This Convention shall apply to persons who are residents
of one or both of the Contracting States.
1. This Convention shall apply to taxes on income imposed
on behalf of each Contracting State, irrespective of the manner in which
they are levied.
2. There shall be regarded as taxes on income all taxes
imposed on total income, or on elements of income, including taxes on
gains from the alienation of movable or immovable property.
3. The existing taxes to which the Convention shall apply
are, in particular:
4. The Convention shall apply also to any identical or
substantially similar taxes that are imposed after the date of signature
of the Convention in addition to, or in place of, the existing taxes. The
competent authorities of the Contracting States shall notify each other of
any significant changes that have been made in their respective taxation
laws.
1. For the purposes of this Convention, unless the context
otherwise requires:
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 law of that State
prevailing over a meaning given to the term under other laws of that
State.
1. For the purposes of this Convention, the term
"resident of a Contracting State" means:
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.
2. Where by reason of the provisions of paragraph 1,
an individual is a resident of both Contracting States, then the
individual's status shall be determined 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,
the competent authorities of the Contracting States shall by mutual agreement endeavour to
settle the question and to determine the mode of application of the
Convention to such person. In the absence of such agreement, such person
shall not be entitled to claim any relief or exemption from tax provided
by the Convention.
1. 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:
3. The term "permanent establishment" likewise
encompasses:
For the purposes of computing the time limits referred to
in subparagraph b), the activities carried on by an enterprise associated
with another enterprise within the meaning of Article 9 shall be
aggregated with the period during which the activities are carried on by
the associated enterprise, if the activities of both enterprises are
identical or substantially similar.
4. Notwithstanding the preceding provisions of this
Article, the term "permanent establishment" shall be deemed not
to include:
5. Notwithstanding the provisions of paragraphs 1 and
2, where a person - other than an agent of an independent status to whom
paragraph 7 applies - is acting in a Contracting State on behalf of
an enterprise of the other Contracting State, that enterprise shall be
deemed to have a permanent establishment in the first-mentioned State in
respect of any activities which that person undertakes for the enterprise,
if such person has, and habitually exercises, in that State an authority
to conclude contracts in the name of the enterprise, unless the activities
of such person are limited to those mentioned in paragraph 4 which,
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. Notwithstanding the preceding provisions of this
Article, an insurance company which is an enterprise of a Contracting
State shall, except in regard to re-insurance, be deemed to have a
permanent establishment in the other Contracting State if it collects
premiums in the territory of that other State or insures risk situated
therein through a representative who is employed or carries on business in
that other State, other than an agent of an independent status to whom
paragraph 7 applies.
7. 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, provided that such persons are acting in the ordinary course of
their business and that, in their commercial or financial relations with
the enterprise, conditions are not made or imposed that differ from those
generally agreed to by independent agents.
8. 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.
1. Income derived by a resident of a Contracting State
from immovable property (including income from agriculture or forestry)
situated in the other Contracting State may be taxed in that other State.
2. For the purposes of this Convention, the term
"immovable property" shall have the meaning which it has for the
purposes of the taxation law of the Contracting State in which the
property in question is situated. The term shall in any case include
property accessory to immovable property, livestock and equipment used in
agriculture and forestry, rights to which the provisions of general law
respecting landed property apply, usufruct of immovable property and
rights to variable or fixed payments as consideration for the working of,
or the right to work, mineral deposits, sources and other natural
resources. Ships and aircraft shall not be regarded as immovable property.
3. The provisions of paragraph 1 shall apply to
income derived from the direct use, letting, or use in any other form of
immovable property and to income from the alienation of such property.
4. The provisions of paragraphs 1 and 3 shall also
apply to the income from immovable property of an enterprise.
1. The business profits of an enterprise of a Contracting
State shall be taxable only in that State unless the enterprise carries on
or has carried on business in the other Contracting State through a
permanent establishment situated therein. If the enterprise carries on or
has carried on business as aforesaid, the business profits of the
enterprise may be taxed in the other State but only so much of them as is
attributable to that permanent establishment. If a company which is a
resident of a Contracting State has a permanent establishment in the other
Contracting State and alienates property to persons in that other State
that is identical or similar to property alienated through that permanent
establishment, the profits from such alienation shall be attributed to
that permanent establishment. However, the profits derived from such
alienation shall not be attributed to that permanent establishment if the
company establishes that such alienation has been carried out for a
purpose other than that of obtaining a benefit from the provisions of this
Convention.
2. Subject to the provisions of paragraph 3, where an
enterprise of a Contracting State carries on or has carried on business in
the other Contracting State through a permanent establishment situated
therein, there shall in each Contracting State be attributed to that
permanent establishment the business profits which it might be expected to
make if it were a distinct and separate enterprise engaged in the same or
similar activities under the same or similar conditions and dealing wholly
independently with the enterprise of which it is a permanent establishment
and with all other persons.
3. In the determination of the business profits of a
permanent establishment of an enterprise, there shall be allowed those
deductible expenses which are incurred for the purposes of the permanent
establishment including executive and general administrative expenses,
whether incurred in the State in which the permanent establishment is
situated or elsewhere. However, no such deduction shall be allowed in
respect of amounts, if any, paid (otherwise than as a reimbursement of
actual expenses) by the permanent establishment to the head office or any
other office of the enterprise as royalties, fees or other similar
payments in return for the use of patents or other rights, or by way of a
commission, for specific services performed or for management, or, except
in the case of a bank, as interest on moneys lent to the permanent
establishment.
