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The Government of Canada and the Government of the State of
Kuwait, desiring to promote their mutual economic
relations by removing fiscal obstacles, through the
conclusion of an agreement for the avoidance of double
taxation and the prevention of fiscal evasion with respect to
taxes on income and on capital, have agreed as follows:
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This Agreement shall apply to persons who are residents of
one or both of the Contracting States.
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1. This Agreement shall apply to taxes on income and on
capital imposed on behalf of each Contracting State, irrespective
of the manner in which they are levied.
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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 property, as well as taxes on
capital appreciation.
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3. The existing taxes to which this Agreement shall apply are
in particular:
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a) in the case of Canada: the taxes on income and on capital
imposed by the Government of Canada (hereinafter referred
to as ``Canadian tax'');
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b) in the case of Kuwait:
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(1) the corporate income tax;
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(2) the contribution from the net profits of the Kuwaiti
shareholding companies payable to the Kuwait Foundation
for Advancement of Science (KFAS); and
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(hereinafter referred to as ``Kuwaiti tax'').
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4. This Agreement shall apply also to any identical or
substantially similar taxes, which are imposed after the date of
signature of this Agreement in addition to, or in place of, the
existing taxes. The competent authorities of the Contracting
States shall notify each other of any substantial changes, which
have been made in their respective taxation laws.
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1. For the purposes of this Agreement, unless the context
otherwise requires:
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a) the term ``Canada'' used in a geographical sense, means the
territory of Canada, including:
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(1) any area beyond the territorial seas of Canada which, in
accordance with international law and the laws of Canada,
is an area within which Canada may exercise rights with
respect to the seabed and subsoil and their natural
resources;
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(2) the seas and airspace above every area referred to in
clause (1), in respect of any activity carried on in
connection with the exploration for or the exploitation of
the natural resources referred to therein;
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b) the term ``Kuwait'' means the territory of the State of
Kuwait including any area beyond the territorial sea which in
accordance with international law has been or may hereafter
be designated, under the laws of Kuwait, as an area over which
Kuwait may exercise sovereign rights or jurisdiction;
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c) the terms ``a Contracting State'' and ``the other Contracting
State'' mean Canada or Kuwait as the context requires;
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d) the term ``person'' includes an individual, a trust, a
company and other body of persons;
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e) the term ``national'' means:
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(1) in respect of Canada: any Canadian within the meaning
of the laws of Canada, and any legal person, partnership or
association deriving its status as such from the laws in force
in Canada;
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(2) in respect of Kuwait: any individual possessing the
Kuwaiti nationality, and any legal person, partnership,
association or other entity deriving its status as such from
the laws in force in Kuwait;
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f) the term ``company'' means any body corporate or any
entity which is treated as a body corporate for tax purposes;
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g) the terms ``enterprise of a Contracting State'' and
``enterprise of the other Contracting State'' mean respectively
an enterprise carried on by a resident of a Contracting State
and an enterprise carried on by a resident of the other
Contracting State;
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h) the term ``international traffic'' means any transport by a
ship or aircraft operated by an enterprise of a Contracting
State, except when the ship or aircraft is operated solely
between places in the other Contracting State;
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i) the term ``tax'' means Canadian tax or Kuwaiti tax, as the
context requires;
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j) the term ``competent authority'' means:
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(1) in Canada: the Minister of National Revenue or the
Minister's authorized representative;
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(2) in Kuwait: the Minister of Finance or the Minister's
authorized representative;
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k) the term ``fixed base'' includes a permanent place for the
purpose of performing professional services or other activities
of an independent nature.
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2. As regards the application of this Agreement by a
Contracting State any term not defined therein shall, unless the
context otherwise requires, have the meaning which it has under
the law of that Contracting State concerning the taxes to which
this Agreement applies.
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1. For the purposes of this Agreement the term ``resident of a
Contracting State'' means:
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a) in the case of Canada: any person who, under the tax law of
Canada is liable to tax therein by reason of the person's
domicile, residence, place of management or any other
criterion of a similar nature, but does not include any person
who is liable to tax in Canada in respect only of income from
sources in Canada;
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b) in the case of Kuwait:
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(1) an individual who is a Kuwaiti national, provided that
the individual has a substantial presence, permanent home
or habitual abode in Kuwait and that the individual's
personal and economic relations are closer to Kuwait than
to any other third state; and
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(2) a company which is incorporated in Kuwait.
