Chapter II - Definitions

DEFINITIONSGeneral definitions1. For the purposes of this Convention, unless the context otherwise requires:the term “person” includes an individual, a company and any other body of persons;

the term “company” means any body corporate or any entity that is treated as a body corporate for tax purposes;

the term “enterprise” applies to the carrying on of any business;

the terms “enterprise of a Contracting State” and “enterprise of the other Contracting State” mean respectively an enterprise carried on by a resident of a Contracting State and an enterprise carried on by a resident of the other Contracting State;

the term “international traffic” means any transport by a ship or aircraft operated by an enterprise that has its place of effective management in a Contracting State, except when the ship or aircraft is operated solely between places in the other Contracting State;

the term “competent authority” means:

(in State A): ................................

(in State B): ................................

the term “national”, in relation to a Contracting State, means:

any individual possessing the nationality or citizenship of that Contracting State; and

any legal person, partnership or association deriving its status as such from the laws in force in that Contracting State;

the term “business” includes the performance of professional services and of other activities of an independent character.

2. As regards the application of the Convention at any time by a Contracting State, any term not defined therein shall, unless the context otherwise requires, have the meaning that it has at that time under the law of that State for the purposes of the taxes to which the Convention applies, any meaning under the applicable tax laws of that State prevailing over a meaning given to the term under other laws of that State.

Paragraph 1The preamble of paragraph 1 was amended when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977 by replacing the words “In this Convention” with “For the purposes of this Convention”. In the 1963 Draft Convention (adopted by the OECD Council on 30 July 1963) and until the adoption of the 1977 Model Convention, the preamble of paragraph 1 read as follows:“1. In this Convention, unless the context otherwise requires:”

Subparagraph a)of the 1977 Model Convention corresponds to subparagraph b) of the 1963 Draft Convention. Subparagraph a) of the 1963 Draft Convention was deleted and subparagraph b) was redesignated as subparagraph a) and amended, by replacing the word “comprises” with “includes” 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, Subparagraphs a) and b)of paragraph 1 read as follows:the terms “a Contracting State” and “the other Contracting State” mean (State A) or (State B), as the context requires;.

the term “person” comprises an individual, a company and any other body of persons;”

Subparagraph b) was amended on 21 September 1995, by replacing the words “entity which” with “entity that”, by the report entitled “The 1995 Update to the Model Tax Convention”, adopted by the OECD Council on 21 September 1995. In the 1977 Model Convention and until 21 September 1995, subparagraph b) of paragraph 1 read as follows:the term “company” means any body corporate or any entity which is treated as a body corporate for tax purposes;”

Subparagraph b) of the 1977 Model Convention corresponded to subparagraph c) of the 1963 Draft Convention. Subparagraph b) of the 1963 Draft Convention was amended and redesignated as subparagraph a) (see history of subparagraph a) above) and subparagraph c) of the 1963 Draft Convention was redesignated as subparagraph b) when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977.

Subparagraph c)as it read before 29 April 2000 was replaced on 29 April 2000, when it was redesignated as subparagraph d) (see history of subparagraph d) below) and a new subparagraph c) 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, on the basis of the Annex of another report entitled “Issues related to Article 14 of the OECD Model Tax Convention” (adopted by the OECD Committee on Fiscal Affairs on 27 January 2000), on the basis of the Annex of another report entitled “Issues related to Article 14 of the OECD Model Tax Convention”.

Subparagraph d)corresponds to subparagraph c) as it read in the 1977 Model Convention and until 29 April 2000. On 29 April 2000 subparagraph d) of the 1977 Model Convention was redesignated as subparagraph e) (see history of subparagraph e) below) and subparagraph c) of the 1977 Model Convention was redesignated as subparagraph d) by the report entitled “The 2000 Update to the Model Tax Convention”, adopted by the OECD Committee on Fiscal Affairs on 29 April 2000.

Subparagraph c) of the 1977 Model Convention corresponded to subparagraph d) of the 1963 Draft Convention (adopted by the OECD Council on 30 July 1963) which was redesignated as subparagraph c) when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977.

