prop · GL03135 · 1998-01-01 00:00:00 — AGREEMENT BETWEEN THE KINGDOM OF AND THE REPUBLIC OF FOR THE AVOIDANCE OF DOUBLE TAXATION WITH RESPECT TO TAXES ON INCOME AND ON CAPITAL The Kingdom of and the Republic of , desi- ring to conclude an Agreement for the avoidance of double taxation with respect to taxes on income and on capital, have agreed as follows: This Agreement shall apply to persons who are residents of one or both of the Contracting States. (1) This Agreement shall apply to taxes on income and on capital imposed on behalf of each Con- tracting State or of its local authorities, irrespective of the in which they are levied. (2) There shall be regarded as taxes on income and on capital all taxes imposed on total income, on total capital, or on elements of income or of capital, including taxes on gains from the alienation of movable or immovable pro- perty, as well as taxes on capital appreciation. (3) The taxes to which the Agreement shall apply are: (a) in the case of : (i) the income tax; (ii) the profit tax; (iii) the property tax; (hereinafter referred to as Macedonian Tax ); (b) in the case of : (i) the national income tax (den statliga inkomstskat- ten), including the with- holding tax on dividends (kupongskatten); (ii) the income tax on non- residents (den särskilda inkomstskatten för utom- lands bosatta); (iii) the income tax on non- resident artistes and athle- tes (den särskilda inkomst- skatten för utomlands bo- satta artister m.fl.); (iv) the municipal income tax (den kommunala inkomst- skatten); (v) the tax on means intended for expansion purposes (expansionsmedelsskatten); (vi) the tax on real estate (fas- tighetsskatten); (vii) the national capital tax (den statliga förmögenhetsskat- ten); (hereinafter referred to as Swedish tax ). (4) The Agreement shall apply also to any identical or sub- stantially similar taxes which are imposed after the date of signature of the Agreement in addition to, or in place of, the taxes referred to in paragraph (3). The competent authorities of the Contracting States shall notify each other of any substantial changes which have been made in their respective taxation laws. (1) For the purposes of this Agreement, unless the context otherwise requires: (a) (i) the term means the territory of the Republic of , and used in geographical sense means its land, inland lake water and bottom over which it has jurisdiction or sovereign rights for the purpose of exploring, exploiting, conserving and managing natural resources, pursuant to internal jurisdiction and international law; (ii) the term means the Kingdom of and, when used in a geographical sense, includes the national territory, the territorial sea of as well as other areas over which in accordance with inter- national law exercises sovereign rights or jurisdiction; (b) the terms a and the other mean or , as the context requires; (c) the term person includes an individual, a company and any other body of persons; (d) the term company means any body corporate or any entity which is treated as a body cor- porate for tax purposes; (e) the term registered office means the legal head office of a company registered under the domestic laws of each Contracting State; (f) the term national means: (i) in relation to any individual possessing Macedonian Nationality in accordance with the Mace- donian Nationality Code; (ii) in relation to any individual possessing the nationality of ; (iii) any legal person, partner- ship and association deriving its status as such from the laws in force in either of the Contracting States; (g) the terms enterprise of a and enterprise of the other mean respectively an enterprise carried on by a resident of a and an enterprise carried on by a resident of the other Contracting State; (h) the term competent authority means: (i) in , the Minister of Finance or his autho- rized representative; and (ii) in , the Minister of Finance, his authorized representative or the autho- rity which is designated as a competent authority for the purposes of this Agree- ment; (i) the term international traffic means any transport by a ship or an aircraft operated by an enterprise which has its place of effective management in a Con- tracting State, except when the ship or aircraft is operated solely between places in the other Con- tracting State. (2) As regards the application of this Agreement by a , any term not defined shall, unless the context otherwise re- quires, have the meaning which it has under the laws of that State concerning the taxes to which the Agreement applies. (1) For the purposes of this Agreement, the term resident of a means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, , place of management, legal head office (registered office) or any other criterion of a similar nature. However, in the case of a partner- ship or estate the term applies only to the extent that the income derived by such partnership or estate is subject to tax in that State as the income of a resident, either in its hands or in the hands of its partners. The term resident of a does not in- clude 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: (a) 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); (b) 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; (c) 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; (d) 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 of the State in which its place of effective management is situated. (1) For the purposes of this Agreement, the term permanent means a fixed place of business through which the business of an enterprise is or partly carried on. (2) The term permanent includes especially: (a) a place of management; (b) a branch; (c) an office; (d) a factory; (e) a workshop; and (f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources. (3) A site or a con- struction, assembly or installation project or supervisory activities in connection therewith constitutes a permanent only if such site, project or activities continue for a period of more than twelve months. (4) Notwithstanding the pre- ceding provisions of this Article, the term permanent establish- ment shall be deemed not to include: (a) the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise; (b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the pur- pose of storage, display or deli- very; (c) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the pur- pose of processing by another enterprise; (d) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise or of