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These notes are issued for the information of taxpayers and their tax - page 24 / 68

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(3)

things attached to land or permanently fastened to anything attached to land.

52.

Apart from defining the meaning of immovable property according

to the respective laws of each Side, it is specifically provided in paragraph 2 of Article 6 that certain assets and rights must always be regarded as immovable property. These assets and rights include property accessory to immovable property, livestock and equipment used in agriculture and forestry, and rights to

which the provisions of general laws in respect of real estate apply. ships and aircraft shall never be regarded as immovable property.

However,

53.

The term “property accessory to immovable property” does not mean

a simple storage in or in connection with immovable property, but refers to a component part of an essential function of the immovable property, such as an

air-conditioning system or elevator of a building.

54.

Paragraphs 1 and 3 of Article 6 also apply to income derived by an

enterprise from immovable property. According to the rules set out above, income derived by an enterprise of One Side from immovable property situated in the Other Side may be taxed in that Other Side, regardless of whether it has a permanent establishment in that Other Side, whether the immovable property is part of that permanent establishment, or whether the income is derived through

that permanent establishment.

Article 7

BUSINESS PROFITS

Allocation of taxing rights

55.

Business profits refer to profits derived by an enterprise from its

business activities.

Under the provisions of paragraph

profits

of

an

enterprise

of

One

Side

shall

be

taxable

only

1 in

of Article 7, that Side (i.e.

the the

Other Other

Side has no right to tax) unless the enterprise carries on business in the Side through a permanent establishment situated therein, in which case

its

profits

may

be

taxed

in

that

Other

Side,

but

only

so

much

of

them

as

is

attributable to that permanent establishment.

20

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