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2. For the purposes of paragraph 1, the term ``resident of a
Contracting State'' shall include:
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a) the Government of that Contracting State or a political
subdivision or local authority thereof; and
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b) any corporation, Central Bank, fund, authority, foundation,
commission, agency or other entity that was established under
the law of that Contracting State and that is wholly-owned and
controlled by the Government of that Contracting State or a
political subdivision or local authority thereof, by any entity
referred to in this subparagraph or by any combination
thereof; and
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c) any entity established in that Contracting State all the capital
of which has been provided by the Government of that
Contracting State or a political subdivision or local authority
thereof either alone or together with the governments of other
States.
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3. 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 in accordance with the
following rules:
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a) the individual shall be deemed to be a resident only of the
Contracting State in which the individual has a permanent
home available;
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b) if the individual has a permanent home available in both
Contracting States, the individual shall be deemed to be a
resident only of the Contracting State with which the
individual's personal and economic relations are closer
(centre of vital interests);
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c) if the Contracting State in which the individual's centre of
vital interests cannot be determined, or if the individual has
not a permanent home available in either Contracting State,
the individual shall be deemed to be a resident only of the
Contracting State in which the individual has a habitual
abode;
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d) if the individual has an habitual abode in both Contracting
States or in neither of them, the individual shall be deemed to
be a resident only of the Contracting State of which the
individual is a national;
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e) if the individual's status cannot be determined under the
provisions of subparagraphs a) to d), the competent
authorities of the Contracting States shall settle the question
by mutual agreement.
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4. Where by reason of the provisions of paragraph 1 a person
other than an individual is a resident of both Contracting States,
then it shall be deemed to be a resident only of the Contracting
State of which it is a national.
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1. For the purposes of this Agreement, the term ``permanent
establishment'' means a fixed place of business through which
the business of an enterprise is wholly or partly carried on.
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2. The term ``permanent establishment'' includes especially:
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a) a place of management;
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f) a mine, an oil or gas well, a quarry or any other place relating
to the exploration for or the exploitation of natural resources.
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3. A building site, or construction, assembly, erection or
installation project or a supervisory activity in connection
therewith constitutes a permanent establishment only if such site,
project or activity continues for a period of more than six months.
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4. The furnishing of services, including consultancy services,
by an enterprise of a Contracting State through employees or
other engaged personnel in the other Contracting State
constitutes a permanent establishment provided that such
activities continue for the same project or a connected project for
a period or periods aggregating more than six months within any
twelve-month period.
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5. An enterprise of a Contracting State shall be deemed to have
a permanent establishment in the other Contracting State if
substantial equipment is being used or installed for more than
three months within any twelve-month period in the other
Contracting State by, for or under contract with the enterprise.
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6. Notwithstanding the preceding provisions of this Article,
the term ``permanent establishment'' shall be deemed not to
include:
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a) the use of facilities solely for the purpose of storage, display
or delivery of goods or merchandise belonging to the
enterprise;
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b) the maintenance of a stock of goods or merchandise
belonging to the enterprise solely for the purpose of storage,
display or delivery;
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c) the maintenance of a stock of goods or merchandise
belonging to the enterprise solely for the purpose of
processing by another enterprise;
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d) the maintenance of a fixed place of business solely for the
purpose of purchasing goods or merchandise or of collecting
information, for the enterprise;
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e) the maintenance of a fixed place of business solely for the
purpose of advertising, for the supply of information, for
scientific research or for similar activities which have a
preparatory or auxiliary character, for the enterprise;
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f) the maintenance of a fixed place of business solely for any
combination of activities mentioned in subparagraphs a) to e),
provided that the overall activity of the fixed place of business
resulting from this combination is of a preparatory or auxiliary
character.
