:“28. PortugalandTurkeyalso reserve the right, in the course of such negotiations, to propose that the leasing of containers (cf. paragraph 10 above) even if supplementary or incidental be regarded as an activity separate from international shipping or aircraft operations, and consequently be excluded from the scope of the Article.”

Paragraph 28 was amended on 23 July 1992, by replacing the words “These countries” at the beginning of the paragraph with “PortugalandTurkey” by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992. In the 1977 Model Convention and until 23 July 1992, paragraph 28 read as follows:“28. These countries also reserve the right, in the course of such negotiations, to propose that the leasing of containers (cf. paragraph 10 above) even if supplementary or incidental be regarded as an activity separate from international shipping or aircraft operations, and consequently be excluded from the scope of the Article.”

Paragraph 28 was added when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977.

Paragraph 29Amended on 15 July 2005 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. In the 1977 Model Convention and until 15 July 2005, paragraph 29 read as follows:“29. Germanyreserves its position as to the application of the Article to income from inland transportation and container services (cf. paragraphs 9 and 10 above).”

Paragraph 29 was added when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977.

Paragraph 30Replaced on 21 September 1995 when paragraph 30 was renumbered as paragraph 31 (see history of paragraph 31) and a new paragraph 30 was added by the report entitled “The 1995 Update to the Model Tax Convention”, adopted by the OECD Council on 21 September 1995. At the same time, the heading preceding paragraph 30 was moved immediately before paragraph 31.

Paragraph 30.1Deleted on 15 July 2005 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 29 April 2000 and until 15 July 2005, paragraph 30.1 read as follows:“30.1 Australiadoes not agree with the interpretations given in paragraphs 8 d) and 9. Australia takes the view that international operation of ships and aircraft does not include inland transportation.”

Paragraph 30.1 was added on 29 April 2000 by the report entitled “The 2000 Update to the Model Tax Convention”, adopted by the OECD Committee on Fiscal Affairs on 29 April 2000.

Paragraph 31Amended on 17 July 2008, by deleting Poland from the list of countries making the reservation, by the report entitled “The 2008 Update to the Model Tax Convention”, adopted by the OECD Council on 17 July 2008. After 29 April 2000 and until 17 July 2008, paragraph 31 read as follows:“31. Canada,Hungary,Mexico,New ZealandandPolandreserve the right to tax as profits from internal traffic, profits from the carriage of passengers or cargo taken on board at one place in a respective country for discharge at another place in the same country.New Zealandalso reserves the right to tax as profits from internal traffic profits from other coastal and continental shelf activities.”

Paragraph 31 was previously amended on 29 April 2000, by deleting Australia from the list of countries making the reservation, by the report entitled “The 2000 Update to the Model Tax Convention”, adopted by the OECD Committee on Fiscal Affairs on 29 April 2000. After 23 October 1997 and until 29 April 2000, paragraph 31 read as follows:“31. Australia,Canada,Hungary,Mexico,New ZealandandPolandreserve the right to tax as profits from internal traffic profits from the carriage of passengers or cargo taken on board at one place in a respective country for discharge at another place in the same country.AustraliaandNew Zealandalso reserve the right to tax as profits from internal traffic profits from other coastal and continental shelf activities.”

Paragraph 31 was previously amended on 23 October 1997, by adding Hungary and Poland to the list of countries making the reservation, by the report entitled “The 1997 Update to the Model Tax Convention”, adopted by the OECD Council on 23 October 1997. After 21 September 1995 and until 23 October 1997, paragraph 31 read as follows:“31. Australia,Canada,MexicoandNew Zealandreserve the right to tax as profits from internal traffic profits from the carriage of passengers or cargo taken on board at one place in a respective country for discharge at another place in the same country.AustraliaandNew Zealandalso reserve the right to tax as profits from internal traffic profits from other coastal and continental shelf activities.”

