nhs FO/M( 60)3 Seale 5 Provisional pending approval by the Committee at its nexc sesaions or, Fry FISCAL COMMITTEE Minutes of the 18th Session held at the Chateau de la Muette, Paris, on Tuesday 10th, Wednesday 11th, Thursday 12th and Friday 13th May, 1960 tir, LOCHER (Chairman) Switzerland API Austria POLLAK ¥ Me. QUESTIAUX Beigium Denmaric Fragee Gertany MANOLAKIS Greece RICE Ireland GLEESON ‘ PAVONE Italy MAINATO i SCHAUS Luxeinboury KAUREMAN tt DEXKER Netherlands DIRKSEN * URBYE Nowiiay BASTOS E SILVA Portugal JERRELRO- in aman Sweden ECXERSTEN 24181. Ta, 63785 - Sth JuneMr. WIDMER Switzerland Mey. DURA Tarkey Mr; OZANSOY Me. BAST. United Kingda Mr, HARRISON . Mr, HUNTER United States Mp, STRAUSS My, JANSEN, Representing the Commission of the European Economie Community Secretariat Mr, GILMER ADOPTION OF THE AGENDA OF THE 18th SESSTON AND APPROVAL OF THE MINUTES OF THE 17th SESSION ‘The session opened cn loth May at 10.15 a.m. Chairman tended, the apologies of Mr, MERSMAN, Mr. ‘VoG! Hr, ACOSTA, Mr, TSINGRIS, and Mr, FAVEIRO, who were unable to be present, He welcomed Mr, MENCK of the Ministry. of Finance of the Federal Republic of Germany, the The Committee adopted the Agenda PC/A(60)3(1st Revision), fixed a timetable for the meetings and decided not to sit on the following afternoon, The Chairman apologised for having to leave Paris during part of the session, He would be away from the end of the afternoon of Tugsday, 10th: May until Thursday morning, and he asked Mr. OHMAN, Vice-Chairman, to act for him during his absence when items 4 and 6 on the Agenda would be examined, At the request of the Chairman, the Secretary of the Committee briefly indicated those points in the report o: Four Experts, "A Remodelled Economic Organisation", which particularly affected the future of the Fiseal Committee's work, ‘The Committee then adopted the minutes of the’ last session FC/M(60)2, with the following amendments: Page ‘{: paragraph A, 1th line, afte? the words "was very low (15 per cent)" ‘add: "This did not prejudge the special case of the relations between parent companies and subsidiary companies, in respect . of vinich Germany, in its Conventions, reserved the right to levy a tax at the source of 25 per cent", Page 4: paragraph A, 26th line, read: "The Delegate for Luxembourg thought that the countries in fevour of exclusive taxation in the country of residence should~ and “that” Be BO/9(60)% how tho necessary compreiension towards those favouring ‘tac~ ation in the country of source arid should consider as satiefact~ e paopeas | to 2 eat the ox An ‘these countries to 15 pen. erageaph AS last-Tine, and ‘page 5, first line, delete. "This: rates! which:was a SL ould, ‘toreoveny: bre (Didaterelt conventions", veoh g eden Page 73 2nd paragrach, 9th line, for “in the bilateral Conventions"; subatibute sta. pans ofa compromise -solution;4 Paze’ we Sh 3rd paragraph, Sthi1ine, 1010": 3 Af the German. tax o on “dtotrtbut a profi te wore pareeroph A, 6th-1ine, the text up to the 12th line, substititecthe following: “three countries tax interest paid to non-residents only: in. cer- vain’éas eee andvanstria: interest secured:on‘immoveble sedond pi nraereoh, ith tines: “Pate ought: ‘he case of interest and royalties, because the:comany: Les out! of which the dividends weve ddotei bute had ae Page 11; ‘petuuetnate paragraphs. fase second’ and’third: sentence "Te-was' a Phot that! certain Conventions ‘inale pre Base G0 be taxed: din the: country tn) whieh: the: mortgaged: prop: \dithat, the; Income. “the” property aot could Happen that neither: the: creditor’ nor:-the: dstits of the: State’ in’ which the’ mortgaged: prope: thee stot ‘had.’ power: Eb ‘Page '1 paraera Bh H - stn lane} ‘Tor \"Fealised @ loss”, ‘read’ “suffers Pag 3 £18. paragraph, 42th ana 13H ae sant” ‘He pointed out: bias the principle. had been acgen! 228, at the Congress of the International Fiscal Association Knocks:2u/0(60)3. : che Page‘J3! paragraph 8, 7th line, . HEeae china cchtonse cubstiaite: "the Delozate fon the Ted grlands shared the Working Party's view That atewpeion was. not justified in.ithe case under consideration. As regards giving eredit for .the “limited tax levied: by the country of ,source, he reserved his position because: his country was-in favour of. exclusive taxation by the country of residence". Page 15 (French: text only)s:Ist-ldneyers 2 i Peat “(1) le droit dtimposition doip-ii Gtr véservé., TI... METHODS OF AVOTD: UBLE TAXATION .:.7 The Committes proceeded. to examine the Supplementary Report by Working Party No. 15 (FC/WP15(60)2 of 25th: April,1960). Ay Paxes_on capital Li ‘The ‘Delegate for’Denmark, Rapporteur of. the Working Party, said that there WS no problem for the countries practising exemption because,. in accordance .with what shad. been.decided. in the dase'of the. income,’ the country to.which. the Convention did not give the ‘right to. tax-must exempt. the, capital, whether, the other country exercised its'right to tax-or:not,, The Chairman thought it ‘necessary nevertheless to mention specifically