4. No business profits shall be attributed to a permanent
establishment of an enterprise by reason of the mere purchase by that
permanent establishment of goods or merchandise for the enterprise.
5. For the purposes of the preceding paragraphs, the
business profits to be attributed to the permanent establishment shall be
determined by the same method year by year unless there is good and
sufficient reason to the contrary.
6. Where business profits include items of income which
are dealt with separately in other Articles of the Convention, then the
provisions of those Articles shall not be affected by the provisions of
this Article.
1. Profits derived by an enterprise of a Contracting State
from the operation of ships or aircraft in international traffic shall be
taxable only in that State.
2. Notwithstanding the provisions of paragraph 1 and
Article 7, profits derived by an enterprise of a Contracting State
from a voyage of a ship or aircraft where the principal purpose of the
voyage is to transport passengers or property between places in the other
Contracting State may be taxed in that other State.
3. The provisions of paragraphs 1 and 2 shall also
apply to profits referred to in those paragraphs derived by an enterprise
of a Contracting State from its participation in a pool, a joint business
or an international operating agency.
4. In this Article,
by that enterprise provided that such charter, rental
or alienation is incidental to the operation by that enterprise of
ships or aircraft in international traffic but does not include the
transportation by an enterprise by any other means of transport or the
provision of accommodation.
Article 9
Associated Persons
1. Where
a) an enterprise of a Contracting State
participates directly or indirectly in the management, control or
capital of an enterprise of the other Contracting State, or
b) the same persons participate directly or
indirectly in the management, control or capital of an enterprise
of a Contracting State and an enterprise of the other Contracting
State,
and in either case conditions are made or imposed between
the two enterprises in their commercial or financial relations which
differ from those which would be made between independent enterprises,
then any income or profits which would, but for those conditions, have
accrued to one of the enterprises, but, by reason of those conditions,
have not so accrued, may be included in the income or profits of that
enterprise and taxed accordingly.
2. Where a Contracting State includes in the income or
profits of an enterprise of that State – and taxes accordingly –
income or profits on which an enterprise of the other Contracting State
has been charged to tax in that other State and the amount so included is
income or profits which would have accrued to the first-mentioned
enterprise if the conditions made between the two enterprises had been
those which would have been made between independent enterprises, then
that other State shall, where it agrees with the inclusion, make an
appropriate adjustment to the amount of tax charged therein on that income
or those profits. In determining such adjustment, due regard shall be had
to the other provisions of this Convention and the competent authorities
of the Contracting States shall if necessary consult each other.
3. A Contracting State shall not change the income or
profits of an enterprise in the circumstances referred to in
paragraph 1 after the expiry of the time limits provided in its
national laws and, in any case, after five years from the end of the year
in which the income or profits which would be subject to such change
would, but for the conditions referred to in paragraph 1, have
accrued to that enterprise.
4. The provisions of paragraphs 2 and 3 shall not
apply in the case of fraud, wilful default or neglect.
Article 10
Dividends
1. Dividends paid by a company which is a resident of a
Contracting State to a resident of the other Contracting State may be
taxed in that other State.
2. However, such dividends may also be taxed in the
Contracting State of which the company paying the dividends is a resident
and according to the laws of that State, but if the beneficial owner of
the dividends is a resident of the other Contracting State, the tax so
charged shall not exceed:
a) 5 per cent of the gross amount of the dividends
if the beneficial owner is a company that controls directly or
indirectly at least 10 per cent of the voting power in the company
paying the dividends; and
b) 15 per cent of the gross amount of the dividends,
in all other cases.
The provisions of this paragraph shall not affect the
taxation of the company in respect of the profits out of which the
dividends are paid.
3. The term "dividends" as used in this Article
means income from shares, "jouissance" shares or
"jouissance" rights, mining shares, founders' shares or other
rights, not being debt-claims, participating in profits, as well as income
which is subjected to the same taxation treatment as income from shares by
the laws of the State of which the company making the distribution is a
resident.
4. The provisions of paragraphs 1 and 2 shall not
apply if the beneficial owner of the dividends, being a resident of a
Contracting State, carries on business in the other Contracting State of
which the company paying the dividends is a resident, through a permanent
establishment situated therein and the holding in respect of which the
dividends are paid is effectively connected with such permanent
establishment. In such case the provisions of Article 7 shall apply.
5. Where a company which is a resident of a Contracting
State derives profits or income from the other Contracting State, that
other State may not impose any tax on the dividends paid by the company,
except insofar as such dividends are paid to a resident of that other
State or insofar as the holding in respect of which the dividends are paid
is effectively connected with a permanent establishment situated in that
other State, nor subject the company's undistributed profits to a tax on
undistributed profits, even if the dividends paid or the undistributed
profits consist wholly or partly of profits or income arising in such
other State.
6. Nothing in this Convention shall be construed as
preventing a Contracting State from imposing on the earnings of a company
attributable to a permanent establishment in that State, a tax in addition
to the tax which would be chargeable on the earnings of a company which is
a national of that State, except that any additional tax so imposed shall
not exceed 5 per cent of the amount of such earnings which have not
been subjected to such additional tax in previous taxation years. For the
purpose of this provision, the term "earnings" means the profits
or income attributable to a permanent establishment or immovable property
in a Contracting State and gains that may be taxed in that State in
accordance with the provisions of Article 13 after deducting
therefrom all taxes, other than the additional tax referred to herein,
imposed in that State on such profits, income or gains.