Paragraph 31 as it read before 21 September 1995 corresponded to paragraph 30 of the 1977 Model Convention. On 21 September 1995 paragraph 31 of the 1977 Model Convention was renumbered as paragraph 32 (cf. history paragraph 32) by the report entitled “The 1995 Update to the Model Tax Convention”, adopted by the OECD Council on 21 September 1995. At the same time, paragraph 30 of the 1977 Model Convention was amended, by adding Mexico and New Zealand to the list of countries making the reservation, renumbered as paragraph 31 and the preceding heading was moved with it. In the 1977 Model Convention and until 21 September 1995, paragraph 30 read as follows:“30. AustraliaandCanada, reserve the right to tax as profits from internal traffic profits from the carriage of passengers or cargo taken on board at one place in a respective country for discharge at another place in the same country.Australiaalso reserves the right to tax as profits from internal traffic profits from other coastal and continental shelf activities.”

Paragraph 30 and the heading preceding it were added when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977.

Paragraph 32Amended on 17 July 2008, by adding Belgium to the list of countries making the reservation, by the report entitled “The 2008 Update to the Model Tax Convention”, adopted by the OECD Council on 17 July 2008. After 15 July 2005 and until 17 July 2008, paragraph 32 read as follows:“32. Canada,Greece,Mexico,TurkeytheUnited Kingdomand theUnited Statesreserve the right not to extend the scope of the Article to cover inland transportation in bilateral conventions (paragraph 2 of the Article).”

Paragraph 32 was previously amended on 15 July 2005, by adding Greece, Mexico and the United Kingdom to the list of countries making the reservation, by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 21 September 1995 and until 15 July 2005, paragraph 32 read as follows:“32. Canada,Turkeyand theUnited Statesreserve the right not to extend the scope of the Article to cover inland transportation in bilateral conventions (paragraph 2 of the Article).”

Paragraph 32 as it read before 21 September 1995 corresponded to paragraph 31 of the 1977 Model Convention. On 21 September 1995 paragraph 31 of the 1977 Model Convention was renumbered as paragraph 32 by the report entitled “The 1995 Update to the Model Tax Convention”, adopted by the OECD Council on 21 September 1995.

Paragraph 31 was added when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977.

Paragraph 33Corresponds to paragraph 32 as it read before 21 September 1995. On that date paragraph 33 was renumbered as paragraph 34 (see history of paragraph 34) and paragraph 32 was renumbered as paragraph 33 by the report entitled “The 1995 Update to the Model Tax Convention”, adopted by the OECD Council on 21 September 1995.

Paragraph 32 was added on 23 July 1992 by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992.

Paragraph 34Deleted on 15 July 2005 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 21 September 1995 and until 15 July 2005, paragraph 34 read as follows:“34. TheUnited Kingdomreserves the right to include in paragraph 1 of the Article profits from the leasing of ships or aircraft on a bare boat basis (cf. paragraph 5 above) and from the leasing of containers (cf. paragraph 10 above).”

Paragraph 34 corresponded to paragraph 33 as it read before 21 September 1995. Paragraph 34 was renumbered as paragraph 35 (see history of paragraph 35) and paragraph 33 was renumbered as paragraph 34 by the report entitled “The 1995 Update to the Model Tax Convention”, adopted by the OECD Council on 21 September 1995.

Paragraph 33 was added on 23 July 1992 by the report entitled “The Revision of the Model Convention”, adopted by the OECD Council on 23 July 1992.

Paragraph 35Corresponds to paragraph 34 as it read before 21 September 1995. On that date paragraph 34 was renumbered as paragraph 35 by the report entitled “The 1995 Update to the Model Tax Convention” adopted by the OECD Council on 21 September 1995.

Paragraph 34 as it read before 31 March 1994 corresponded to paragraph 25 of the 1977 Model Convention. On 31 March 1994 paragraph 25 was amended and renumbered as paragraph 34 and paragraph 25 of the 1977 Model Convention was amended and renumbered as paragraph 34 by the report entitled “1994 Update to the Model Tax Convention”, adopted by the OECD Council on 31 March 1994. At the same time, the heading preceding paragraph 25 was deleted. In the 1977 Model Convention and until 31 March 1994, paragraph 25 and the preceding heading read as follows:“Special Derogation

25. In view of its particular situation in relation to shipping,Greecewill retain its freedom of action with regard to the provisions in the Convention relating to profits from the operation of ships in international traffic, to remuneration of crews of such ships, to capital represented by ships in international traffic and by movable property pertaining to the operation of such ships, and to capital gains from the alienation of such ships and assets.”