the » taxation of capital in Article Bs the Committee adopted this point of!view. . The Delegate for Austria thought that the: Contracting States should be entitled: to agree: bilaterally that’ Attlole Band Article: A:did-not apply where there was)a capital - tax in-one. country only. The: Chairman obseryed .that, the. question ought. to be settled by Article I, which specified the taxes covered by’ the Convention, but that.it couid.be mentioned. in the Commentary," The Delegate for-Denmark pointed: out: that, the: Working. Party considere: giving credit. for: capital taxes « should ‘be settled by bilateral negotiations, because it was necessary:for: the countries “concerned to: agree upon; the exact | nature of such taxes, The: Chairman: said thet<1f, both, countries had “true capital taxes, giving.credit for one, against the other ereated no problens but: if sthe .country.to. which dt foll'to give: eredit- didnot ‘Itself. have: a capital tax the question,.was, whether. it should give credit against its income tax. : The. Delegate Cor the United Kingdom said that the first case was theoretica. because, to his knowledge, ofthe countries using the, credit method only ‘one had a capital :tax,:...-In-the -second.case, it was necessary to determine by bilateral negotiations ‘the nature of the tax to be glven credit for, and against what tax 1t should be credited, The Delegate for France considered that credit. for » a capital tax Gould not properly be given ‘against. an income. ‘tax, ‘The Chairman thought that Article a ought to cover the taxation of capital where this existed in both States... The Delegate for Italy did-not share this opinion and thought tat the questionshould be dealt with in the Commentary, ‘The Delége’ é. United Kingdom, the Nethemands, sweden ahd Gepmany suppor the Chalmmants View, ince they wished to itsure, balance 31 presentation of ApticlesA.and 3, The. Sheieneo wanted. thes Commentary, to.state that, the case where only one coyppry tax capital, the identification of capital taxes, hi against. which taxes. credit, would-be given: for thi must be settled by bilateral negotiation betieen the. Contract ing States, "The Worlcing. Party. expressed its. agreement. By° Matching ‘oredits “The Delegate for: Deninark pointed ‘out that. the. questi created no problem for. the, countrics: ueieg ‘the: exemption: meted, For the countries using the tax credit.method, it would. be.nec- essary, to obtain. a certificate of the amount-by which the tax. or the taxable Income had been reduced: in. the other State,. because the credit’ was. usually: < ven.in tespect of taxes: actually paid, The:other ‘solution: would: be, for” these countries to, exempt; this: solution was, the only.possible ot nthe ¢: ‘3 of foreign. students in receipt. of remittances from their country und in the'case ‘of pensions if: war-disabled persons... The» Worlcing Party. thought, .howeyer, that. the question could be settled only by bilateral negotiations. . The Delegate for Germany pointed. out. that) Article XIZ, concerning Students. and Pusiness apprentices provided that the payments they recetved. "shall not be taxed", hich implied total” exemptions: ‘TheChaix- man edid’that in the particular case.of royalties, dividends an interest, the countries using. the.exemption. method must .give credit, and that the same ‘problem existed..for: them 17. the State of source did not levy, the reduced, tax.providéd for-by the Co: vention. “The Delegate ‘for Italy thought. that. the. general, que: Hon shold se deste Sith a ene: lealt Gn theArticles ‘and“that df would be. equitable if the. countries using ‘the: oredit.method accorded tne same treatment as the countries using the exemption method, If: a country was-given the’ right to tax, it should also be given the right not to levy the tax.for.certain economle-reasona, . 3 Delegate for France said that if"a French’ conipany had a business in one Of the State: ‘one of the. States..of. the Community; only the-profits consid- ~ ered to have been realised in. France were taxable:in. France, i> regardless of how the profits held to,have: been realiged-in. the other. territory were taxed. there, * He thought that this: pro- cedure had the: same: results as a.matching credit, but it: could not. be embodied.into a. seneral..rule;..:He: thought it :would: be desirable for the Conmittee:.to, express?its. opinion, on:..: the general question in the Commentary, The Delegate for the Netherlands thought that;.1n;the case of royaiti: aivrdande Gud tnberest Priority. in taxation: belonged.t.pudilo suldoredtte besee dealt with in the Commentary Pte oy ed tax. conceded to n.of matebthg At. (Whe Delegate fo Germany thought that the question should be dealt with in: the’. ommentary and.‘hot, in thé ‘Article.’ The Delegate for. Austria’ was of" the same opinion. He could hot, however, adhere. t6. the natching credit method becalsé the’ question here’ was, not one of double taxation but-of economic policy... The Delegates for Belgium, Luxembourg and Greece also. tholight.that-the question Bout be-deate wee, be dealt: with in the Commentary, The Delegate. for, Portugal preferréd ‘the’ problem tobe Settled in the Articles, | Te was Inportant that. the effects of the’ measures. taken by the = country’ of source to attract foreign capital should ‘not, be caneelted’ out: by taxation: in! the country’ of residence... ‘The’ Delegates’ for: Norway ard Sweden ‘Shared the Vorlding PartyTs” opinion: ‘The Delegate for the UnitedKingdom was ofthe same view" atd'-thought that, the Commentary should merely: indicate ” that the“quéstion should ‘te’ the subject of negotiations’ between the countries concerned, “He* could not ‘agree to provisiens of | an automatic» nature, He considered ‘it indispensable to. -°- maintain equality. of- treatment between ‘resident ‘taxpayers; the system ‘in -question- would. give: an ‘advantage: to’ those’ with ” foreigh.incomé which received preferential ‘treatment. The = Delegate: for Switzerland though that the Commentary. should -be. peptsiotad to the cose where the tax credit:method was used, His coimtry: could not, "however, agree to" give a tax credit. where’ the reduced tax in'respect of royalties, interest and dividéris was not: levied bythe country’of source. The : Chairmay’ found ‘that. the’ inajority 1h the Committee, which was ‘supported by the Delegate for Tukey, was in: favour:of dealing with. the queation in ihe Commentary, end acked the Woricing Party to take into account’ the observations made by the <0: Delegates.) 9 25 BEE ob SERGE AR es O.: Drafting of APtiolesA’and’B “Lom the Worldng Party! proposals ‘the committee’ agreed"to the deletion:of: the former-paragraph: 1 of Article’ A,” consider- ing that:the reference to the laws of the:Contracting States was not'ind£spensable.: The: Delegate: for ited Kingdom”: asked=that the Working Party should mention “in ‘the Commentary. the possibility of taking into acount, for the ‘purposes ‘of the’ tax credit, not°only the taxes levied at the*source“on the dividends butvalso the taxes’pdid'by the company on'its profits, as did. the draft sole Article submitted by his Delegation. the Delegate for the Netherlands askéd' whether iention should not Be nade Of the political sub-divisions and local authorities in the Contracting States, The Delegate for Denmark considered that only the States should be mentioned, as Contracting Parties, ‘The Secretary of the Committee suggested ‘that the-7e FO. 0603 expressions. "a resident. of, a. Contracting State" and. "the. t Contracting State-of which the person is a resident" should... be used inthe, English text, and, that. the. presentation of the.” second paragraph of Article B should be’ the same as. that of the first.paragraph: of. Artioles, A and By:. the Delegate ton’ ” Denmark ‘said. that the Working: Party thought it better to have Three Articies. céverig each possible combination rather than. a single Article, |; |D.\ Extent of the tax. credit to be ‘given in the vase _ p. bE royalties; dividends and interest, by count ids Jno.) Being, the” exemption. metho : eres The! Delegate: for. ‘Denmarit: said. that:-the,. question .was. unethery Ih the Gass Of Peyalttes, dividends wid interest, country of residence normally using the exemption,.method i should give the ordinary credit. provided, for jin Article Aor the full credit for, the, reduced tax levied by..the. country of source, The Working Party thought. thet. the; choice would depend’ on, ‘the maximum. rates which, Would-be. adopted by. the Committee! for ‘the tax.in thé. country. of source, . If. these rates were low, the country of residence, shose. rate: generally-higher;-would.in fact. give, full ‘oredit;’ therefore be sinpler t6, apply. this: method directiy. ° ‘The: Delegate ‘for: France could not agree to this. method because,. ‘Owd ne Eo eRe wae a @ various reliefs, the corresponding,.tax in the country of residence might be lower tha lat. levied, inthe. ‘country of source, , The Delegate for, Switzepiand reiterated.” ‘his. country's. reservation con Soneernin iB paragraph 2 of “Arty, TEL. ': ‘GENERAL PROVISIONS. OF THE CONVENTION “oy, Under the ‘Ghatrmanshtp of Mr. GHMAN, thé Committee examined" Article Eon thé futual agreement procedure sub- mitted by Vorking Party No. 14 in its report FC/tP14(59)2'0f 3rd ‘March,..1959,.in the Light of the observations put forward by certain Delegations and recorded in Note "FC/WP14(60)2.0f. 3rd May, 1960... The Delegate for Austria, Rapporteur of ‘the \, ilorking’ Party, defined’ he cases Whore the mutual agréenent. procedure should apply. e lenaaae yess : As regards the'first ‘paragraph, the Committee, on the oposal ofthe Delegate for Switzerland, and after hearing e observations of. “oie Delerate for Belgium concerning the sual meane of reardss open to te fo. aernjers'uae are taxed” cessively or by mistake. by the national ‘taxation alibhorit: jecided. to substitute "taxation" for "double, taxation” ‘and, on e Proposal of the Delegate, forthe Netheriands, to substi ute "provisions” for "prinotpies".., The Delegate for Ireland jought-that taxpayers should apply