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7. Notwithstanding the provisions of paragraphs 1 and 2,
where a person - other than an agent of an independent status
to whom paragraph 8 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 Contracting State, in respect of any activities
which that person undertakes for the enterprise, if:
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a) that person has and habitually exercises in the
first-mentioned Contracting State a general authority to
negotiate and conclude contracts in the name of such
enterprise; or
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b) that person has no such authority, but habitually maintains
in the first-mentioned Contracting State a stock of goods or
merchandise belonging to such enterprise from which that
person regularly delivers goods or merchandise on behalf of
such enterprise; or
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c) that person habitually secures orders in the first-mentioned
Contracting State, exclusively or almost exclusively for the
enterprise itself or for such enterprise and other enterprises
which are controlled by it or have a controlling interest in it;
or
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d) in so acting, that person manufactures in that Contracting
State for the enterprise goods or merchandise belonging to the
enterprise.
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8. 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 Contracting
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. However, when
the activities of such a person are devoted wholly or almost
wholly on behalf of that enterprise, that person shall not be
considered an agent of an independent status within the meaning
of this paragraph.
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9. 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 Contracting State (whether through a permanent
establishment or otherwise), shall not of itself constitute either
company a permanent establishment of the other.
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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 Contracting State.
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2. The term ``immovable property'' shall have the meaning,
which it has under the 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.
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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 profits from the alienation of such property.
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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.
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1. The profits of an enterprise of a Contracting State shall be
taxable only in that Contracting State unless the enterprise carries
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 profits of the enterprise may
be taxed in the other Contracting State but only so much of them
as is attributable to that permanent establishment.
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2. Subject to the provisions of paragraph 3, where an
enterprise of a Contracting State carries 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 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.
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3. In determining the profits of a permanent establishment,
there shall be allowed as deductions those deductible expenses
which are incurred for the purposes of the permanent
establishment, including executive and general administrative
expenses so incurred, whether in the Contracting 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 towards reimbursement of actual expenses)
by the permanent establishment to the head office of the
enterprise or any of its other offices, by way of royalties, fees or
other similar payments in return for the use of patents or other
rights, or by way of commission, for specific services performed
or for management, or, except in the case of a banking enterprise,
by way of interest on moneys lent to the permanent
establishment. Likewise, no account shall be taken, in the
determination of the profits of a permanent establishment, for
amounts charged (otherwise than towards reimbursement of
actual expenses), by the permanent establishment to the head
office of the enterprise or any of its other offices, by way of
royalties, fees or other similar payments in return for the use of
patents or other rights, or by way of commission for specific
services performed or for management, or, except in the case of
a banking enterprise, by way of interest on moneys lent to the
head office of the enterprise or any of its other offices.
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4. No profits shall be attributed to a permanent establishment
by reason of the mere purchase by that permanent establishment
of goods or merchandise for the enterprise.
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5. Insofar as it has been customary in a Contracting State to
determine the profits to be attributed to a permanent
establishment on the basis of an apportionment of the total profits
of the enterprise to its various parts, nothing in paragraph 2 shall
preclude that Contracting State from determining the profits to be
taxed by such an apportionment as may be customary; the
method of apportionment adopted shall, however, be such that
the result shall be in accordance with the principles contained in
this Article.
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6. If the information available to the competent authority of a
Contracting State is inadequate to determine the profits to be
attributed to the permanent establishment of an enterprise,
nothing in paragraph 2 shall affect the application of any law or
regulations of that Contracting State relating to the determination
of the tax liability of the enterprise in relation to that permanent
establishment by the making of an estimate by the competent
authority of that Contracting State of the profits to be attributed
to that permanent establishment, provided that such law or
regulations shall be applied, so far as the information available to
the competent authority permits, in accordance with the
principles of this Article.
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7. For the purpose of the preceding paragraphs, the 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.
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8. 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.
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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 Contracting State.
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2. For the purposes of this Article, profits from the operation
of ships or aircraft in international traffic include:
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a) profits from the rental on a bareboat basis of ships and
aircraft; and
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b) profits from the use, maintenance or rental of containers,
including trailers and related equipment for the transport of
containers, used for the transport of goods or merchandise;
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where such rental or such use, maintenance or rental, as the case
may be, is incidental to the operation of ships or aircraft in
international traffic.
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3. Notwithstanding the provisions of paragraph 1 and Article
7, profits derived from the operation of ships or aircraft used
principally to transport passengers or goods exclusively between
places in a Contracting State may be taxed in that Contracting
State.