collecting in- formation, for the enterprise; (e) 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; (f) the maintenance of a fixed place of business solely for any combination of activities mentio- ned in sub-paragraphs (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 pro- visions of paragraphs (1) and (2), where a person other than an agent of an independent status to whom paragraph (6) applies is acting in a on behalf of an enterprise of the other , that enterprise shall be deemed to have a permanent in the first-mentioned in respect of any activities which that person undertakes for the enterprise, if such a 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 establish- ment under the provisions of that paragraph. (6) An enterprise of a Con- tracting State shall not be deemed to have a permanent in the other merely because it on business in that other State through a broker, general com- mission 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 Con- tracting State controls or is con- trolled by a company which is a resident of the other , or which on business in that other State (whether through a permanent or otherwise) shall not of itself constitute either company a per- manent of the other. Income from immovable property (1) Income derived by a resident of a from immovable property (including in- come from agriculture or forestry) situated in the other may be taxed in that other State. (2) The term immovable pro- perty shall have the meaning which it has under the law of the 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, deposits, sources and other natural resources; ships, boats and aircraft shall not be regarded as im- movable 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. (4) The provisions of paragraphs (1) and (3) shall also apply to the income from immovable property of an enterprise and to income from immovable property used for the performance of independent personal services. (1) The profits of an enterprise of a be taxable only in that State unless the enterprise on business in the other through a permanent situated therein. If the enterprise on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to that permanent . (2) Subject to the provisions of paragraph (3), where an enterprise of a on business in the other through a permanent situated therein, there shall in each be attributed to that perma- nent the 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 independently with the enterprise of which it is a per- manent . (3) In the determination of the profits of a permanent establish- ment, there shall be allowed as deductions expenses which are incurred for the purposes of the business of the permanent , including executive and general administrative expens- es so incurred, whether in the State in which the permanent is situated or else- where. (4) No profits shall be attributed to a permanent by reason of the mere purchase by that permanent of goods or merchandise for the enterprise. (5) For the purposes of the preceding paragraphs, the profits to be attributed to the permanent be determined by the same method year by year unless there is good and sufficient reason to the contrary. (6) Where profits include items of income which are dealt with separately in other Articles of this Agreement, then the provisions of those Articles shall not be affected by the provisions of this Article. (1) Profits from the operation of ships or aircraft in international traffic shall be taxable only in the in which the place of effective management of the enterprise is situated. If that State according to its legislation cannot tax the whole of the profits, the profits shall be taxable only in the of which the enterprise is a resident. (2) With respect to profits derived by the air transport consortium () the provisions of paragraph (1) shall apply only to such part of the profits as corresponds to the participation held in that consortium by , the Swedish partner of SAS. (3) The provisions of paragraph (1) shall also apply to profits from the participation in a pool, a joint business or an international operating agency. (1) Where: (a) an enterprise of a Con- tracting State participates directly or indirectly in the management, control or capital of an enterprise of the other , or (b) the same persons participate directly or indirectly in the management, control or capital of an enterprise of a and an enterprise of the other , 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 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 profits of that enterprise and taxed accordingly. (2) Where a includes in the profits of an enter- prise of that State and taxes accordingly profits on which an enterprise of the other has been charged to tax in that other State and the profits so included are profits which would have accrued to the enterprise of the first-mentioned State if the conditions made between the two enterprises had been those which would have been made between independent enterprises, then that other State shall make an appro- priate adjustment to the amount of the tax charged therein on those profits where that other State con- siders the adjustment justified. In determining such adjustment, due regard shall be had to the other provisions of this Agreement and the competent authorities of the Contracting States shall if necess- ary consult each other. (1) Dividends paid by a com- pany which is a resident of a Con- tracting State to a resident of the other may be taxed in that other State. (2) Notwithstanding the provi- sions of paragraph (1), such divi- dends may also be taxed in the of which the company paying the dividends is a resident and according to the laws of that State, but if the recipient is the beneficial owner of the divi- dends the tax so charged shall not exceed 15 per cent of the gross amount of the dividends. How- ever, if the beneficial owner is a company (other than a partnership) which holds directly at least 25 per cent of the capital of the company paying the dividends, the divi- dends shall be exempt from tax in the of which the company paying the dividends is a resident. 