in the first fustance to”FC/11(60)3 -8- fee taxation authorities of their own country and that the rst paragraph did not seem necessary, Tho Delésates for Austria ‘and Germany pointed out that certain cas Sees ae wig tie outside the province of the national taxation authorities, The Delegate for Sweden said that in many cotintries the Ragdtion SUCHOFIETEe were not the same as the éompetent™ 7 “ authority within the meaning. of the Convention, ~The Delegat: for the United Kingdom recognised that the promsisie or as @® SSG paragraph might be necessary for other countries, 7 ee cretary of the Committee observed that the expression ~ ctions of the tex authorities of the ‘two Contracting States' emed to limit’ the application ofthe mutual agreement pro— dure to the case where the. objection related to measures e ken in each of the two States, If 1t were desired to avoid ich aA reéatriction, the proper expression should be’ "actions ‘the ‘tax authorities of one or of both of the ‘Contracting jates",”- The Chairman ‘recalled that the Netherlands ‘Legation had wanted the procedure to be iimited to the case ere an objection by a taxpayer resident of one State related actions’ of the tax authorities of the other State, He ought ‘that such a restriction would be going too far as it ght ‘sometimes be impossible for the taxpayer to, determine eli tax authorities were responsible, The Delégate for enbourg thought that the procedure should HOE Bpsly if the aSUrEs objected to had been taken by the State of thé. tax- yer's residence, but that it should apply if such’ measures: °: re taken by the other State or by both States at once. He ~ ought. that the expression "has evidence” was too categorical. e Delegate for. Germany thought that the procedure’ should ply dn ali-cases, Beetuse it might be weetal Tor @ State to we its actions confirmed by the other State, The Delegate wr France thought that the Article should not throw doubt on 1s good faith of the States by suggesting that they were able of actions contrary to the Convention, ‘The ‘Secretary the Yommittee suggested the following draft: c Mihere-a\ resident ofa Contracting State consider's that he effects of the actions of the tax-authorities of one or of oth of the Contracting States are ‘not in harmony ‘with -the pro~ sions of-this'Convention, he may, notwithstanding the.inter- jal legal remedies, present his case to -the competént authority f the. Contracting State of which he is a resident," . The Delegate for Belgium proposed saying: "he may. . escnt”& Feesoned Peaueet wéeasoned requést.....'. - The. Delegate for Austria ought that the formula "notwithstanding the internal legal medies" should give satisfaction to the Swiss Delegation ‘ich had asked that it should be stressed that the mitual cement, procedure ‘had no connection with internal “legal uedies. the Delegate for Belgium thought it necéasary to ecify, at Teast in the Coitiontary, the’ time limit for lodging objection, which should be consistent with the provisions der the national law. The Delegate for Germany thought-9- FC/W{69)3 at allowgnce should be made for tne time needed to exhaust @ internal legal remedics, as a taxpayer who had not obtained itisfaction from.the tax. authorities or the courts of his ow uuntry should. then be entitled to seek the benefit.of the ual agreenent procedure, The Delegate for Luxembour, ; inted out ‘that the starting point of the period of lim me tation. ould also be fixed, and suggested that it should be the date the last action resulting in double taxation or contrary,.to je Convention, The Delegates‘ for Italy and France thought. it icessary ;to mention this point, The Chairman asked: the icing Party. to deal with this question in the Commentary, AS -vegards ‘the Second paragraph, the Delegate for the, proposed daying: "df the objection os deemed 6. bo | Justified", “As regards ‘the third paragraph, the Delegates. for. Switzerland, the. Netaerlands and Norway wanted 1t made. clear hat the consultations envisaged must e with the objéct’ of aching agreément. The Delegate for Luxembourg considered ,” the interpretations Given Ey the Tppetene a emipetent authorities. hed legal force because the right to interpret the Convention uld not properly lie with a ‘subordinate authority. ‘The. legate for Germany said that in his country Conventions nad fares of lav ant could be interpreted by tne.courts.. The dtfesse mpetent authorities could not{ therefore assert.a different terpretation, He thought, with the Delegats for France,. that Ses “hot provided, for. in the Convention should be the subject an additional Protocol; “but he did not think that the com tent authorities would always be able. to agree upot. the solu- on of certain complicated cases of double taxation, — The Lerate for Erance. proposed a hew version for. paragraphs 3 and ED/FCT Soret ath Nay, 1960). The Delegates. for Belgium, embourg and Norviay agreed to the proposed new paragraph 3, elefates for ths United Kington and Germany thought: 2¢ SP Eo Say EREE THe SORBET ONE eae) nities jay by