Subparagraph e)corresponds to subparagraph d) as it read before 29 April 2000. On 29 April 2000 subparagraph e) was redesignated as subparagraph f) (see history of subparagraph f) below) and subparagraph d) was redesignated as subparagraph e) by the report entitled “The 2000 Update to the Model Tax Convention”, adopted by the OECD Committee on Fiscal Affairs on 29 April 2000.

Subparagraph d) of the 1977 Model Convention was amended on 21 September 1995, by replacing the words “enterprise which” with the words “enterprise that”, by the report entitled “The 1995 Update to the Model Tax Convention”, adopted by the OECD Council on 21 September 1995. In the 1977 Model Convention and until 21 September 1995, subparagraph d) read as follows:the term “international traffic” means any transport by a ship or aircraft operated by an enterprise which has its place of effective management in a Contracting State, except when the ship or aircraft is operated solely between places in the other Contracting State;”

Subparagraph d) 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, subparagraph d) of the 1963 Draft Convention was redesignated subparagraph c) and a new subparagraph d) was added.

Subparagraph f)corresponds to subparagraph e) as it read in the 1977 Model Convention and until 29 April 2000. On 29 April 2000 subparagraph f) was redesignated as subparagraph g) (see history of subparagraph g) below) and subparagraph e) was redesignated as subparagraph f) by the report entitled “The 2000 Update to the Model Tax Convention”, adopted by the OECD Committee on Fiscal Affairs on 29 April 2000.

Subparagraph e) of the 1963 Draft Convention was amended 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, subparagraph e) read as follows:the term “competent authority” means:

(in State A):

(in State B):”

Subparagraph g)was amended on 28 January 2003 by adding the words “, in relation to a Contracting State” immediately before the word “means”, by the report entitled “The 2002 Update to the Model Tax Convention” adopted by the OECD Council on 28 January 2003. After 29 April 2000 and until 28 January 2003 subparagraph g) read as follows:the term “national” means:

any individual possessing the nationality of a Contracting State;

any legal person, partnership or association deriving its status as such from the laws in force in a Contracting State;”

Subparagraph g) as it read after 29 April 2000 corresponded to subparagraph f) as it read in the 1977 Model Convention. Subparagraph f) was redesignated as subparagraph g) by the report entitled “The 2000 Update to the Model Tax Convention” adopted by the OECD Committee on Fiscal Affairs on 29 April 2000.

Subparagraph f) as it read after 23 July 1992 corresponded to paragraph 2 of Article 24 of the 1977 Model Convention. On 23 July 1992 paragraph 2 of Article 24 was amended and redesignated as subparagraph f) of paragraph 1 of Article 3 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 2 of Article 24 read as follows“2. The term “nationals” means:all individuals possessing the nationality of a Contracting State;

all legal persons, partnerships and associations deriving their status as such from the laws in force in a Contracting State.”

Paragraph 2 of Article 24 of the 1977 Model Convention was amended when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977, by substituting the word “laws” for “law” in subparagraph b). In the 1963 Draft Convention (adopted by the OECD Council on 30 July 1963) and until the adoption of the 1977 Model Convention, paragraph 2 of Article 24 read as follows:“2. The term “nationals” means:all individuals possessing the nationality of a Contracting State;

all legal persons, partnerships and associations deriving their status as such from the law in force in a Contracting State.”

Subparagraph h)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, on the basis of the Annex of another report entitled “Issues related to Article 14 of the OECD Model Tax Convention” (adopted by the OECD Committee on Fiscal Affairs on 27 January 2000).

Paragraph 2Amended 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. In the 1977 Model Convention and until 21 September 1995, paragraph 2 read as follows:“2. As regards the application of the Convention by a Contracting State any term not defined therein shall, unless the context otherwise requires, have the meaning which it has under the law of that State concerning the taxes to which the Convention applies.”

Paragraph 2 was previously amended 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 2 read as follows:“2. As regards the application of the Convention by a Contracting State any term not otherwise defined shall, unless the context otherwise requires, have the meaning which it has under the laws of that Contracting State relating to the taxes which are the subject of the Convention.”

Resident1. For the purposes of this Convention, the term “resident of a Contracting State” means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature, and also includes that State and any political subdivision or local authority thereof. This term, however, does not include any person who is liable to tax in that State in respect only of income from sources in that State or capital situated therein.

2. Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, then his status shall be determined as follows:he shall be deemed to be a resident only of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident only of the State with which his personal and economic relations are closer (centre of vital interests);

if the State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either State, he shall be deemed to be a resident only of the State in which he has an habitual abode;

if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident only of the State of which he is a national;

if he is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.

3. Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident only of the State in which its place of effective management is situated.

The title of Article 4:Changed 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, the title of Article 4 as follows:“FISCAL DOMICILE”

Paragraph 1Amended on 21 September 1995, by adding to the first sentence the words “and also includes that State and any political subdivision or local authority thereof” and by replacing in the second sentence the words “But this term” with “This term, however,”, by the report entitled “The 1995 Update to the Model Tax Convention”, adopted by the OECD Council on 21 September 1995. In the 1977 Model Convention and until 21 September 1995, paragraph 1 read as follows:“1. For the purposes of this Convention, the term “resident of a Contracting State” means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature. But this term does not include any person who is liable to tax in that State in respect only of income from sources in that State or capital situated therein.”

Paragraph 1 was previously amended when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977, by the addition of the second sentence. 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. For the purposes of this Convention, the term “resident of a Contracting State” means any person who, under the law of that State, is liable to taxation therein by reason of his domicile, residence, place of management or any other criterion of a similar nature.”

Paragraph 2Amended on 23 October 1997, by adding the word “only” after the word “resident” in the third line of subparagraph a) to correct an omission that was made when similar changes were made to subparagraphs a), b) and c) as part of the 1995 update (see below), 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 subparagraph a) of paragraph 2 read as follows:he shall be deemed to be a resident only of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident of the State with which his personal and economic relations are closer (centre of vital interests);”

Subparagraphs a), b), and c) were previously amended on 21 September 1995, by adding the word “only” after the word “resident” (except in the third line of subparagraph a)), by the report entitled “The 1995 Update to the Model Tax Convention”, adopted by the OECD Council on 21 September 1995. In the 1977 Model Convention and until 21 September 1995, paragraph 2 read as follows:“2. Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, then his status shall be determined as follows:he shall be deemed to be a resident of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident of the State with which his personal and economic relations are closer (centre of vital interests);

if the State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either State, he shall be deemed to be a resident of the State in which he has an habitual abode;

if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident of the State of which he is a national;

if he is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.”

Paragraph 2 was previously amended 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 2 read as follows:“2. Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, then this case shall be determined in accordance with the following rules:He shall be deemed to be a resident of the Contracting State in which he has a permanent home available to him. If he has a permanent home available to him in both Contracting States, he shall be deemed to be a resident of the Contracting State with which his personal and economic relations are closest (centre of vital interests);

If the Contracting State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either Contracting State, he shall be deemed to be a resident of the Contracting State in which he has an habitual abode;

If he has an habitual abode in both Contracting States or in neither of them, he shall be deemed to be a resident of the Contracting State of which he is a national;

If he is a national of both Contracting States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.”

Paragraph 3Amended on 21 September 1995, by adding the word “only” after the words “shall be deemed to be a resident”, by the report entitled “The 1995 Update to the Model Tax Convention”, adopted by the OECD Council on 21 September 1995. In the 1977 Model Convention and until 21 September 1995, paragraph 3 read as follows:“3. Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident of the State in which its place of effective management is situated.”

Paragraph 3 was previously amended when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977, by replacing the words “the Contracting State in which” with “the State in which”. 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. Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident of the Contraction State in which its place of effective management is situated.”

Permanent establishment1. For the purposes of this Convention, the term “permanent establishment” means a fixed place of business through which the business of an enterprise is wholly or partly carried on.

2. The term “permanent establishment” includes especially:a place of management;

a branch;

an office;

a factory;

a workshop, and

a mine, an oil or gas well, a quarry or any other place of extraction of natural resources.

3. A building site or construction or installation project constitutes a permanent establishment only if it lasts more than twelve months.

4. Notwithstanding the preceding provisions of this Article, the term “permanent establishment” shall be deemed not to include:the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise;

the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery;

the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;

the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise or of collecting information, for the enterprise;

the maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, any other activity of a preparatory or auxiliary character;

the maintenance of a fixed place of business solely for any combination of activities mentioned in subparagraphs a) to e), provided that the overall activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary character.