7. The provisions of this Article shall not apply if it was the main
purpose or one of the main purposes of any person concerned with the
creation or assignment of the shares or other rights in respect of
which the dividend is paid to take advantage of this Article by means
of that creation or assignment.
Article 11
Interest
1. Interest arising in a Contracting State and paid to a
resident of the other Contracting State may be taxed in that other State.
2. However, such interest may also be taxed in the
Contracting State in which it arises and according to the laws of that
State, but if the beneficial owner of the interest is a resident of the
other Contracting State, the tax so charged shall not exceed 10 per
cent of the gross amount of the interest.
3. Notwithstanding the provisions of paragraph 2:
a) interest arising in a Contracting State may be
taxed only in the other Contracting State where the beneficial
owner is a resident of that other State and the person paying the
interest or the recipient thereof is a Contracting State or its
central bank, or a political subdivision or local authority
thereof;
b) interest arising in Mexico and paid to a
resident of Canada who is the beneficial owner thereof shall be
taxable only in Canada if it is paid in respect of a loan having a
term of not less than three years made, guaranteed or insured, or
a credit for such period extended, guaranteed or insured, by
Export Development Canada, or by any other institution as may be
agreed to from time to time between the competent authorities of
the Contracting States;
c) interest arising in Canada and paid to a
resident of Mexico who is the beneficial owner thereof shall be
taxable only in Mexico if it is paid in respect of a loan having a
term of not less than three years made, guaranteed or insured, or
a credit for such period extended, guaranteed or insured, by Banco
Nacional de Comercio Exterior, S.N.C. or Nacional Financiera,
S.N.C., or by any other institution as may be agreed to from time
to time between the competent authorities of the Contracting
States;
d) interest arising in a Contracting State and
paid to a resident of the other Contracting State which was
constituted and is operated exclusively to administer or provide
benefits under one or more pension, retirement or other employee
benefits plans shall not be taxable in the first-mentioned State
provided that:
(i) the resident is the beneficial owner of
the interest and is generally exempt from tax in the other
State;
(ii) the interest is not derived from carrying
on a trade or a business; and
(iii) the interest is not derived from a
related person.
4. The term "interest" as used in this Article
means income from debt-claims of every kind, whether or not secured by
mortgage, and in particular, income from government securities and income
from bonds or debentures, including premiums and prizes attaching to such
securities, bonds or debentures, as well as income which is subjected to
the same taxation treatment as income from money lent by the laws of the
State in which the income arises. However, the term "interest"
does not include income dealt with in Article 8 or Article 10.
5. The provisions of paragraphs 1 and 2 shall not apply if
the beneficial owner of the interest, being a resident of a Contracting
State, carries on business in the other Contracting State in which the
interest arises through a permanent establishment situated therein and the
debt-claim in respect of which the interest is paid is effectively
connected with such permanent establishment. In such case the provisions
of Article 7 shall apply.
6. Interest shall be deemed to arise in a Contracting
State when the payer is a resident of that State. Where, however, the
person paying the interest, whether that person is a resident of a
Contracting State or not, has in a Contracting State a permanent
establishment in connection with which the indebtedness on which the
interest is paid was incurred, and such interest is borne by such
permanent establishment, then such interest shall be deemed to arise in
the State in which the permanent establishment is situated.
7. Where, by reason of a special relationship between the
payer and the beneficial owner or between both of them and some other
person:
a) the amount of the interest exceeds, for
whatever reason, the amount which would have been agreed upon by
the payer and the beneficial owner in the absence of such
relationship, the provisions of this Article shall apply only to
the last-mentioned amount. In such case, the excess part of the
payments shall remain taxable according to the laws of each
Contracting State, due regard being had to the other provisions of
this Convention;
b) the conditions (including amount) of the
debt-claim differ from those that would have been agreed upon by
the payer and the beneficial owner in the absence of such
relationship, the interest thereon may be taxable according to
paragraph 2 of Article 10.
8. The provisions of this Article shall not apply if it
was the main purpose or one of the main purposes of any person concerned
with the creation or assignment of the debt-claim in respect of which the
interest is paid to take advantage of this Article by means of that
creation or assignment.
Article 12
Royalties
1. Royalties arising in a Contracting State and paid to a
resident of the other Contracting State may be taxed in that other State.
2. However, such royalties may also be taxed in the
Contracting State in which they arise and according to the laws of that
State, but if the beneficial owner of the royalties is a resident of the
other Contracting State, the tax so charged shall not exceed 10 per
cent of the gross amount of the royalties.
3. Notwithstanding the provisions of paragraph 2,
copyright royalties and other like payments in respect of the production
or reproduction of any cultural, dramatic, musical or other artistic work
(but not including royalties in respect of motion picture films and works
on film or videotape or other means of reproduction for use in connection
with television) arising in a Contracting State and paid to a resident of
the other Contracting State who is subject to tax thereon shall be taxable
only in that other State.
4. The term "royalties" as used in this Article
means payments of any kind received as a consideration for the use of, or
the right to use, any copyright, patent, trade mark, design or model,
plan, secret formula or process or other intangible property, or for the
use of, or the right to use, industrial, commercial or scientific
equipment, or for information concerning, industrial, commercial or
scientific experience, and includes payments of any kind in respect of
motion picture films and works on film, videotape or other means of
reproduction for use in connection with television.