mutual ‘sement resolve" or "shall endeavour to resolve", The legate for the Netherlands wanted the Commentary to Specify he paragraph also covered cases. of double taxation Wo2ying residents of a third State possessing, for example, manent ‘establishments in the tio Contracting Stetes. As regards the fourth paragraph, the Committee. adopted ‘the! wording: proposed, by the Delegate for France subject to. certain agendnence (*stalt sonmunicste Giresely with each: other"; "opal exchanges of views"; "nay tale i place"), . The Delegates for Ireland and’ tile United Kindo’ did not. think it hecessary_to provide Tor a” joint comission but nevertheless accepted thé proposed text. teral Cofivention tiere adopted latcr, a Consultative Commission fe The Delegate for. Suitzerland thought that’ if a miti-~ jould be set up within the. Fiseal Committee to.give an opinionFe/M(60)3 any’ disputes’ arising in -olation’to the application or terpretation of such a Convention, © This’ Commission might be mposedof “five members’ and of tepreseiitatives ‘of ‘the countries volved in thedispute, In this connection, the Delegate ferred to the proposals made in February 1959 bythe ternational Chamber of Commerce concerning the, settlement of sputes,’ “The Delegate for Ttaly: thought the question : erature dnd Ehae Te Wes ROE BeGGesery to ‘deal with it “in the mméntary.” “The Delegate for Belgium did not share this point . ‘view and consitleved thet the creation of an internationar e isdiction with respect’ to double taxation was’ Becoming ispensabie and should be studied later, The Delegate for jeden pointed out that the Articles drafted in he Fiscal — mmittes had for this’ very reason a'dertain imltilateral |= aracter nd that the question should be mentioned in the ©” mnontary; ‘The Delegate ror the Netherlands was’ of. the. same nigh, Il¢ tHeUgRE that the creation of a’ Consultative : Uission' would “be inevitable in:tho future, “It posed lerous difficult legal problems which would“have tobe studied nthe: time\came, In particular, ‘the decisions of such a ission vould ‘have to be binding’ not ‘only on'the’States but 6. on the: courts, -otherwise they would-be useless, The irman-asked:the Worlting Party to make, later on; a detailed iy Of this question and to mention it now. in the Commentary. asked the. Working Party also to submit for ‘the June Session ‘evised: text of Article E secempented-by-e-Cemmentery, TV," SAXADTON OP DIVIDENDS “The Coninittee examined the list of questions ‘mentioned in the Aide-Memoie of Workirg Party No; 12 /Fc/uP12(60)2 of 30th April, 1960/, ; A.’ Case whee the country of residence does not tax ividends 7 The Delegate for Switzerland, acting’ as Rapporteur, ' said that the Guestion was Whether the country ef souree was Sound tc apply the redueed rate provided in the Coltvention where’ thé vaxpayer wax not taxed in the country of residence by reason of losses of reliefs’ Gr because the country of residence did not bax ingome derived from.abroad, | He thought that’ the "subject %o tax" clause was necessary to’ prevent non-texation, \ The Delegate for the United Jdngdom thought that. the question was ‘GF speckal importance inthe sees ot royalties. and ‘interest; as regards dividends, the question only arose for the United, Kingdom'in relation to the surtax, which was only reduced if the dividénds were taxed in the country of the, sharcholder's residence, - He thought that the Commentary should allow the vountries cohcerned to‘apply such a limitation by bilatéral negotiations, The Delegate for Italy shared this view.’ -@.Fo/(60)3 tax'oonditional ‘upon the toxpayer being taxed: by the: country of residence, “Certain countries, for instance, did not tax dividends received by'a company’ from its subsidiary. Nevertheless, .e agreed to the question being mentioned in thé Commentary, By. Definition of "dividends" ana "corpanies" The. Delegate for switzerland said that. income from “parts""4 Thor aiden ividends of partnerships of individuals’ should be excluded afd assimilated to the profits of’a’ permanent establishment, “The Committee agreed to this... The Delegates for Francé'and Germany thought that income from bonds partici= pating. in profits" should. be eXcluded and assimilated to ; interest’ and not.to dividends, The Committee adopted this point of view, the Delegate for the Netherlands, who wat of” the contrary opinion, Peserving his post tise To; position for the moment, ‘The Committee.decided'to delete, In the English text, the words "limited partnerships with share capital" to say "actions ou bons: fe -jouissance",:"parts de fondateur ov parts bénéfi- clatres"). “The Delegates for the Netherlands and Germeny said that in their countries, there were certain securities carrying” a ribht-to-dividends. but not to a’ participation in the capital. The Chairman asked the Delegates to inform the: Worlting Party ° what they thought should-be added: to the definition of divi~ dendé, ‘The Delegate for the Netherlands. asked’ that income from: ‘gav'ta In soc operative Soeiseise at Co-operative Societies