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 or other rights, not being debt-claims, participating in profits, as well as income from other corporate rights which is subjected to the same taxation treatment as income from shares by the laws of the State of which the company making the distri- bution 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 , on business in the other of which the company paying the dividends is a resident, through a permanent situated therein, or performs in that other State in- dependent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply. (5) Where a company which is a resident of a de- rives profits or income from the other , that other State may not impose any tax on the dividends paid by the com- pany, except insofar as such divi- dends 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 or a fixed base situ- ated in that other State, nor subject the company s undistributed pro- fits to a tax on the company s undistributed profits, even if the dividends paid or the undistributed profits consist or partly of profits or income arising in such other State. (1) Interest arising in a Con- tracting State and paid to a resi- dent of the other may be taxed in that other State. (2) However, such interest may also be taxed in the in which it arises and according to the laws of that State, but if the recipient is the beneficial owner of the interest the tax so charged shall not exceed 10 per cent of the gross amount of the interest. (3) Notwithstanding the provi- sions of paragraph (2) interest, mentioned in paragraph (1), shall be taxable only in the where the beneficial owner of the interest is a resident if one of the following requirements is fulfilled; (a) the payer or the recipient of the interest is the itself, a statutory body or a local authority thereof or the of a Contracting State; (b) the interest is paid in respect of a loan which has been approved by the Government in the Con- tracting State where the payer of the interest is a resident; (c) the interest is paid in respect of a loan granted or guaranteed by Deve- lopment Authority (SIDA), or () or any other institution of a public character with the objective to promote exports or development, if the credit is granted or guaranteed on preferential condi- tions; (d) the interest is paid in respect of a loan granted by a bank. (4) The term interest as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor s profits, and in particular, income from government securities and income from bonds or debentures, inclu- ding premiums and prizes attach- ing to such securities, bonds or debentures. Penalty charges for late payment shall not be regarded as interest for the purpose of this Article. (5) The provisions of paragraphs (1), (2) and (3) shall not apply if the beneficial owner of the in- terest, being a resident of a Con- tracting State, on business in the other in which the interest arises, through a permanent situated therein, or performs in that other State independent personal servi- ces from a fixed base situated therein, and the debt-claim in respect of which the interest is paid is effectively connected with such permanent or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply. (6) Interest shall be deemed to arise in a when the payer is that State itself, a local authority or a resident of that State. Where, however, the person paying the interest, whether he is a resident of a or not, has in a a permanent or a fixed base in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such per- manent or fixed base, then such interest shall be deemed to arise in the State in which the permanent establish- ment or fixed base 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, the amount of the interest, having regard to the debt-claim for which it is paid, exceeds 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 , due regard being had to the other provisions of this Agreement. (1) Royalties arising in a Con- tracting State and paid to a resi- dent of the other be taxable only in that other State if such resident is the bene- ficial owner of the royalties. (2) The term royalties as used in this Article means payments of any kind received as a conside- ration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films and films or tapes for radio or television broad- casting, any patent, trade mark, design or model, plan, secret formula or process, or for infor- mation concerning industrial, com- mercial or scientific experience. (3) The provisions of paragraph (1) shall not apply if the beneficial owner of the royalties, being a resident of a , on business in the other in which the royalties arise, through a perma- nent situated there- in, or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the royalties are paid is effectively connected with such permanent or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply. (4) Royalties shall be deemed to arise in a when the payer is that State itself, a local authority or a resident of that State. Where, however, the person paying the royalties, whether he is a resident of a or not, has in a a permanent or a fixed base in connection with which the liability to pay the royalties was incurred, and such royalties are borne by such permanent or fixed base, then such royalties shall be deemed to arise in the State in which the permanent or fixed base is situated. (5) Where by reason of a special relationship between the payer and the beneficial owner or between both of them and some other per- son, the amount of the royalties, having regard to the use, right or information for which they are paid, exceeds 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 , due regard being had to the other provisions of this Agreement. (1) Gains derived by a resident of a from the alienation of immovable property referred to in Article 6 and situated in the other may be taxed in that other State. (2) Gains derived by a resident of a from the alienation of shares in a company the assets of which consist principally of immovable property referred to in Article 6 and situated in the other may be taxed in that other State. (3) Gains from alienation of movable property forming part of the business property of a perma- nent which an enter- prise of a has in the other or of movable property pertaining to a fixed base available to a resident of a in the other for the purpose of performing independent perso- nal services, including such gains from the alienation of such a permanent (alone or with the whole enterprise) or of such fixed base, may be taxed in that other State. (4) Gains from the alienation of ships or aircraft operated in inter- national traffic or movable pro- perty pertaining to the operation of such ships or aircraft, shall be taxable only in the in which the place of effective management of the enterprise is situated.