Bill S-8

SCHEDULE 2

(Section 2)

PROTOCOL

At the moment of signing the Agreement between Canada and the Republic of Turkey for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital, the undersigned have agreed upon the following provisions which shall constitute an integral part of the Agreement.

1. The Agreement shall not apply to any company, trust or other entity that is a resident of a Contracting State and is beneficially owned or controlled, directly or indirectly, by one or more persons who are not residents of that State, if the amount of the tax imposed on the income or capital of the company, trust or other entity by that State (after taking into account any reduction or offset of the amount of tax in any manner, including a refund, reimbursement, contribution, credit or allowance to the company, trust, or other entity or to any other person) is substantially lower than the amount that would be imposed by that State if all of the shares of the capital stock of the company or all of the interests in the trust or other entity, as the case may be, were beneficially owned by one or more individuals who were residents of that State.

2. With reference to paragraph 1 of Article 6, it is understood that, in the case of immovable property situated in Canada, the provisions of that paragraph shall also apply to income from the alienation of immovable property.

3. With reference to Article 7, it is understood that, where an enterprise of a Contracting State has a permanent establishment in the other Contracting State, and the enterprise

(a) effects sales in that other State of goods or merchandise of the same or similar kind as those sold through that permanent establishment, or

(b) carries on other business activities in that other State of the same or similar kind as those effected through that permanent establishment

profits derived from such sales and business activities may be taxed in that other Contracting State as part of the profits of the permanent establishment to the extent that the same or similar kind of sales or activities have been effected through the permanent establishment. However, the profits derived from such sales or activities shall not be taxed in that other Contracting State if the enterprise can prove that the sales or the activities have been carried on for other purposes than achieving benefits under this Agreement.

4. With reference to paragraph 1 of Article 7, it is understood that where an enterprise of a Contracting State which had carried on business in the other Contracting State through a permanent establishment situated therein, receives after it has ceased to carry on business as aforesaid, profits attributable to that permanent establishment, such profits may be taxed in that other State in accordance with the principles laid down in Article 7.

5. It is understood that, notwithstanding the provisions of Articles 7 and 8, 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 State.

6. With reference to paragraph 3 of Article 10, it is understood that the term “dividends” in the case of Turkey shall also include the income from investment funds and investment trusts.

7. With reference to paragraph 2 of Article 21, it is understood that, in the case of income from an estate or trust, the tax charged by Canada shall, provided that the income is taxable in Turkey, not exceed 15 per cent of the gross amount of the income.

8. With reference to paragraph 1 of Article 25, it is understood that to be admissible, the application referred to in that paragraph must be submitted:

(a) in the case of Canada, within two years from the first notification of the action which gives rise to taxation not in accordance with the Agreement; and

(b) in the case of Turkey, within one year from the first notification of the action which gives rise to taxation not in accordance with the Agreement. However, if such period has expired, the taxpayer may, in any case, present an application to the competent authority of Turkey within a period of five years beginning on the first day of January of the calendar year next following the related taxable year. For that purpose, the related taxable year is the year in which the income subject to the action resulting in taxation not in accordance with the provisions of the Agreement is derived.

9. It is understood that nothing in the 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. It is also understood that this provision shall not give Canada any right in respect of the taxation of residents of Turkey.

10. It is understood that nothing in the Agreement shall be construed so as to restrict in any manner any exemption, allowance, credit or other deduction accorded

(a) by the laws of a Contracting State in the determination of the tax imposed by that State; or

(b) by any other agreement entered into by a Contracting State.

11. For the purposes of paragraph 3 of Article XXII (Consultation) of the General Agreement on Trade in Services, the Contracting States agree that, notwithstanding that paragraph, any dispute between them as to whether a measure falls within the scope of this 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 4 of Article 25 or, failing agreement under that procedure, pursuant to any other procedure agreed to by both Contracting States.

IN WITNESS whereof the undersigned have signed this Protocol and affixed their seals thereto.

DONE in duplicate at Ottawa, this 14th day of July 2009, in the English, French and Turkish languages, all three texts being equally authentic.

James Fox

Assistant Deputy Minister, Europe, Middle East, Maghreb

Department of Foreign Affairs and International Trade

FOR CANADA

Mehmet Kilci

Commissioner of Revenue

Ministry of Finance

FOR THE REPUBLIC OF TURKEY

Published under authority of the Senate of Canada

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