5. Notwithstanding the provisions of paragraphs 1 and 2, where a person — other than an agent of an independent status to whom paragraph 6applies — is acting on behalf of an enterprise and has, and habitually exercises, in a Contracting State an authority to conclude contracts in the name of the enterprise, that enterprise shall be deemed to have a permanent establishment in that State in respect of any activities which that person undertakes for the enterprise, unless the activities of such person are limited to those mentioned in paragraph 4which, if exercised through a fixed place of business, would not make this fixed place of business a permanent establishment under the provisions of that paragraph.

6. An enterprise shall not be deemed to have a permanent establishment in a Contracting State merely because it carries on business in that State through a broker, general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business.

7. The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State, or which carries on business in that other State (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment of the other.

Paragraph 1Amended when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977, by replacing the words “in which the business of the enterprise” with “through which the business of an enterprise”. 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. For the purposes of this Convention, the term “permanent establishment” means a fixed place of business in which the business of the enterprise is wholly or partly carried on.”

Paragraph 2Amended when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977, by substituting the words “includes” in the first line for “shall include”. At the same time, the word “and” was added at the end of subparagraph e), subparagraph f) was modified and subparagraph g) was deleted. In the 1963 Draft Convention (adopted by the OECD Council on 30 July 1963) and until the adoption of the 1977 Model Convention, paragraph 2 read as follows:“2. The term “permanent establishment” shall include especially:a place of management;

a branch;

an office;

a factory;

a workshop, and

a mine, quarry or other place of extraction of natural resources;

a building site or construction or assembly project which exists for more than twelve months.”

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 was amended and renumbered as paragraph 4 (see history of paragraph 4) and a new paragraph 3 was added.

Paragraph 4Corresponds to paragraph 3 of the 1963 Draft Convention as it read before 11 April 1977. On that date paragraph 4 of the 1963 Draft Convention was amended and renumbered as paragraph 5 (see history of paragraph 5) when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977. At the same time, paragraph 3 was renumbered as paragraph 4 and amended, by modifying its preamble and subparagraph e) and adding subparagraph f). 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. The term “permanent establishment” shall not be deemed to include:the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise;

the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery;

the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;

the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise, or for collecting information, for the enterprise;

the maintenance of a fixed place of business solely for the purpose of advertising, for the supply of information, for scientific research or for similar activities which have a preparatory or auxiliary character, for the enterprise.”

Paragraph 5Corresponds to paragraph 4 of the 1963 Draft Convention as it read before 11 April 1977. On that date paragraph 5 of the 1963 Draft Convention was amended and renumbered as paragraph 6 (see history of paragraph 6) when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977. At the same time, paragraph 4 of the 1963 Draft Convention was renumbered as paragraph 5 and amended. In the 1963 Draft Convention (adopted by the OECD Council on 30 July 1963) and until the adoption of the 1977 Model Convention, paragraph 4 read as follows:“4. A person acting in a Contracting State on behalf of an enterprise of the other Contracting State — other than an agent of an independent status to whom paragraph 5 applies — shall be deemed to be a permanent establishment in the first-mentioned State if he has, and habitually exercises in that State, an authority to conclude contracts in the name of the enterprise, unless his activities are limited to the purchase of goods or merchandise for the enterprise.”

Paragraph 6Corresponds to paragraph 5 of the 1963 Draft Convention as it read before 11 April 1977. On that date paragraph 6 of the 1963 Draft Convention was renumbered as paragraph 7 (see history of paragraph 7) and paragraph 5 of the 1963 Draft Convention was amended and renumbered as paragraph 6 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 5 read as follows:“5. An enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that other State through a broker, general commission agent or any other agent of an independent status, where such persons are acting in the ordinary course of their business.”

Paragraph 7Corresponds to paragraph 6 of the 1963 Draft Convention as it read before 11 April 1977. On that date paragraph 6 of the 1963 Draft Convention was renumbered as paragraph 7 when the 1977 Model Convention was adopted by the OECD Council on 11 April 1977.