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4. The provisions of paragraphs 1, 2 and 3 shall also apply to
profits derived from the participation in a pool, a joint business
or an international operating agency.
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1. Where
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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
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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,
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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.
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2. Where a Contracting State includes in the profits of an
enterprise of that Contracting State - and taxes
accordingly - profits on which an enterprise of the other
Contracting State has been charged tax in that other Contracting
State and the profits so included are profits which would have
accrued to the enterprise of the first-mentioned Contracting State
if the conditions made between the two enterprises had been
those which would have been made between independent
enterprises, then that other Contracting State shall make an
appropriate adjustment to the amount of the tax charged therein
on those profits. 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
necessary, consult each other.
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3. A Contracting State shall not change the 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 profits
which would be subject to such change would have accrued to an
enterprise of that Contracting State.
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4. The provisions of paragraphs 2 and 3 shall not apply in the
case of fraud, wilful default or neglect-.
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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 Contracting State.
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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 Contracting State, but
if a resident of the other Contracting State is the beneficial owner
of the dividends the tax so charged shall not exceed:
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a) except in the case of dividends paid by a
non-resident-owned investment corporation that is a resident
of Canada, 5 per cent of the gross amount of the dividends if
the beneficial owner is a company that owns 10 per cent or
more of the issued and outstanding voting stock, or 25 per cent
or more of the value of all the issued and outstanding stock, of
the company paying the dividends; and
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b) 15 per cent of the gross amount of the dividends in all other
cases.
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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.
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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 taxation
laws of the Contracting State of which the company making the
distribution is a resident.
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4. The provisions of paragraph 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, or performs
in that other Contracting State independent 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 establishment or fixed base. In such case the
provisions of Article 7 or Article 14, as the case may be, shall
apply.
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5. Where a company which is a resident of a Contracting State
derives profits or income from the other Contracting State, that
other Contracting 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 Contracting State or insofar as the
holding in respect of which the dividends are paid is effectively
connected with a permanent establishment or a fixed base
situated in that other Contracting State, nor subject the
company's undistributed profits to a tax on the company's
undistributed profits, even if the dividends paid or the
undistributed profits consist wholly or partly of profits or income
arising in such other Contracting State.
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6. Notwithstanding any provision in this Agreement, Canada
may impose on the earnings of a company attributable to
permanent establishments in Canada, or on the alienation of
immovable property (within the meaning assigned by Article 6)
situated in Canada by a company carrying on a trade in
immovable property, tax in addition to the tax which would be
chargeable on the earnings of a company that is a resident of
Canada, provided that the rate of such additional tax so imposed
shall not exceed the percentage limitation provided for under
subparagraph a) of paragraph 2 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:
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a) the earnings attributable to the alienation of such
immovable property situated in Canada as may be taxed by
Canada under the provisions of Article 6 or of paragraph 1 of
Article 13; and
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b) the profits attributable to such permanent establishments in
Canada (including gains from the alienation of property
forming part of the business property, referred to in paragraph
2 of Article 13, of such permanent establishments) in
accordance with Article 7 in a year and previous years after
deducting therefrom:
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(1) business losses attributable to such permanent
establishments (including losses from the alienation of
property forming part of the business property of such
permanent establishments) in such year and previous years,
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(2) all taxes chargeable in Canada on such profits, other
than the additional tax referred to herein,
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(3) the profits reinvested in Canada, provided that the
amount of such deduction shall be determined in
accordance with the provisions of the law of Canada, as
they may be amended from time to time without changing
the general principle hereof, regarding the computation of
the allowance in respect of investment in property in
Canada, and
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(4) five hundred thousand Canadian dollars ($500,000) or
its equivalent in the currency of Kuwait, less any amount
deducted:
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(ii) by a person related thereto from the same or a similar
business as that carried on by the company,
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1. Interest arising in a Contracting State and paid to a resident
of the other Contracting State may be taxed in that other
Contracting State.
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2. However, such interest may also be taxed in the Contracting
State in which it arises and according to the laws of that
Contracting State, but if a resident of the other Contracting State
is the beneficial owner of the interest the tax so charged shall not
exceed 10 per cent of the gross amount of the interest.
