DT2861 - DT: Azerbaijan: double taxation agreement, SI95 No 762, Exchange of notes

EXCHANGE OF NOTES

ARTICLE 2 : TAXES COVERED

The Contracting States agree that the term `substantial changes` in Article 2(4) includes changes in the rates, base or structure of the tax system, or the introduction of new or substituted taxes in either Contracting State, but does not include minor changes.

ARTICLE 4 : RESIDENCE

Where a person other than an individual is a resident of both Contracting States and the competent authorities of the Contracting States endeavour to determine its status by mutual agreement under the terms of Article 4(3), they shall have regard to such factors as the place of effective management, the place where it is incorporated, the place where it is registered for the purposes of taxation and any other relevant factors.

ARTICLE 5 : PERMANENT ESTABLISHMENT

With respect to paragraph 2(f) the Contracting States agree that the term installation includes a drilling rig or ship used for the exploration of natural resources.

The Contracting States agree that the applicability of the second sentence of Article 5(6) falls to be considered on a case by case basis and in the light of all the facts.

ARTICLE 8 : SHIPPING AND AIR TRANSPORT

The provisions of Article 8(3) shall apply only to so much of the profits derived from the participation in a pool, a joint business or an international operating agency as is attributable to the participant in proportion to its share in the joint operation.

ARTICLE 11 : INTEREST

The competent authorities of the Contracting States shall if necessary settle by mutual agreement the mode of application of the limitation imposed by Article 11(2).

Article 26 : Mutual Agreement Procedure

With reference to paragraph (2), the Government of the United Kingdom takes note of the view of the Government of Azerbaijan that provision should be made for a procedure of binding arbitration with a view to the avoidance of taxation which is not in accordance with the Convention where one of the competent authorities fails to resolve the case by mutual agreement with the competent authority of the other Contracting State. In the event of a change in the domestic law of the United Kingdom to permit such a procedure of binding arbitration to be entered into, the competent authority of the United Kingdom will notify the competent authority of Azerbaijan with a view to the negotiation of a Protocol to this Convention which will provide for a binding arbitration procedure.

With reference to paragraph (4), the Contracting States agree that in the event that the domestic law of both States is amended to permit an oral exchange of opinion to take place through a Commission consisting of the competent authorities of the Contracting States, they are ready to use such a procedure.

Article 29 : Entry into Force

The Contracting States agree that notwithstanding paragraphs (a) and (b) the provisions of this Convention shall, as a practical matter, be applied to transactions entered into on or after 18 October 1991 where this would afford any greater relief from tax than is due under the domestic law of either Contracting State.

In the case of any difficulties or doubts arising as to the interpretation or application of the provisions of this Convention in respect of transactions entered into between 18 October 1991 and the entry into force of this Convention the competent authorities of the Contracting States shall endeavour to resolve these by mutual agreement.

Capital

The Contracting States agree that if either Contracting State introduces a capital tax under its domestic law, both Contracting States will participate without delay in negotiations for a Protocol to this Convention with a view to extending the scope of this Convention to include the above-mentioned capital tax.