5. Without prejudice to whether or not such payments would
be dealt with as royalties under this Article in the absence of this
paragraph, the term "royalties" as used in this Article shall
include payments of any kind as consideration for the reception of, or the
right to receive, visual images or sounds, or both, transmitted to the
public by satellite or by cable, optic fibre or similar technology, or the
use in connection with television broadcasting or radio broadcasting, or
the right to use in connection with television broadcasting or radio
broadcasting, visual images or sounds, or both, transmitted by satellite
or by cable, optic fibre or similar technology.
6. The term "royalties" also includes gains
derived from the alienation of any right or property referred to in
paragraphs 4 and 5, which are contingent on the productivity or use
thereof.
7. The provisions of paragraphs 1, 2 and 3 shall not
apply if the beneficial owner of the royalties, being a resident of a
Contracting State, carries on business in the other Contracting State in
which the royalties arise through a permanent establishment situated
therein and the right or property in respect of which the royalties are
paid is effectively connected with such permanent establishment. In such
case the provisions of Article 7 shall apply.
8. Royalties shall be deemed to arise in a Contracting
State when the payer is a resident of that State. Where, however, the
person paying the royalties, whether that person is a resident of a
Contracting State or not, has in a Contracting State a permanent
establishment in connection with which the obligation to pay the royalties
was incurred, and such royalties are borne by such permanent
establishment, then such royalties shall be deemed to arise in the State
in which the permanent establishment is situated.
9. Where, by reason of a special relationship between the
payer and the beneficial owner or between both of them and some other
person, the amount of the royalties exceeds, for whatever reason, the
amount which would have been agreed upon by the payer and the beneficial
owner in the absence of such relationship, the provisions of this Article
shall apply only to the last-mentioned amount. In such case, the excess
part of the payments shall remain taxable according to the laws of each
Contracting State, due regard being had to the other provisions of this
Convention.
10. The provisions of this Article shall not apply if it
was the main purpose or one of the main purposes of any person concerned
with the creation or assignment of the rights in respect of which the
royalties are paid to take advantage of this Article by means of that
creation or assignment.
Article 13
Capital Gains
1. Gains derived by a resident of a Contracting State from
the alienation of immovable property situated in the other Contracting
State may be taxed in that other State.
2. Gains from the alienation of movable property forming
part of the business property of a permanent establishment which an
enterprise of a Contracting State has in the other Contracting State,
including such gains from the alienation of such a permanent establishment
(alone or with the whole enterprise), may be taxed in that other State.
3. Gains from the alienation of ships or aircraft operated
in international traffic by an enterprise of a Contracting State or
movable property pertaining to the operation of such ships or aircraft, shall be taxable only in that State.
4. Gains derived by a resident of a Contracting State from
the alienation of:
a) shares, participations or other rights in the
capital of a company, the value of which is derived principally
from immovable property situated in that other State, or
b) an interest in a partnership, trust or estate
the value of which is derived principally from immovable property
situated in that other State,
may be taxed in that other State. For the purposes of this
paragraph, the term "immovable property" does not include any
property, other than rental property, in which the business of the
company, partnership, trust or estate is carried on.
5. In addition to gains taxable in accordance with the
provisions of the preceding paragraphs, gains derived by a resident of a
Contracting State from the alienation of shares, participation or other
rights in the capital of a company or other legal person that is a
resident of the other Contracting State may be taxed in that other State
if the recipient of the gain, at any time during the twelve month period
preceding such alienation, together with all persons who are related to
the recipient, had a participation of at least 25 per cent in the
capital of that company or other legal person.
6. Except as provided in Article 12, gains from the
alienation of any property, other than that referred to in
paragraphs 1, 2, 3, 4 and 5 shall be taxable only in the Contracting
State of which the alienator is a resident.
7. The provisions of paragraph 6 shall not affect the
right of a Contracting State to levy, according to its law, a tax on gains
from the alienation of any property (other than property to which the
provisions of paragraph 8 apply) derived by an individual who is a
resident of the other Contracting State and has been a resident of the
first-mentioned State at any time during the six years immediately
preceding the alienation of the property.
8. Where an individual who ceases to be a resident of a
Contracting State, and immediately thereafter becomes a resident of the
other Contracting State, is treated for the purposes of taxation in the
first-mentioned State as having alienated a property and is taxed in that
State by reason thereof, the individual may elect to be treated for the
purposes of taxation in the other State as if the individual had,
immediately before becoming a resident of that State, sold and repurchased
the property for an amount equal to its fair market value at that time.
Article 14
Income From Employment
1. Subject to the provisions of Articles 15 and 18,
salaries, wages and other similar remuneration derived by a resident of a
Contracting State in respect of an employment shall be taxable only in
that State unless the employment is exercised in the other Contracting
State. If the employment is so exercised, such remuneration as is derived
there from may be taxed in that other State.
2. Notwithstanding the provisions of paragraph 1,
remuneration derived by a resident of a Contracting State in respect of an
employment exercised in the other Contracting State shall be taxable only
in the first-mentioned State:
a) if the remuneration earned in the other
Contracting State in the calendar year concerned does not exceed
sixteen thousand Canadian dollars ($16,000) or its equivalent in
Mexican pesos or such other amount as may be specified and agreed
in letters exchanged between the competent authorities of the
Contracting States; or
b) if
(i) the recipient is present in the other
State for a period or periods not exceeding in the aggregate
183 days in any twelve month period commencing or ending
in the calendar year concerned, and
(ii) the remuneration is paid by, or on behalf
of, an employer who is not a resident of the other State, and
such remuneration is not borne by a permanent establishment
which the employer has in the other State.