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3. Notwithstanding the provisions of paragraph 2,
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a) interest arising in a Contracting State and paid in respect of
indebtedness of the government of that Contracting State or of
a political subdivision or local authority thereof shall,
provided that the interest is beneficially owned by a resident
of the other Contracting State, be taxable only in that other
Contracting State;
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b) interest arising in Kuwait and paid to a resident of Canada
shall be taxable only in Canada if it is paid in respect of a loan
made, guaranteed or insured, or a credit extended, guaranteed
or insured by Export Development Canada, provided the loan
or credit, as the case may be, was undertaken for the purpose
of financing export from Canada;
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c) interest arising in Canada and paid to a resident of Kuwait
shall be taxable only in Kuwait if it is paid in respect of a loan
made, guaranteed or insured, or a credit extended, guaranteed
or insured by the Government of Kuwait or by any institution
specified and agreed to in letters exchanged between the
competent authorities of the Contracting States, provided the
loan or credit, as the case may be, was undertaken for the
purpose of financing export from Kuwait.
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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, 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
Contracting State in which the income arises. However, the term
``interest'' does not include income dealt with in Article 10.
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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, or performs in that other Contracting State independent
personal services from a fixed base situated therein, and the
debt-claim in respect of which the interest is paid is effectively
connected with such permanent establishment or fixed base. In
such case the provisions of Article 7 or Article 14, as the case may
be, shall apply.
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6. Interest shall be deemed to arise in a Contracting State when
the payer is a resident of that Contracting State. Where, however,
the person paying the interest, whether that person is resident of
a Contracting State or not, has in a Contracting State a permanent
establishment 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 permanent establishment or fixed base,
then such interest shall be deemed to arise in the Contracting
State in which the permanent establishment or fixed base is
situated.
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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 Contracting State, due regard being had to the other
provisions of this Agreement.
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1. Royalties arising in a Contracting State and paid to a
resident of the other Contracting State may be taxed in that other
Contracting State.
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2. However, such royalties may also be taxed in the
Contracting State in which they arise and according to the laws
of that Contracting State, but if a resident of the other Contracting
State is the beneficial owner of the royalties the tax so charged
shall not exceed 10 per cent of the gross amount of the royalties.
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3. 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 of literary, artistic or scientific work
including cinematograph films and works on films, tapes or other
means of reproduction for use in connection with television or
radio broadcasting, any patent, trade mark, design or model,
plan, secret formula or process, or for the use of, or the right to
use, industrial, commercial or scientific equipment, or for
information concerning industrial, commercial or scientific
experience.
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4. The provisions of paragraphs 1 and 2 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, or performs in that other
Contracting 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 establishment or fixed base. In such case the
provisions of Article 7 or Article 14, as the case may be, shall
apply.
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5. Royalties shall be deemed to arise in a Contracting State
when the payer is a resident of that Contracting 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 or a fixed base in connection with
which the liability to pay the royalties was incurred, and such
royalties are borne by such permanent establishment or fixed
base, then such royalties shall be deemed to arise in the
Contracting State in which the permanent establishment or fixed
base is situated.
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6. 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, 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 Contracting State,
due regard being had to the other provisions of this Agreement.
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1. Gains derived by a resident of a Contracting State from the
alienation of immovable property referred to in Article 6 and
situated in the other Contracting State may be taxed in that other
Contracting State.
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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 or of movable property pertaining to a fixed base available
to a resident of a Contracting State in the other Contracting State
for the purpose of performing independent personal services,
including such gains from the alienation of such a permanent
establishment (alone or with the whole enterprise) or of such
fixed base may be taxed in that other Contracting State.
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3. Gains derived by an enterprise of a Contracting State from
the alienation of ships or aircraft operated in international traffic
or movable property pertaining to the operation of such ships or
aircraft, shall be taxable only in that Contracting State.
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4. Gains derived by a resident of a Contracting State from the
alienation of:
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a) shares (other than shares listed on the Kuwaiti Stock
Exchange or a Canadian stock exchange prescribed for the
purpose of the Income Tax Act) of the capital stock of a
company the property of which consists wholly or principally
of immovable property situated in the other Contracting State,
and
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b) an interest in a partnership, trust or estate, the property of
which consists wholly or principally of immovable property
situated in the other Contracting State,
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may be taxed in that other Contracting State. For the purposes of
this paragraph, the term ``immovable property'' includes the
shares of a company referred to in subparagraph a) or an interest
in a partnership, trust or estate referred to in subparagraph b) but
does not include any property, other than rental property, in
which the business of the company, partnership, trust or estate is
carried on.