sfiowld not’ be assini~ lated to dividends because his country regarded:them a& personal income or: as' industrial or commercial profits, ‘Sums Paid toa nonerestdent’ were’ not taxable. unless they ‘could be — held to be: Income: derived from. at enterprise. having permanent establishment: in the Netherlands... The Chairman said that this case was covered: by’ paragraph’) of the Article, The Pelenate for: France'thought’ that the ‘definition should cover: parts” ‘in cS-dperative societies, "parts" in "sociétés & Pesponsabilité:limitée” and “sociétés en: gominandite ‘simple", inthe ‘same’ way. as othér "parts sociales", The Chairman obsorved that urider ‘certain ‘countries’ laws "parts" in the first ‘two were not’ regarded a5 paper securities, He thought that paragraph 5-(a) should ‘refer solely to "parts sociales sous: forme ‘de ‘papiers-valeurs" and to ‘such income from "parts de sociétés" asthe national “laws treated as dividerids or was taxed as ‘such, Mey “ith respect to paragraph 'b), the Delegate for - Ipeland thought that the specie? Bodb de the BY 5 per bent. prd+ Vided for.in the dase of dividends paid by ‘a subsidiary to its parent company where the’ parent company owned ab least 50. por: cent of the capital should ‘also apply to dividends paid by.a:° company, to an individual ‘hoarding more than 50 per cen’ of theBG/4(60)3 = io ' shares,’ The Chairman considered that a private majority shareholder Was Not on the-sane-footing as-a..parént -conpany because: the parent company in its turn distributed dividends uch were taxed tn the hends.of its shareholdars, . The Delemates for the Netherlands and the United Kingdom asked if a Special definition of companies for the purposes of ‘paragraph -2 (a) of the Article was necessary in view of the fact’ that the Convention would have a general definition of the term, Chairman said‘ that it was necessary for the purposes of p graph @-(a) to excludé partnerships of individuals, but that the Working: Party. would consider. whether the question could be dealt with in-the Commentary, . The Delegate for the Netherlands pro- posed substituting for the expression "commercial-association possessing a joint capitel”. ("société & base de capitaux") ‘the expression. "gommercial: association whose capital is wholly. or parcly represented by actions”, The Delegate for the United Kingdon proposed deleting, in the ERELTsh Se#t; the words. "OF ‘aSsociatiors", : - - C. .-Paseof countries with no. dividends..tax. . Dns Delegate for Switzerland thought it-necessary to establisa reciprocal treatment in regard to the tax reliefs given. bythe Contracting States, The qucsticn therefore was how the ‘Article could be. applied in‘relation. to-countries like the. United.Kingdomy Ireland and Belgium, whic! had no taxation of Gividends but: merely taxation of the company,...In the case of the United Kingdom, it-could be held that the part of the income tax paid.by. the compafiy on its, distributed profits was in fact a tax on dividends because the company was entitled. to withhold the. amount of this tax from the dividends paid te the sharcholcor and the Shareholder could claim.personal.reliefs on the sums so withheld, The Delegate fon the United Kingdom sald. that in his country” dividends p paid to individuals: resident abroad were. liable to the surtax once they totalled £2,000 inva year.” In its Conventions the United Kingdom. agreed not to chargé the ‘surtax here the dividends were taxed: in the other State, Tt also agreed to give, on a proportionate basis, the relief for family responsibilities applying to its residents but, by their nature; these reliefs applied only to individuals and not.to-companies, .. The Delegate said that, the, profits tax did not come into the matter because, like the income tax, ‘this was a flat rate tax on companies! profits; .the rate had’ becn the samé since 1958 for both distributed and undistributed profits, In reply to a question from the Chairman, -the Delegate said that he did not see the possibility of giving reliefs to foréign companies receiving. dividends. from the United Kingdom, " The Chairman thought. that the Artiole should apply in the case of the stirtax since the United Iingdom was prepared. to give up this tax altagether, He regretted that the United Kingdom, whieh charged both the incom tax and the profits taxon’ companies, should be unable.te-give a, reduction on the purt of the tax which was in fact borne by the foreign- 13 Bo/ti(60)3. shareholders ‘while the otter, eountrs us tere prepared, $0 agree to.a reduotion: tova maximum 15‘por-eent, \: Phe:Delegate for Trance thought thet these countries stoma AoE be Banos ive vais Feduction:in respect ‘of dividends pald'to British resi~ . Gents janys Polegate for. Sweden pointed .cut that -the question of dividends: eon -sottied satisfactorily: in-the: Conventions concluded with. the: United:Kingdom-and- Ireland, ‘Phe-Delegate « for Germany observed: thats? the britich view wee seneeder thot the Income. tax.which: the. company: deducted: from dividends: paid... to.4ts-shareholders. was not.:a dividends: tax, tt ‘vould ibe Logical forthe country of. ‘the foreign shareholder! s)residence. not. to» give credit for that, tax because: it wes a-tax,on:the company and not on the,.shareholder,. The Delegate for. the United Kingdom said that his. country..alloved the tax credio-not only for the. tax.on the dividends paid abroad but.also; for: the «underlying taxes, that. is, for.the-tax gharged on the company's total: profits, ment’ for. foreign. shareholders.of,,.British companies, o> The’: Delegate. for. Ineland thought. that,.