3. Notwithstanding the preceding provisions of this
Article, remuneration in respect of an employment exercised aboard a ship
or aircraft operated in international traffic by a resident of a
Contracting State, shall be taxable only in that State. However, if the
remuneration is derived by a resident of the other Contracting State it
shall be taxable only in that other State.
Article 15
Directors' Fees
1. Directors' fees and other similar payments derived by a
resident of a Contracting State in that resident's capacity as a member of
the board of directors or a similar organ of a company which is a resident
of the other Contracting State, may be taxed in that other State.
2. Salaries, wages and other similar remuneration derived
by a resident of a Contracting State in that resident's capacity as an
official in a top-level managerial position of a company which is a
resident of the other Contracting State may be taxed in that other State.
Article 16
Artistes and Sportspersons
1. Notwithstanding the provisions of Articles 7 and
14, income derived by a resident of a Contracting State as an entertainer,
such as a theatre, motion picture, radio or television artiste, or a
musician, or as a sportsperson, from that resident's personal activities
as such exercised in the other Contracting State, may be taxed in that
other State. Income derived by an entertainer or a sportsperson who is a
resident of a Contracting State from that resident's personal activities
relating to that resident's reputation as an entertainer or sportsperson
exercised in the other Contracting State may be taxed in that other State.
2. Where income in respect of personal activities
exercised by an entertainer or a sportsperson in that individual's
capacity as such accrues not to the entertainer or athlete personally but
to another person, that income may, notwithstanding the provisions of
Articles 7 and 14, be taxed in the Contracting State in which the
activities of the entertainer or sportsperson are exercised.
3. The provisions of paragraphs 1 and 2 shall not
apply to income derived from activities performed in a Contracting State
by a resident of the other Contracting State in the context of a visit in
the first-mentioned State of a non-profit organization of the other State,
provided the visit is substantially supported by public funds.
Article 17
Pensions and Annuities
1. Pensions and annuities arising in a Contracting State
and paid to a resident of the other Contracting State may be taxed in that
other State.
2. Pensions arising in a Contracting State and paid to a
resident of the other Contracting State may also be taxed in the State in
which they arise, and according to the law of that State. However, in the
case of periodic pension payments, the tax so charged shall not exceed the
lesser of:
a) 15 per cent of the gross amount of the payment; and
b) the rate determined by reference to the amount of tax that the
recipient of the payment would otherwise be required to pay for the
year on the total amount of the periodic pension payments received
by that individual in the year, if that individual were a resident
of the Contracting State in which the payment arises.
3. Annuities, other than pensions, arising in a
Contracting State and paid to a resident of the other Contracting State
may also be taxed in the State in which they arise, and according to the
law of the State; but the tax so charged shall not exceed 15 per cent
of the portion thereof that is subject to tax in that State. For the
purposes of this Convention, the term "annuities" means a stated
sum paid periodically at stated times during life or during a specified
number of years, under an obligation to make the payments in return for
adequate and full consideration (other than services rendered), but does
not include a payment that is not a periodic payment or any annuity the
cost of which was deductible for the purposes of taxation in the
Contracting State in which it was acquired.
4. Notwithstanding anything in the Convention:
a) war pensions and allowances (including pensions and allowances
paid to war veterans or paid as a consequence of damages or injuries
suffered as a consequence of a war) arising in a Contracting State
and paid to a resident of the other Contracting State shall be
exempt from tax in that other State to the extent that they would be
exempt from tax if received by a resident of the first-mentioned
State; and
b) alimony and other similar payments arising in a
Contracting State and paid to a resident of the other Contracting
State who is subject to tax therein in respect thereof, shall be
taxable only in that other State. However, where a deduction or a
credit for alimony or a similar payment is not allowed for the
purposes of taxation in the Contracting State in which such
payment arises, such payment shall not be taxable in the other
Contracting State.
Article 18
Government Service
1.
a) Salaries, wages and similar remuneration,
other than a pension, paid by a Contracting State or a political
subdivision or a local authority thereof to an individual in
respect of services rendered to that State or subdivision or
authority in any other State shall be taxable only in the
first-mentioned State.
b) However, such salaries, wages and similar
remuneration shall be taxable only in the other Contracting State
if the services are rendered in that State and the individual is a
resident of that State who:
(i) is a national of that State; or
(ii) did not become a resident of that State
solely for the purpose of rendering the services.
2. The provisions of paragraph 1 shall not apply to
salaries, wages and similar remuneration in respect of services rendered
in connection with a business carried on by a Contracting State or a
political subdivision or a local authority thereof.
Article 19
Students
Payments which a student, apprentice or business trainee
who is, or was immediately before visiting a Contracting State, a resident
of the other Contracting State and who is present in the first-mentioned
State solely for the purpose of that individual's education or training
receives for the purposes of that individual's maintenance, education or
training shall not be taxed in that State, provided that such payments
arise from sources outside that State.
Article 20
Other Income
1. Subject to the provisions of paragraph 2, items of
income of a resident of a Contracting State, wherever arising, not dealt
with in the foregoing Articles of this Convention shall be taxable only in
that State.