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5. Gains from the alienation of any property other than that
referred to in paragraphs 1, 2, 3 and 4, shall be taxable only in the
Contracting State of which the alienator is a resident.
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6. The provisions of paragraph 5 shall not affect the right of
either of the Contracting States to levy, according to its law, a tax
on gains from the alienation of any property derived by an
individual who is a resident of the other Contracting State and has
been a resident of the first-mentioned Contracting State at any
time during the five years immediately preceding the alienation
of the property.
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7. 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 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.
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1. Income derived by an individual who is a resident of a
Contracting State in respect of professional services or other
activities of an independent character shall be taxable only in that
Contracting State unless the individual has a fixed base regularly
available in the other Contracting State for the purpose of
performing the activities. If the individual has or had such a fixed
base, the income may be taxed in the other Contracting State but
only so much of it as is attributable to that fixed base.
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2. The term ``professional services'' includes especially
independent scientific, literary, artistic, educational or teaching
activities, as well as the independent activities of physicians,
lawyers, engineers, architects, dentists and accountants.
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1. Subject to the provisions of Articles 16, 18, and 19, 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 Contracting State unless the employment is exercised
in the other Contracting State. If the employment is so exercised,
such remuneration as is derived therefrom may be taxed in that
other Contracting State.
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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 Contracting
State if:
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a) the recipient is present in the other Contracting 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
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b) the remuneration is paid by, or on behalf of, an employer
who is not a resident of the other Contracting State; and
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c) the remuneration is not borne by a permanent establishment
or a fixed base which the employer has in the other
Contracting State.
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3. Notwithstanding the preceding provisions of this Article,
remuneration derived in respect of an employment exercised
aboard a ship or aircraft operated in international traffic by an
enterprise of a Contracting State, shall be taxable only in that
Contracting State, unless the remuneration is derived by a
resident of the other Contracting State.
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Directors' fees and other similar payments derived by a
resident of a Contracting State in the 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 shall be taxable only in the
first mentioned Contracting State.
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1. Notwithstanding the provisions of Articles 14 and 15,
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 an athlete, from that resident's
personal activities as such exercised in the other Contracting
State, may be taxed in that other Contracting State.
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2. Where income in respect of personal activities exercised by
an entertainer or an athlete 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, 14 and 15, be taxed in the Contracting State in which
the activities of the entertainer or athlete are exercised.
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3. The provisions of paragraphs 1 and 2 shall not apply to
income derived by entertainers or athletes who are residents of a
Contracting State from personal activities as such exercised in the
other Contracting State if their visit to that other Contracting
State is substantially supported from the public funds of the
first-mentioned Contracting State, including those of any
political subdivision, a local authority or statutory body thereof,
nor to income derived by a non-profit making organization in
respect of such activities provided no part of its income is payable
to, or is otherwise available for the personal benefit of its
proprietors, founders or members.
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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 Contracting State.
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2. Pensions arising in a Contracting State and paid to a resident
of the other Contracting State may also be taxed in the
Contracting State in which they arise, and according to the law
of that Contracting State. However, in the case of periodic
pension payments, other than payments under the social security
legislation in a Contracting State, the tax so charged shall not
exceed 15 per cent of the gross amount of the payment.
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3. Annuities arising in a Contracting State and paid to a
resident of the other Contracting State may also be taxed in the
Contracting State in which they arise, and according to the law
of that Contracting State; but the tax so charged shall not exceed
15 per cent of the portion thereof that is subject to tax in that
Contracting State. However, this limitation does not apply to
lump-sum payments arising on the surrender, cancellation,
redemption, sale or other alienation of an annuity.
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4. As used in this Article:
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a) the term ``pensions'' means periodic payments, including
payments under the social security legislation in a Contracting
State, made after retirement in consideration of past
employment or by way of compensations for injuries received
in connection with past employment;
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b) the term ``annuity'' means a stated sum payable periodically
at stated times during life, or during a specified or
ascertainable period of time, under an obligation to make the
payments in return for adequate and full consideration in
money or money's worth.
