Canadian Treaty Series
E102420 - CTS 1999 No. 3
PROTOCOL AMENDING THE CONVENTION BETWEEN CANADA AND THE KINGDOM OF THE NETHERLANDS FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME, WITH PROTOCOL, SIGNED AT THE HAGUE ON 27 MAY 1986, AS AMENDED BY THE PROTOCOL SIGNED AT THE HAGUE ON 4 MARCH 1993
The Government of Canada and the Government of the Kingdom of the Netherlands,
Desiring to amend the Convention between Canada and the Kingdom of the Netherlands for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, with Protocol, signed at The Hague on 27 May 1986, as amended by the Protocol signed at The Hague on 4 March 1993 (hereinafter referred to as “the Convention”),
Have agreed as follows:
Subparagraphs (a) and (b) of paragraph 2 of Article 10 of the Convention shall be deleted and replaced by the following:
“(a) 5 per cent of the gross amount of the dividends if the beneficial owner is a company (other than a partnership) that owns at least 25 per cent of the capital of, or that controls directly or indirectly at least 10 per cent of the voting power in, the company paying the dividends;
(b) notwithstanding subparagraph (a), 10 per cent of the gross amount of the dividends if the dividends are paid by a non-resident-owned investment corporation that is a resident of Canada to a beneficial owner that is a company (other than a partnership) that is a resident of the Netherlands and that owns at least 25 per cent of the capital of, or that controls directly or indirectly at least 10 per cent of the voting power in, the company paying the dividends; and”
Paragraph 3 of Article 12 of the Convention shall be deleted and replaced by the following:
“3. Notwithstanding the provisions of paragraph 2
(a) copyright royalties and other like payments in respect of the production or reproduction of any literary, dramatic, musical or other artistic work (but not including royalties in respect of motion picture films nor royalties in respect of works on film or videotape or other means of reproduction for use in connection with television broadcasting), and
(b) royalties for the use of, or the right to use, computer software or any patent or for information concerning industrial, commercial or scientific experience (but not including any such information provided in connection with a rental or franchise agreement)
arising in a State and paid to a resident of the other State who is the beneficial owner of the royalties shall be taxable only in that other State.”
Paragraph 4 of Article 13 of the Convention shall be deleted and replaced by the following:
“4. Gains derived by a resident of one of the States from the alienation of
(a) shares (other than shares listed on an approved stock exchange in one of the States) forming part of a substantial interest in the capital stock of a company that is a resident of the other State, the value of which shares is derived principally from immovable property situated in the other State, or
(b) a substantial interest in a partnership, trust or estate that was established under the law in the other State, or a controlling interest in a partnership or trust that was not established under the law in the other State, the value of which in either case is derived principally from immovable property situated in the other State,
may be taxed in that other State. For the purposes of this paragraph, the term “immovable property” includes the shares of a company the value of which shares is derived principally from immovable property or a substantial interest in a partnership, trust or estate referred to in sub-paragraph (b), but does not include property (other than rental property) in which the business of the company, partnership, trust or estate is carried on; a substantial interest exists when the resident and persons related thereto own 10% or more of the shares of any class of the capital stock of a company or have an interest of 10% or more in a partnership, trust or estate; and a controlling interest exists when the resident and persons related thereto have an interest of 50 per cent or more in a partnership, trust or estate.”
Paragraph 3 of Article 18 of the Convention shall be deleted and replaced by the following:
“3. Benefits under the Old Age Security Act of Canada and war pensions allowances (including pensions and allowances paid to war veterans or paid as a consequence of a war) arising in Canada and paid to a resident of the Netherlands may be taxed in Canada in accordance with the law of Canada.”
Paragraphs 4 and 5 of Article 22 of the Convention shall be deleted and replaced by the following:
“4. Notwithstanding the provisions of paragraph 2, the Netherlands shall allow a deduction from the Netherlands tax for the tax paid in Canada on items of income which according to Article 7, paragraph 5 of Article 10, paragraph 6 of Article 11, paragraph 5 of Article 12 and Article 14 of this Convention may be taxed in Canada to the extent that these items are included in the basis referred to in paragraph 1, if and insofar as the Netherlands under the provisions of the Netherlands law for the avoidance of double taxation allows a deduction from the Netherlands tax of the tax levied in another country on such items of income. For the computation of this deduction the provisions of paragraph 3 shall apply accordingly.
5. 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 the Netherlands on profits, income or gains arising in the Netherlands shall be deducted from any Canadian tax payable in respect of such profits, income or gains; and
(b) 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.
6. For the purposes of paragraph 5
(a) profits, income or gains of a resident of Canada which may be taxed in the Netherlands in accordance with the Convention shall be deemed to arise in the Netherlands, and
(b) the taxes referred to in paragraphs 3(b) and 4 of Article 2 shall be considered income taxes and in determining the amount of these taxes the investment premiums and bonuses and disinvestment payments as meant in the Netherlands Investment Account Law (“Wet investeringsrekening”), and the investment levies as meant in the Netherlands Industrial Deconcentration Act (“Wet selectieve investeringsrekening”) shall not be taken into account.”