2. However, if such income is derived by a resident of a
Contracting State from sources in the other Contracting State, such income
may also be taxed in the State in which it arises, and according to the
law of that State. Where such income is income from an estate or a trust,
other than a trust to which contributions were deductible, the tax so
charged shall, if the income is taxable in the Contracting State in which
the beneficial owner is a resident, not exceed 15 per cent of the
gross amount of the income.
IV. Methods for Prevention of Double Taxation
Article 21
Elimination of Double Taxation
1. In the case of Canada, double taxation shall be avoided
as follows:
a) subject to the existing provisions of the law
of Canada regarding the deduction from tax payable in Canada of
tax paid in a territory outside Canada and to any subsequent
modification of those provisions - which shall not affect the
general principle hereof - and unless a greater deduction or
relief is provided under the laws of Canada, tax payable in Mexico
on profits, income or gains arising in Mexico shall be deducted
from any Canadian tax payable in respect of such profits, income
or gains;
b) subject to the existing provisions of the law
of Canada regarding the allowance as a credit against Canadian tax
of tax payable in a territory outside Canada and to any subsequent
modification of those provisions - which shall not affect the
general principle hereof - where a company that is a resident of
Mexico pays a dividend to a company that is a resident of Canada
which controls directly or indirectly at least 10 per cent of the
voting power in the first-mentioned company, the credit shall take
into account the tax payable in Mexico by that first-mentioned
company in respect of the profits out of which such dividend is
paid; and
c) where, in accordance with any provision of the
Convention, income derived by a resident of Canada is exempt from
tax in Canada, Canada may nevertheless, in calculating the amount
of tax on other income, take into account the exempted income.
2. In the case of Mexico, double taxation shall be avoided
as follows:
a) residents of Mexico may credit against the
Mexican tax on income arising in Canada the income tax paid in
Canada in any amount not exceeding the tax payable in Mexico on
such income; and
b) subject to the existing provisions of the law
of Mexico, companies which are residents of Mexico may also credit
against Mexican tax on dividends paid by companies that are
residents of Canada the income tax paid in Canada on the profits
out of which the dividends are paid.
3. For the purposes of this Article, profits, income or
gains of a resident of a Contracting State which may be taxed in the other
Contracting State in accordance with this Convention shall be deemed to
arise from sources in that other State.
V. Special Provisions
Article 22
Non-Discrimination
1. Nationals of a Contracting State shall not be subjected
in the other Contracting State to any taxation or any requirement
connected therewith which is other or more burdensome than the taxation
and connected requirements to which nationals of that other State in the
same circumstances, in particular with respect to residence, are or may be
subjected.
2. The taxation on a permanent establishment which a
resident of a Contracting State has in the other Contracting State shall
not be less favourably levied in that other State than the taxation levied
on residents of that other State carrying on the same activities.
3. Nothing in this Article shall be construed as obliging
a Contracting State to grant to residents of the other Contracting State
any personal allowances, reliefs and reductions for taxation purposes on
account of civil status or family responsibilities which it grants to its
own residents.
4. Except where the provisions of paragraph 1 of
Article 9, paragraph 7 of Article 11, or paragraph 9
of Article 12 apply, interest, royalties and other disbursements paid
by an enterprise of a Contracting State to a resident of the other
Contracting State shall, for the purposes of determining the taxable
profits of such enterprise, be deductible under the same conditions as if
they had been paid to a resident of the first-mentioned State. Similarly,
any debts of an enterprise of a Contracting State to a resident of the
other Contracting State shall, for the purposes of determining the taxable
profits of such enterprise, be deductible under the same conditions as if
they had been paid to a resident of the first-mentioned State.
5. Any provisions of paragraph 4 shall not affect the
operation of any provision of the taxation laws of a Contracting State:
a) relating to the deductibility or
recharacterization of interest and which is in force on the date
of signature of this Convention (including any subsequent
modification of such provisions that does not change the general
nature thereof); or
b) adopted after such date by a Contracting State
and which is designed to ensure that a person who is not a
resident of that State does not enjoy, under the laws of that
State, a tax treatment that is more favourable than that enjoyed
by residents of that State.
6. Enterprises of a Contracting State, the capital of
which is wholly or partly owned or controlled, directly or indirectly, by
one or more residents of the other Contracting State, shall not be
subjected in the first-mentioned State to any taxation or any requirement
connected therewith which is other or more burdensome than the taxation
and connected requirements to which other similar enterprises of the
first-mentioned State, the capital of which is wholly or partly owned or
controlled, directly or indirectly, by one or more residents of a third
State, are or may be subjected.
7. Notwithstanding the provisions of Article 2, this
Article shall apply to all taxes imposed by a Contracting State.
Article 23
Mutual Agreement Procedure
1. Where a person considers that the actions of one or
both of the Contracting States result or will result for that person in
taxation not in accordance with the provisions of this Convention, that
person may, irrespective of the remedies provided by the domestic law of
those States, address to the competent authority of the Contracting State
of which that person is a resident an application in writing stating the
grounds for claiming the revision of such taxation. To be admissible, the
said application must be submitted within three years from the first
notification of the action which gives rise to taxation not in accordance
with the Convention.
2. The competent authority referred to in paragraph 1
shall endeavour, if the objection appears to it to be justified and if it
is not itself able to arrive at a satisfactory solution, to resolve the
case by mutual agreement with the competent authority of the other
Contracting State, with a view to the avoidance of taxation not in
accordance with the Convention.