Paragraph 25 and the heading preceding it were added when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977.

Paragraph 36Added on 21 September 1995 by the report entitled “The 1995 Update to the Model Tax Convention”, adopted by the OECD Council on 21 September 1995.

Paragraph 37Deleted on 15 July 2005 by the report entitled “The 2005 Update to the Model Tax Convention”, adopted by the OECD Council on 15 July 2005. After 23 October 1997 and until 15 July 2005, paragraph 37 read as follows:“37. Polandreserves the right to broaden the scope of the Article to cover transport by road vehicles and to make a corresponding change to the definition of “international traffic” in Article 3.”

Paragraph 37 was added on 23 October 1997 by the report entitled “The 1997 Update to the Model Tax Convention”, adopted by the OECD Council on 23 October 1997.

Paragraph 38Amended on 22 July 2010 by the report entitled “The 2010 Update to the Model Tax Convention”, adopted by the OECD Council on 22 July 2010. After 29 April 2000 and until 22 July 2010, paragraph 38 read as follows:“38. Australiareserves the right to tax profits from the carriage of passengers or cargo taken on board at one place in Australia for discharge in Australia. Australia also reserves the right to tax profits from other coastal and continental shelf activities.”

Paragraph 38 was added on 29 April 2000 by the report entitled “The 2000 Update to the Model Tax Convention”, adopted by the OECD Committee on Fiscal Affairs on 29 April 2000.

Paragraph 39Added on 29 April 2000 by the report entitled “The 2000 Update to the Model Tax Convention”, adopted by the OECD Committee on Fiscal Affairs on 29 April 2000.

Paragraph 40Added on 28 January 2003 by the report entitled “The 2002 Update to the Model Tax Convention”, adopted by the OECD Council on 28 January 2003.

Paragraph 41Added on 28 January 2003 by the report entitled “The 2002 Update to the Model Tax Convention”, adopted by the OECD Council on 28 January 2003.

Paragraph 42Amended on 15 July 2014 by the Report entitled “The 2014 Update to the Model Tax Convention”, adopted by the Council of the OECD on 15 July 2014. After 28 January 2003 and until 15 July 2014, paragraph 42 read as follows:“42. Turkeyreserves the right in exceptional cases to apply the permanent establishment rule in taxation of profit from international transport. Turkey also reserves the right to broaden the scope of the Article to cover transport by road vehicle and to make a corresponding change to the definition of “international traffic” in Article 3.”

Paragraph 42 as it read after 28 January 2003 corresponded to paragraph 26 of the 1977 Model Convention. Paragraph 26 was amended and renumbered as paragraph 42 by the report entitled “The 2002 Update to the Model Tax Convention”, adopted by the OECD Council on 28 January 2003. In the 1977 Model Convention and until 28 January 2003, paragraph 26 read as follows:“26. While agreeing in principle to abide by the provisions of Article 8 in bilateral conventions,Turkeyintends in exceptional cases to apply the permanent establishment rule in taxing international transport profits.”

Paragraph 26 and the heading preceding it were added when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977.

Paragraph 43Amended on 15 July 2014, by adding Estonia to the list of countries making the reservation, by the Report entitled “The 2014 Update to the Model Tax Convention”, adopted by the Council of the OECD on 15 July 2014. After 22 July 2010 and until 15 July 2014, paragraph 43 read as follows:“43. ChileandSloveniareserve the right not to extend the scope of the Article to cover inland waterways transportation in bilateral conventions and to make corresponding modifications to paragraph 3 ofArticles 13, 15 and 22.”

Paragraph 43 was added on 22 July 2010 by the report entitled the “2010 Update to the Model Tax Convention” adopted by the OECD Council on 22 July 2010.