Paragraphs 1 and 2 of Article 26 of the Convention shall be deleted and replaced by the following:
“The competent authorities of the States shall exchange such information as is necessary for carrying out the provisions of this Convention or of the domestic laws of the States concerning taxes covered by the Convention insofar as the taxation thereunder is not contrary to the Convention. The exchange of information is not restricted by Article 1. Any information received by one of the States 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) involved in the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation to, taxes. 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.”
The following new Articles shall be inserted immediately after Article 26 of the Convention:
Assistance in collection
1. The States undertake to lend assistance to each other in the collection of taxes covered by this Convention, together with interest, costs, additions to such taxes and civil penalties, referred to in this Article as a “revenue claim”. The provisions of this Article are not restricted by Article 1.
2. An application for assistance in the collection of a revenue claim shall include a certification by the competent authority of the applicant State that, under the laws of that State, the revenue claim has been finally determined. For the purposes of this Article, a revenue claim is finally determined when the applicant State has the right under its internal law to collect the revenue claim and all administrative and judicial rights of the taxpayer to restrain collection in the applicant State have lapsed or been exhausted.
3. A revenue claim of the applicant State that has been finally determined may be accepted for collection by the competent authority of the requested State and, subject to the provisions of paragraph 7, if accepted shall be collected by the requested State as though such revenue claim were the requested State’s own revenue claim finally determined in accordance with the laws applicable to the collection of the requested State’s own taxes.
4. Where an application for collection of a revenue claim in respect of a taxpayer is accepted by a State, the revenue claim shall be treated by that State as an amount payable under the Income Tax Act of that State, the collection of which is not subject to any restriction.
5. Nothing in this Article shall be construed as creating or providing any rights of administrative or judicial review of the applicant State’s finally determined revenue claim by the requested State, based on any such rights that may be available under the laws of either State. If, at any time pending execution of a request for assistance under this Article, the applicant State loses the right under its internal law to collect the revenue claim, the competent authority of the applicant State shall promptly withdraw the request for assistance in collection.
6. Subject to this paragraph, amounts collected by the requested State pursuant to this Article shall be forwarded to the competent authority of the applicant State. Unless the competent authorities of the States otherwise agree, the ordinary costs incurred in providing collection assistance shall be borne by the requested State and any extraordinary costs so incurred shall be borne by the applicant State.
7. A revenue claim of the applicant State accepted for collection shall not have in the requested State any priority accorded to the revenue claims of the requested State even if the recovery procedure used is the one applicable to its own revenue claims. A revenue claim of the applicant State shall not be recovered by imprisonment for debt of the debtor in the requested State.
8. Notwithstanding the provisions of paragraph 1, the competent authorities of the States may by exchange of notes agree that the provisions of this Article also apply to taxes and duties other than the taxes referred to in Article 2 collected by or on behalf of the Government of the States.
9. The competent authorities of the States shall agree upon the mode of application of this Article, including agreement to ensure comparable levels of assistance to each of the States.
Limitation of Articles 26 and 26A
In no case shall the provisions of Articles 26 and 26A be construed so as to impose on one of the States the obligation:
(a) to carry out administrative measures at variance with the laws or the administrative practice of that or of the other 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 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).”
Paragraph 1 of Article 28 of the Convention shall be deleted and replaced by the following:
“1. Nothing in this Convention shall be construed as preventing Canada from imposing a tax on amounts included in the income of a resident of Canada with respect to a partnership, trust, or controlled foreign affiliate, in which that resident has an interest.”
1. This Protocol shall enter into force on the thirtieth day after the latter of the dates on which the respective Governments have notified each other in writing that the formalities constitutionally required in their respective States have been complied with, and its provisions shall have effect:
(a) in the case of Canada,
(i) for tax withheld at the source with respect to amounts paid on or after the day of the later notification referred to above is received, and
(ii) for other taxes, with respect to taxation years beginning on or after the day of the later notification referred to above is received; and
(b) in the case of the Netherlands,
(i) for tax withheld at the source, to amounts paid on or after the day of the later notification referred to above is received, and
(ii) for all other taxes, for taxable years and periods beginning on or after the day of the later notification referred to above is received.
2. Notwithstanding the provisions of paragraph 1, Articles 26A and 26B of the Convention shall have effect for revenue claims finally determined by a requesting State after the date that is 10 years before the date on which the Protocol enters into force.
IN WITNESS WHEREOF the undersigned, duly authorized thereto, have signed this Protocol.
DONE at The Hague this 25th day of August 1997, in duplicate, in the English, French and Dutch languages, each version being equally authentic.
FOR THE GOVERNMENT OF CANADA
FOR THE GOVERNMENT OF THE KINGDOM OF THE NETHERLANDS
Dirk E. Witteveen