-toyavoid double taxation,: it was noe necessary te 0.'g0. into: the details, of the different. tax. systems, The principal question was to Imow-by how much ‘the. -sbareholder!s income was @iminished by ‘the various taxes: levied in. the two countries, “in order..td Benet his diminution by # means. of a tax credit, The Chairman observed. that, 2f the. country of residence was prepared to give credit for taxa. levied by the Gountry of, source, irrespective of their amolint, the paragraph 2 in-the Article was pointless, but. the Delegate for_Ineland, considered ‘that ‘the. country: of. source Which already et ie Company's. total profits should reduce its tax on the. dividends,:....The Delegate for’ France painted out that the United Kingaom's waiving of Tes suntan attacked only sharo~ holders with more than £2,000 in dividends a. year: and that small shareholders were discouraged by. the reburfis they had. to complete in order to.obtain the personal reliefs.” ‘The Chairman recalled that he had already asked whether it would na : possible to obtain an automatic fixed reduction for individuals and companies. The Delegate for the United Kingdom repliéd that the very’ nature oF these reliers wane sie wade this ti inpuseibles 7 TAXATION OF INTEREST ir fhe Committee exsinined the second report of. working Party No. 11 /FC/iP11(60)1. of 3rd May, 1960/.. The Delezate for France, Rapporteur of the Working Party, sai ‘on. page, 3, Pavagraph b, in the sixth line, the words, "to, exclude” should be deleted, and'that in thé French text of paragraph 1 of the Article ‘the correct. words were "résident de. cet Etat". He pointed out that, in the Article the country of residence and the’ country, of souree were treated on exactly the: sane footing, ~~ : : foc! it.was.therefere entitled to. claim reciprocal treat-"the Delegate for Italy said that interest arising inttaly des Tisbls tothe Vtaposta a1 riechensa _pmobiiet (23.pexr. cent in the.case of interest in the natuve-of income from capitel; 18 per cent, as a »feneral rule, in other cases, although certain local ~edditions brought the rate up to around 27 percent); there were exemptions in certain cases. In addition, interest paid toa person restdent abroad was liable to ‘the Simposta”complementare progressive" if the recipl-_ ent. was an individual, or to the *imposta sulle societa! if the recipient was a company o-assoclation posseas- - ing a, permanent, establishment 1n Italy. Finally, there Wasa taxat the source on bonds, of 5”pex mil ‘of h the taxable value ‘of the bonds.” v Ttaly, “although in favour of exclusive taxation in the country of source, was prepared to give up the "imposta oomplementare™ er, 4f-the interest was not exempt from.the "imposta di ricchezza mobile", the tax on bonds, but on condition that the person entitled to the interest had no permanent establish- ment in‘Italys The Delegate said that if the Committee did not accept this position, he would be obliged to enter a reservation on the entire Article, Shove tihitent thd. efor Franee ‘said that i e n that case on: 3 : a noe Go fix in paragraph 2 of the : _ ibgrest te Cotnerg. GF gone tig, torted on, * Bh that the reduction’ of the tree ie, ; Bs et Gores btled by biletera? ‘negotiatrone® The Chairman: not"seem to hi of the fact that all Member, cone = & An favour of fixings maxiaun ate "LO" per Cent ar ie ne baw re Kise: ‘He ould propose that it be fixed at 15 per events ee elegate for Greece reserved his country's position over the vate. ‘The Chairman observed that these remarks related only to the rate, whereas Italy's reservation related to the eompro- mine itself, The Delegate for Switzerland proposed the déletion of paragraph 6 in the draft icle relating to interest in excess of a just and reasonable rate, because 16 would be difficult to | apply in practice, The Delegate for the Netherlands shared thus yuu He cotisidered that‘tnis Guestion should bd settled amd ta national laws, Ti rte United Kingaon thoiight , on the contrary, that the paragraph was necessary, ‘The Chairman thought it necessary to take into account special relations between creditor and debtor and to decide how the excess Was to be treated for tax purposes, The Delegate for Exance thought that the authorities of the two countries should consult together on such a point, ‘The Delegate for Luxembourg recalled that the problem also existed in relation to royalties and that there could be a general Article covering the two cases, He thoiight that how the excess