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1. a) Salaries, wages and other 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 Contracting State or
subdivision or authority shall be taxable only in that
Contracting State.
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b) However, such salaries, wages and other similar
remuneration shall be taxable only in the other Contracting
State if the services are rendered in that Contracting State and
the individual is a resident of that Contracting State who:
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(1) is a national of that Contracting State; or
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(2) did not become a resident of that Contracting State
solely for the purpose of rendering the services.
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2. The provisions of Articles 15, 16 and 17 shall apply to
salaries, wages and other similar remuneration in respect of
services rendered in connection with a business carried on by a
Contracting State or a political subdivision or local authority
thereof.
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Payments which a student 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
Contracting State solely for the purpose of that individual's
education or training receives for the purpose of that individual's
maintenance, education or training shall not be taxed in that
Contracting State, provided that such payments arise from
sources outside that Contracting State.
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1. Notwithstanding the provisions of Articles 10 and 11,
dividends paid by a company that is a resident of a Contracting
State, and interest that arises in that Contracting State and that is
paid by a company that is a resident of that Contracting State, to
a resident of the other Contracting State that is referred to in
paragraph 2 of Article 4 and that is the beneficial owner of the
dividends or interest, as the case may be, shall be taxable only in
the other Contracting State provided that:
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a) the recipient, together with all other residents of the other
Contracting State that are referred to in paragraph 2 of Article
4, neither own or control shares of the company representing
more than 25 per cent of the value of all of its issued and
outstanding shares nor control directly or indirectly in any
manner whatever more than 25 per cent of the votes in respect
of the shares of the company; and
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b) the recipient has not received the dividends or interest, as
the case may be, in the course of carrying on an industrial or
commercial activity.
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2. Notwithstanding the provisions of Article 13, gains derived
by a resident of a Contracting State that is referred to in paragraph
2 of Article 4 from the alienation of shares or debt-claims the
dividends or interest on which would be exempt from taxation in
the other Contracting State shall be taxable only in the
first-mentioned Contracting State.
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1. Items of income of a resident of a Contracting State,
wherever arising, not dealt with in the foregoing Articles of this
Agreement shall be taxable only in that Contracting State.
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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 Contracting State in which
it arises, and according to the law of that Contracting State.
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3. The provisions of paragraph 1 shall not apply to income,
other than income from immovable property referred to in
Article 6, if the recipient of such income, being a resident of a
Contracting State, carries on business in the other Contracting
State through a permanent establishment situated therein, or
performs in that other Contracting State independent personal
services from a fixed base situated therein, and the right or
property in respect of which the income is paid is effectively
connected with such permanent establishment or fixed base. In
such case the provisions of Article 7 or Article 14, as the case may
be, shall apply.
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1. Capital represented by immovable property referred to in
Article 6, owned by a resident of a Contracting State and situated
in the other Contracting State, may be taxed in that other
Contracting State.
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2. Capital represented by 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 or by movable property pertaining to a fixed base available
to a resident of a Contracting State in the other Contracting State
for the purpose of performing independent personal services,
may be taxed in that other Contracting State.
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3. Capital represented by ships and aircraft operated in
international traffic by an enterprise of a Contracting State and by
movable property pertaining to the operation of such ships and
aircraft, shall be taxable only in that Contracting State.
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4. All other elements of capital of a resident of a Contracting
State shall be taxable only in that Contracting State.
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1. It is agreed that double taxation shall be avoided in
accordance with the following paragraphs of this Article.
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a) In the case of Canada: 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 Kuwait on profits, income or gains arising in
Kuwait shall be deducted from any Canadian tax payable in
respect of such profits, income or gains.
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b) In the case of Kuwait: where a resident of Kuwait derives
income or owns capital which, in accordance with the
provisions of this Agreement, may be taxed in both Canada
and Kuwait, Kuwait shall allow as a deduction from the tax on
the income of that resident, an amount equal to the income tax
paid in Canada; and as a deduction from the tax on the capital
of that resident, an amount equal to the capital tax paid in
Canada. Such deduction in either case shall not, however,
exceed that part of the income tax or capital tax, as computed
before the deduction is given, which is attributable, as the case
may be, to the income or the capital which may be taxed in
Canada.