3. A Contracting State shall not, after the expiry of the
time limits provided in its national laws and, in any case, after five
years from the end of the taxable period to which the income concerned was
attributed, increase the tax base of a resident of either of the
Contracting Sates by including therein items of income which have also
been charged to tax in the other Contracting State. This paragraph shall
not apply in the case of fraud, wilful default or neglect.
4. The competent authorities of the Contracting States
shall endeavour to resolve by mutual agreement any difficulties or doubts
arising as to the interpretation or application of the Convention and may
communicate with each other directly for the purpose of applying the
Convention.
5. If any difficulty or doubt arising as to the
interpretation or application of the Convention cannot be resolved by the
competent authorities pursuant to the preceding paragraphs of this
Article, the case may be submitted for arbitration if both competent
authorities and the taxpayer agree and the taxpayer agrees in writing to
be bound by the decision of the arbitration board. The decision of the
arbitration board in a particular case shall be binding on both States
with respect to that case. The procedure shall be established in an
exchange of notes between the Contracting States.
6. For the purposes of paragraph 3 of Article XXII
(Consultation) of the General Agreement on Trade in Services, the
Contracting States agree that, notwithstanding that paragraph, any dispute
between them as to whether a measure falls within the scope of this
Convention may be brought before the Council for Trade in Services, as
provided by that paragraph, only with the consent of both Contracting
States. Any doubt as to the interpretation of this paragraph shall be
resolved under paragraph 4 of Article 23 or, failing agreement
under that procedure, pursuant to any other procedure agreed to by both
Contracting States.
Article 24
Exchange of Information
1. The competent authorities of the Contracting States
shall exchange such information as is forseeably relevant for carrying out
the provisions of this Convention or to the administration or enforcement
of the domestic laws of the Contracting States concerning taxes of every
kind and description imposed by a Contracting State insofar as the
taxation thereunder is not contrary to the Convention. The exchange of
information is not restricted by Articles 1 and 2.
2. Any information received under paragraph 1 by a
Contracting State shall be treated as secret in the same manner as
information obtained under the domestic laws of that State and shall be
disclosed only to persons or authorities (including courts and
administrative bodies) concerned with the assessment or collection of, the
enforcement or prosecution in respect of, the determination of appeals in
relation to taxes referred to in paragraph 1, or the oversight of the
above. Such persons or authorities shall use the information only for such
purposes. They may disclose the information in public court proceedings or
in judicial decisions.
3. In no case shall the provisions of paragraphs 1
and 2 be construed so as to impose on a Contracting State the obligation:
a) to carry out administrative measures at
variance with the laws or the administrative practice of that or
of the other Contracting State;
b) to supply information which is not obtainable
under the laws or in the normal course of the administration of
that or of the other Contracting State; or
c) to supply information which would disclose any
trade, business, industrial, commercial or professional secret or
trade process, or information, the disclosure of which would be
contrary to public policy (ordre public).
4. If information is requested by a Contracting State in
accordance with this Article, the other Contracting State shall use its
information gathering measures to obtain the requested information even
though that other State may not need such information for its own
purposes. The obligation contained in the preceding sentence is subject to
the limitation of paragraph 3 but in no case shall such limitations be
construed to permit a Contracting State to decline to supply information
solely because it has no domestic interest in such information. If
specifically requested by the competent authority of a Contracting State,
the competent authority of the other Contracting State shall endeavour to
provide information under this Article in the form requested, such as
depositions of witnesses and copies of unedited original documents
(including books, papers, statements, records, accounts or writings), to
the same extent such depositions and documents can be obtained under the
laws and administrative practices of that other State with respect to its
own taxes.
5. In no case shall the provisions of paragraph 3 be
construed to permit a Contracting State to decline to supply information
solely because the information is held by a bank, other financial
institution, nominee or person acting in an agency or fiduciary capacity
or because it relates to ownership interests in a person.
Article 25
Diplomatic Agents and Consular Officers
1. Nothing in this Convention shall affect the fiscal
privileges of diplomatic agents or consular officers under the general
rules of international law or under the provisions of special agreements.
2. Notwithstanding the provisions of Article 4, an
individual who is a member of a diplomatic mission, consular post or
permanent mission of a Contracting State that is situated in the other
Contracting State or in a third State shall be deemed for the purposes of
the Convention to be a resident of the sending State if that individual is
liable in the sending State to the same obligations in relation to tax on
total income as are residents of that sending State.
Article 26
Miscellaneous Rules
1. The provisions of this Convention shall not be
construed to restrict in any manner any exemption, allowance, credit or
other deduction accorded:
a) by the laws of a Contracting State in the
determination of the tax imposed by that State; or
b) by any other agreement entered into by a
Contracting State.
2. Nothing in the Convention shall be construed as
preventing a Contracting State from imposing a tax on amounts included in
the income of a resident of that State with respect to a partnership,
trust, or controlled foreign affiliate, in which the resident has an
interest.
3. The Convention shall not apply to any company, trust,
partnership or other entity that is a resident of a Contracting State and
is beneficially owned or controlled directly or indirectly by one or more
persons who are not residents of that State, if the amount of the tax
imposed on the income of the company, trust, partnership or entity by that
State (after taking into account any reduction or offset of the amount of
tax in any manner, including a refund, reimbursement, contribution, credit
or allowance to the company, trust, partnership or other person) is
substantially lower than the amount that would be imposed by the State if
all of the shares of the capital stock of the company or all of the
interests in the trust, partnership or any other entity, as the case may
be, were beneficially owned by one or more individuals who were residents
of that State.
