Replaced by new DTA, which applies in UK from 1st April 2003 for
CT, 6th April 2003 for IT and 1st January 2004 for PRT. For US
withholding taxes it applies from 1st May 2003 and for other US
taxes from 1st January 2004. See DT19938.
(1) Where an enterprise of a Contracting State is related to
another enterprise and conditions are made or imposed between the
two enterprises in their commercial or financial relations which
differ from those which would have been made between independent
enterprises, then any income, deductions, receipts, or outgoings
which would, but for those conditions, have been attributed to one
of the enterprises but by reason of those conditions have not been
so attributed, may be taken into account in computing the profits
or losses of that enterprise and taxed accordingly.
(2) Where any income, deductions, receipts or outgoings
which have been taken into account in one Contracting State in
computing the profits or losses of an enterprise are also taken
into account in the other Contracting State in computing the
profits or losses of a related enterprise in accordance with
paragraph (1) of this Article, then the first-mentioned State shall
make such adjustment as may be appropriate to the amount of tax
charged on those profits in that State.
(3) If one Contracting State disagrees with the amount of
any income, deductions, receipts or outgoings, taken into account
in computing profits or losses in the other in accordance with
paragraph (1), the two Contracting States shall endeavour to reach
agreement in accordance with the procedure in Article 25 (Mutual
agreement procedure).
(4) Except as specifically provided in this Article:
(a) where an enterprise doing business in one Contracting
State:
(i) is a resident of the other Contracting State; or
(ii) is controlled, directly or indirectly, by an enterprise
which is a resident of the other Contracting State; and
(b) where the enterprise which is a resident of the other
Contracting State is a corporation, such corporation is neither:
(i) a controlled foreign corporation within the meaning of
section 957 of the United States Internal Revenue Code of 1954 (as
it may be amended from time to time without changing the principle
thereof); nor
(ii) created or organised under the laws of the
first-mentioned State or of any third State or controlled, directly
or indirectly, by a corporation which is a resident of any third
State;
then, in determining the tax liability of the
first-mentioned enterprise in the State in which it does business
such State shall not take into account the income, deductions,
receipts or outgoings of a related enterprise which is a resident
of the other Contracting State or of an enterprise of any third
State which is related to the enterprise of the other Contracting
State, except that this prohibition shall not apply where the
first-mentioned enterprise is a resident of the first-mentioned
Contracting State, to the extent that it owns, directly or
indirectly, the capital of the related enterprise.
(5) For the purposes of this Convention, an enterprise is
related to another enterprise if either enterprise directly or
indirectly controls the other, or if any third person or persons
(related to each other or acting together) control both.