was to be treatedena a FO/M(G0)3 depended on particular eave: elejates for Austria, Germany, Ireland, Norway, Portugal” the United Kingoon were in-fayour*of a Separate proviszon in thé two Apticlés; the Delegates for Belgium and Italy favoured ‘a.provigion in. the Article on royalties only; the ‘Delenates for Denmark, ~ Luxembourg and-sultzeriand: thought Such a provision unnecessary ae ‘either of the two Articles, ~The Chairman'asked the. Working a Party to review the drafting and»alsd the question of the treatment" of the’ éxcess' ahd ‘the possibility:of a general Article, in liaison with Working Party No. 8, @ The Chairman asked the Working Party to. consider. whether a simplified definition was possible in paragraph 5, ‘the Delegate’ for Switzerland thought that the question’ of deducta~ bility Tor purposes of the payers tax arose ‘inthe case-of “\ interest, as.in “the case of royalties. He ‘sala “that: certain countries allowed such a. deduction: only where: the creditor Ye resided in the’ sane country ao ehev~tnewhieh. the debtor was ovWO toxal Hore tented, but refused’ 1t othertiise, He thought that ‘thesé. coun~ ‘tries should continue"to allow this ‘reduction ‘even’ when’ they: reduced ‘their ‘taxon interest or royalties in ‘accordatice with the Convention, for otherwise the’ measures: to’ avoid’ double taxation would be frustrated, ‘The: Delegates: for Ttaly, Austra, Germia d France ‘thought that this was7a probiem Se internal Ta ‘aw« ‘She Chairman said that Switzerland would © submit’'a detailed’ note. The Delegate for the United Kingdom recalled that there was also"Uhe question of caabiliey ia the country Of resideneé, "The Delegate for.‘the Netherlands ved his ‘position concerning paragraph Fy TAXATION OF ROVALITES The Committee took note of the second Aide~Mémoire of Vorieing’ Party No, 8 /FC/WPG(60)1 of 3rd May; 19607 and _ found “that -the ‘questions of deductipility for the purposes ‘of othe" Payers" ‘tax and of royalties In excess of an adeai consideration were’the same'ds in the case of titerEet: ea ad & decided “to stesume consideration of these points ,!and algo the question cf film vents at the ‘session in September, 1960/° VEE, - EAK'REGULATIONS CONCERNING NUCLEAR RISK INSURANCE Lin the Secretary ‘of the ‘Committee said thatthe report of- the Insuraiice “Sub-oomniet Conmittes-on the technical and practical ~ conditions ‘Under which ‘nuclear risk insurance would take place would shortly be distributed and submitted to the Joint trade and European ‘Payments Corimittes for adoption as soon as the revised draft Convention on third-party llability in the field of nuclear energy had been adopted, ‘The draft ConventionBC/I(60)3 -16- would-be examined by the Executive Committee of 17th May, 1960: he Delegate for the United Kingdom, Rapporteur of Working Party No, 10) said that the Worl ine Party would commence its work as. soon as the Convention had been adopted ‘by’ the/Council’and.the Joint Committee's report ‘was- available. He would:say at the next Session in June whether the Worlting Party thought: it possible to. present: its report. at the. Septem- ver Session, > OTHER: BUSINESS oo © i a Shademan asked Working Parties Nos. 8, 11, 12 and 15 ‘to. ho. joint meeting on. Vonday, 27th June, 1960 at 5.50 Pill, ab the Ch@teau.de 1a Muctte, to discuss. the harmonization of the Anticles.and Commentaries, ‘he Chairman,asked each oMepiclng Party. to. examine.carefully the articles. drafted by ‘the otner Working Parties, He suggested that. the. commentaries... ‘Should be drawn up in accordance with a uniform plan; .. (1) elir-"” rent .taxation,systems; (2) characteristics, of. the. ; ae} (3) commentary;.(4); reservations. Tt. was. decided. that. the final reports of the: first four Worlting Parties, would be... examined et the 20th Session from 5th to. Jth September, 1960. They should.reach the Secretariat by, 20th guly, 1960.20 order to be distributed before the holidays. Tne. final report of Working Party Now 15 would, be examined, at the 21st Session in October’, 1960, . ‘The Chairman suggested that: the Working . & Parties should take advantage of the fact that the next, plenary session would be a short one and meet in Paris, and annouriced that Working Party No. 12 would meet.on Thursday morning, 30th Chairmen confirmed that, thé 19th Session would be 4 _/ hela grom Tuesday 23th June at 10 aim. to Wednesday, 298h Jung, ae test ‘Lebel. dn order to examine the new text of Article E.ené oy ak the-Cermentmertes draun up by Vorlcing Party Nos. dt, and, the éraft report tothe Council drawn up by the Secretariat and approved by the Drafting Group at its meeting on Sth Nay. Tits draft would be distributed to Delegates before the end of Way, . "The Delegates were asked to send any. amendments to the Secretariat by 15th June, 1960, so that they could be assembled-in one paper and discussion of them.thereby facilite- ted... fhe Conmittee decided that the annual luncheon ofthe Fiseal Comittee would take place on Wednesday's.29th June, 1950. The Seasion closed on Friday, 13th May. abl poms