4. Where under any provision of the Convention any income
is relieved from tax in a Contracting State and, under the law in force in
the other Contracting State a person, in respect of that income, is
subject to tax by reference to the amount thereof that is remitted to or
received in that other Contracting State and not by reference to the full
amount thereof, then the relief to be allowed under the Convention in the
first-mentioned Contracting State shall apply only to so much of the
income as is taxed in the other Contracting State.
VI. Final Provisions
Article 27
Entry Into Force
1. This Convention shall enter into force on the date on
which the Contracting States exchange notes through diplomatic channels
notifying each other that the last of such things has been done as is
necessary to make the Convention applicable in Canada and in Mexico, as
the case may be, and thereupon the Convention shall have effect:
a) in respect of tax withheld at the source on
amounts paid or credited to non-residents, on or after the first
day of January in the calendar year next following that in which
the Convention enters into force; and
b) in respect of other taxes, for taxation years
beginning on or after the first day of January in the calendar
year next following that in which the Convention enters into
force.
2. The provisions of the Convention between the Government
of Canada and the Government of the United Mexican States for the
Avoidance of Double Taxation and the Prevention of Fiscal Evasion with
respect to Taxes on Income signed at Ottawa on April 8, 1991, as well
as the provisions of the Convention between the Government of Canada and
the Government of the United Mexican States for the Exchange of
Information with respect to Taxes signed at Mexico City on March 16,
1990 (hereinafter referred to as the "1990 Convention") shall
cease to have effect:
a) in respect of tax withheld at the source on
amounts paid or credited to non-residents, on or after the first
day of January in the calendar year next following that in which
this Convention enters into force; and
b) in respect of other taxes, for taxation years
beginning on or after the first day of January in the calendar
year next following that in which this Convention enters into
force.
Article 28
Termination
This Convention shall continue in effect indefinitely but
either Contracting State may, on or before June 30 of any calendar
year after the year in which it entered into force, give to the other
Contracting State a notice of termination in writing through diplomatic
channels; in such event, the Convention shall cease to have effect:
a) in respect of tax withheld at the source on
amounts paid or credited to non-residents, on or after the first
day of January of the next following calendar year; and
b) in respect of other taxes, for taxation years
beginning on or after the first day of January of the next
following calendar year.
IN WITNESS WHEREOF, the undersigned, duly authorized by
their respective governments, have signed this Convention.
DONE in duplicate at Mexico City, this twelfth day of
September 2006, in the English, French and Spanish languages, each version
being equally authentic.
FOR THE GOVERNMENT
OF CANADA
|
FOR THE GOVERNMENT OF THE
UNITED MEXICAN STATES
|
G. Daniel Caron
Deputy Head of Mission and Minister-Counsellor,
Embassy of Canada to the United Mexican States
|
José Francisco Gil Diaz
Secretary of Finance and Public Credit |
Protocol
At the moment of signing the Convention this day concluded
between the Government of Canada and the Government of the United Mexican
States for the avoidance of double taxation and the prevention of fiscal
evasion with respect to taxes on income, the undersigned have agreed upon
the following provisions which shall be an integral part of the
Convention.
1. Notwithstanding the provisions of Article 2 of the
Convention, residents of Canada, whose profits derived from Mexico are not
taxable in Mexico in accordance with the provisions of Article 8 of the
Convention, shall not be taxed under the Mexican Assets Tax Law on the
assets used to produce such profits.
2. For the purposes of paragraph 6 of Article 11 of the
Convention, in the case of Mexico, when the indebtedness is contracted by
a resident of a Contracting State, and distributed between different
permanent establishments situated in different countries, interest shall
be deemed to arise in the Contracting State in which the permanent
establishment that bears the payment of the interest is situated.
3. For the purposes of paragraph 8 of Article 12 of the
Convention, in the case of Mexico, when the obligation to pay the
royalties is contracted by a resident of a Contracting State and the right
or property is effectively connected with different permanent
establishments situated in different countries, royalties shall be deemed
to arise in the Contracting State in which the permanent establishment
that bears the payment of the royalties is situated.
4. With respect to Article 16 of the Convention, it is
understood that income in respect of personal activities referred to in
that Article includes income derived from the performance of independent
personal services, the direct use, letting, or use in any other form of
goods or the alienation thereof, where such income is related to the
activities exercised by an entertainer or a sportsperson.
5. For the purposes of Articles 6 and 13 of the Convention
it is understood that the term "immovable property situated in the
other Contracting State" includes any right that allows the use or
enjoyment of immovable property situated in that other Contracting State
where that use or enjoyment relates to time sharing.
6. It is understood that the principles for exchanging
information contained in the 1990 Convention and the obligations and
undertakings of the Contracting States thereunder are continued under the
provisions of this Convention.
7. The competent authorities of the Contracting States
shall by mutual agreement settle the mode of application of
subparagraph f), paragraph 4 of Article 5 of the
Convention.
IN WITNESS WHEREOF, the undersigned, duly authorized by
their respective governments, have signed this Protocol.
DONE in duplicate at Mexico City, this twelfth day of
September 2006, in the English, French and Spanish languages, each version
being equally authentic.