GENERAL

In case an entity that is treated as a body corporate for tax purposes is liable as such to tax in a Contracting State, but the income of that entity is taxed in the other Contracting State as income of the participants in that entity, the competent authorities shall take such measures that on the one hand no double taxation remains, but on the other hand it is prevented that merely as a result of application of the Convention income is (partly) not subject to tax. To determine whether this is the case, the tax levied on the income of that entity shall be deemed to be tax levied on the income of the participants in that entity, in proportion to their participation in the capital of that entity. Insofar necessary, it may also, in addition, be determined that each participant, in proportion of his/its participation in that entity, may credit the tax levied on the income at the level of that entity (including possible withholding tax thereon of third States), with the tax that he/it is due on the same income. Furthermore, the State of residence of that entity may abandon possible taxation on distribution of profit of that entity to the participants.

It is understood that, if the competent authorities of the Contracting States have, by mutual agreement, reached a solution within the context of the Convention for cases in which

• a)application of paragraph 2 of Article 3 with respect to the interpretation of a term not defined in the Convention; or
• b)differences in qualification (for example of an element of income or of a person)

would result in double taxation or double exemption, this solution, after publication thereof by both competent authorities, shall also be binding for the application of the provisions of the Convention in other similar cases.

An individual living aboard a ship without any real domicile in either of the Contracting States shall be deemed to be a resident of the Contracting State in which the ship has its home harbour.

In respect of paragraphs 1 and 2 of Article 7, where an enterprise of a Contracting State sells goods or merchandise or carries on business in the other Contracting State through a permanent establishment situated therein, the profits of that permanent establishment shall not be determined on the basis of the total amount received by the enterprise, but shall be determined only on the basis of that portion of the income of the enterprise that is attributable to the actual activity of the permanent establishment in respect of such sales or business.

Specifically, in the case of contracts for the survey, supply, installation or construction of industrial, commercial or scientific equipment or premises, or of public works, when the enterprise has a permanent establishment, the profits attributable to such permanent establishment shall not be determined on the basis of the total amount of the contract, but shall be determined only on the basis of that part of the contract that is effectively carried out by the permanent establishment in the Contracting State in which the permanent establishment is situated. The profits related to that part of the contract which is carried out by the head office of the enterprise shall be taxable only in the Contracting State of which the enterprise is a resident.

Payments received as a consideration for technical services, including studies or surveys of a scientific, geological or technical nature, or for consultancy or supervisory services shall be deemed to be payments to which the provisions of Article 7 or Article 14, as the case may be, apply.

• 1.For the purposes of Articles 8, 13, 15 and 23, the place of effective management of the existing Koninklijke Luchtvaartmaatschappij N.V. (KLM N.V.) shall be deemed to be situated in the Netherlands, as long as the Netherlands has an exclusive taxing right with respect to KLM N.V. under the tax convention concluded between the Netherlands and France.
• 2.The provision of paragraph 1 shall also apply in any situation where the air transport activities of the existing KLM N.V. would be continued fully or substantially by another person, who is considered to be a resident of the Netherlands.

Where tax has been levied at source in excess of the amount of tax chargeable under the provisions of Articles 10, 11 or 12, applications for the refund of the excess amount of tax have to be lodged with the competent authority of the State having levied the tax, within a period of three years after the expiration of the calendar year in which the tax has been levied.

It is understood that, in case an individual, resident in a Contracting State, has a substantial holding in a company and receives income in connection with the (total or partial) liquidation of that company or a purchase of own shares by that company, such income is treated as income from shares and not as capital gains.

It is understood that the term “financial institution” as mentioned in paragraph 3 of Article 11 includes:

• –the Netherlands Development Finance Company (Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden N.V.);
• –the Netherlands Investment Bank for Developing Countries (Nederlandse Investeringsbank voor Ontwikkelingslanden N.V.) and
• –the Netherlands insurance agency Atradius Dutch State Business N.V. (Atradius DSB).

The competent authorities may determine by mutual agreement other governmental institutions to which this provision shall apply.

Where a company is a resident of the Netherlands, the term “member of the board of directors” includes both a “bestuurder” and a “commissaris”. The terms “bestuurder” and “commissaris” mean respectively persons who are charged with the general management of the company and persons who are charged with the supervision thereof.

The competent authorities of the States may also agree, with respect to any agreement reached as a result of a mutual agreement procedure as meant in Article 26, if necessary contrary to their respective national legislation, that the State in which there is an additional tax charge as a result of the aforementioned agreement shall not impose any increases, surcharges, interest and costs with respect to this additional tax charge, to the extent that a corresponding deduction of tax is made in the other State as a result of the agreement and no interest is payable in that State with respect to such a reduction of tax.

• 1.The provisions of Articles 27 and 28 shall apply accordingly to information that is relevant for carrying out the income related regulations and assistance in the collection of the contributions or payments made under the income related regulations under the laws of the Netherlands by the tax authorities of the Netherlands concerned with the implementation, administration or enforcement of these income related regulations.
• 2.Any information received under paragraph 1 of this Article in connection with Article 27 of this Convention, shall be used only for the purpose of the determination and levying of the contributions and the determination and granting of the benefits under the income related regulations as meant in paragraph 1 of this Article.