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2. For the purposes of this Article, profits, income or gains of
a resident of a Contracting State which are taxed in the other
Contracting State in accordance with this Agreement shall be
deemed to arise from sources in that other Contracting State.
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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 Agreement
that person may, irrespective of the remedies provided by the
domestic law of those Contracting States, present a case to the
competent authority of the Contracting State of which the person
is a resident. The case must be presented within two years from
the first notification of the action resulting in taxation not in
accordance with the provisions of this Agreement.
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2. The competent authority 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 which is not in accordance
with this Agreement. Any agreement reached shall be
implemented notwithstanding any time limits in the domestic
law of the Contracting States, provided that the competent
authority of the other Contracting State has received notification
that such a case exists within six years from the end of the taxable
year to which the case relates.
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3. 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 this
Agreement. They may also consult together for the elimination
of double taxation in cases not provided for in this Agreement.
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4. The competent authorities of the Contracting States may
communicate with each other directly for the purpose of reaching
an agreement in the sense of the preceding paragraphs.
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1. The competent authorities of the Contracting States shall
exchange such information as is necessary for carrying out the
provisions of this Agreement or of the domestic laws of the
Contracting States concerning taxes covered by this Agreement
insofar as the taxation thereunder is not contrary to this
Agreement. The exchange of information is not restricted by
Article 1. Any information received by a Contracting State shall
be treated as secret in the same manner as information obtained
under the domestic laws of that Contracting 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, the taxes covered by this
Agreement. 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.
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2. In no case shall the provisions of paragraph 1 be construed
so as to impose on a Contracting State the obligation:
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a) to carry out administrative measures at variance with the
laws and administrative practices of that or of the other
Contracting State;
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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;
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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).
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1. The laws in force in either of the Contracting States shall
continue to govern the taxation in the respective Contracting
State except where provisions to the contrary are made in this
Agreement.
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2. The provisions of this Agreement shall not be construed to
restrict in any manner any exclusion, exemption, deduction,
credit or other allowance now or hereafter accorded:
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a) by the laws of a Contracting State in the determination of
the tax imposed by that Contracting State; or
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b) by any other special arrangement on taxation in connection
with the economic or technical cooperation between the
Contracting States.
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3. Nothing in this Agreement 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.
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4. For 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 Agreement 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 3 of Article 25 or,
failing agreement under that procedure, pursuant to any other
procedure agreed to by both Contracting States.
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Nothing in this Agreement shall affect the fiscal privileges of
members of a diplomatic mission, a consular post or an
international organization under the general rules of international
law or under the provisions of special agreements.
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Each of the Contracting States shall notify to the other the
completion of its constitutional procedures for the entry into
force of this Agreement. This Agreement shall enter into force on
the date of the later of these notifications and its provisions shall
thereupon have effect in both Contracting States:
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a) in respect of taxes withheld at source, for amounts paid or
credited on or after the first day of January of the year in which
this Agreement enters into force;
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b) in respect of other taxes, for taxable periods beginning on
or after the first day of January of the year in which this
Agreement enters into force.
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This Agreement shall remain in force for a period of five years
and shall continue thereafter for a similar period or periods
unless, either Contracting State notifies the other in writing at
least six months before the expiry of the initial period, or any
subsequent period, of its intention to terminate this Agreement.
In such event, this Agreement shall cease to have effect in both
Contracting States:
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a) in respect of taxes withheld at source, for amounts paid or
credited on or after the first day of January of the year next
following that in which the notice of termination is given; and
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b) in respect of other taxes, for taxable periods beginning on
or after the first day of January of the year next following that
in which the notice of termination is given.
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IN WITNESS WHEREOF the respective plenipotentiaries of
both Contracting States, have signed this Agreement.
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DONE at Ottawa this 28th day of January 2002 corresponding
to 15th day of Thul gida 1422H, in duplicate, in the English,
French and Arabic languages, all texts being equally
authoritative.
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FOR THE GOVERNMENT F
OR THE GOVERNMENT OF CANADA OF THE STATE OF KUWAIT
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Pierre S. Pettigrew Yousef Hamad
Al-Ibrahim
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