CONVENTION BETWEEN THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND AND FRANCE FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME SIGNED AT LONDON ON 22 MAY 1968, AS MODIFIED BY THE PROTOCOLS SIGNED AT LONDON ON 10 FEBRUARY 1971, 14 MAY 1973, 12 JUNE 1986 AND 15 OCTOBER 1987

The Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the French Republic;

Desiring to conclude a Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income;

Have agreed as follows:

article 1

(1) The taxes which are the subject of this Convention are:

(a) in the United Kingdom of Great Britain and Northern Ireland:

the income tax including surtax, the corporation tax and the capital gains tax

(hereinafter referred to as "United Kingdom tax");
(b) in France:

the income tax, the corporation tax, including any withholding tax, prepayment (précompte) or advance payment with respect to the aforesaid taxes (hereinafter referred to as "French tax").

(2) This Convention shall also apply to any identical or substantially similar future taxes which are imposed in addition to, or in place of, the existing taxes by either Contracting State or by the Government of any territory to which this Convention is extended under Article 29. The competent authorities of the Contracting States shall notify to each other any changes which have been made in their respective taxation laws.

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article 2

(1) In this Convention:

(a) the term "United Kingdom" means Great Britain and Northern Ireland, including any area outside the territorial sea of the United Kingdom which is, in accordance with international law, an area within which the United Kingdom may exercise rights with respect to the sea bed and sub-soil and their natural resources;

(b) the term "France" means the European and Overseas Departments (Guadeloupe, Guyane, Martinique and Réunion) of the French Republic, including any area outside the territorial sea of France which is, in accordance with international law, an area within which France may exercise rights with respect to the sea bed and sub-soil and their natural resources;

(c) the terms "a Contracting State" and "the other Contracting State" mean the United Kingdom or France as the context requires;

(d) the term "competent authorities" means, in the case of the United Kingdom, the Commissioners of Inland Revenue or their authorised representative; in the case of France, the Minister of Economy and Finance (le Ministre de l’Economie et des Finances) or his authorised representative; and, in the case of any territory to which this Convention is extended under Article 29, the competent authority for the administration in such territory of the taxes to which this Convention applies;

(e) the term "tax" means United Kingdom tax or French tax as the context requires;

(f) the term "person" comprises an individual, a company and any other body of persons;

article 3

(1) For the purposes of this Convention, the term "resident of a Contracting State" means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature. But this term does not include any person who is liable to tax in that State in respect only of income from sources in that State.

(2) Where by reason of the provisions of paragraph (1) an individual is a resident of both Contracting States, then this case shall be determined in accordance with the following rules:

(a) He shall be deemed to be a resident of the Contracting State in which he has a permanent home available to him. If he has a permanent home available to him in both Contracting States, he shall be deemed to be a resident of the Contracting State with which his personal and economic relations are closest (centre of vital interests).

(b) If the Contracting State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either Contracting State, he shall be deemed to be a resident of the Contracting State in which he has an habitual abode.

(c) If he has an habitual abode in both Contracting States or in neither of them, he shall be deemed to be a resident of the Contracting State of which he is a national.

(d) If he is a national of both Contracting States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.

(3) Where by reason of the provisions of paragraph (1) a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident of the Contracting State in which its place of effective management is situated.

(4) The term "resident of a Contracting State" and "resident of the other Contracting State" means a person who is a resident of the United Kingdom, or a person who is a resident of France, as the context requires.

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article 4

(1) For the purposes of this Convention, the term "permanent establishment" means a fixed place of business in which the business of the enterprise is wholly or partly carried on.

(2) The term "permanent establishment" shall include especially:

(a) a place of management;

(b) a branch;

(d) a factory;

(e) a workshop;

(f) a mine, quarry or other place of extraction of natural resources;

(g) a building site or construction or assembly project which exists for more than twelve months.

(3) The term "permanent establishment" shall not be deemed to include:

(a) the use of facilities solely for the purpose of storage, display or delivery of

goods or merchandise belonging to the enterprise;

(b) the maintenance of a stock of goods or merchandise belonging to the enterprise

solely for the purpose of storage, display or delivery;

(c) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;

(d) the maintenance of a fixed place of business solely for the purpose of pur-
chasing goods or merchandise, or for collecting information, for the enterprise;

(e) the maintenance of a fixed place of business solely for the purpose of advertis-

ing, for the supply of information, for scientific research or for similar activities

which have a preparatory or auxiliary character, for the enterprise.

(4) A person acting in a Contracting State on behalf of an enterprise of the other Contracting State—other than an agent of an independent status to whom paragraph (5) applies—shall be deemed to be a permanent establishment in the first-mentioned State if he has, and habitually exercises in that State, an authority to conclude contracts in the name of the enterprise, unless his activities are limited to the purchase of goods or merchandise for the enterprise.

(5) An enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that other State through a broker, general commission agent or any other agent of an independent status, where such persons are acting in the ordinary course of their business.

(6) The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State, or which carries on business in that other State (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment of the other.

(7) An insurance enterprise of a Contracting State shall be deemed to have a permanent establishment in the other Contracting State if it collects premiums there or insures risks situated there through an agent established there but not including any such agent as is mentioned in paragraph (5).

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article 5

(1) Income derived by a resident of a Contracting State from immovable property (including income from agriculture and forestry) situated in the other Contracting State, including income derived from rights attached to such property, may be taxed in that other State.

(2)(a) The term "immovable property" shall, subject to the provisions of sub-paragraphs (b), (c) and (d) below, have the meaning which it has under the law of the Contracting State in which the property in question is situated.

(b) Shares or rights in a company or legal person, the assets of which consist mainly of immovable property situated in one of the Contracting States, shall be treated as immovable property situated in that State. For the purposes of this provision, immovable property pertaining to the industrial, commercial or agricultural operation of such a company or legal person or the performance of independent professional activities shall not be taken into account

(c) The term "immovable property" shall in any case include property accessory to immovable property, livestock and equipment used in agriculture and forestry, rights to which the provisions of general law respecting landed property apply, usufruct of immovable property and rights to variable or fixed payments as consideration for the working of, or the right to work, mineral deposits, sources and other natural resources.

(d) Ships and aircraft shall not be regarded as immovable property.

(3) The provisions of paragraph (1) shall apply to income derived from the direct use, letting, or use in any other form of immovable property.

(4) The provisions of the preceding paragraphs shall also apply to the income from immovable property of an enterprise and to income from immovable property used for the performance of independent professional activities.

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article 6

(1) The industrial or commercial profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the industrial or commercial profits of the enterprise may be taxed in the other State but only so much of them as is attributable to that permanent establishment.

(2) Where an enterprise of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment the industrial or commercial profits which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing at arm's length with the enterprise of which it is a permanent establishment.

(3) In the determination of the industrial or commercial profits of a permanent establishment, there shall be allowed as deductions expenses which are incurred for the purposes of the permanent establishment including executive and general administrative expenses so incurred, whether in the State in which the permanent establishment is situated or elsewhere, excluding expenses which would not be deductible if the permanent establishment were a separate enterprise.

(4) No profits shall be attributed to a permanent establishment by reason of the mere purchase by that permanent establishment of goods or merchandise for the enterprise.

(5) The term "industrial or commercial profits" means income derived by an enterprise from the conduct of a trade or business including income derived by an enterprise from the furnishing of services of employees or other personnel, but does not include income dealt with in Article 5, in Article 9 (dividends) excluding paragraph (8), in Article 11 (interest) excluding paragraph (4), and in Article 12 (royalties) excluding paragraph (3), nor does it include income received by an individual as compensation for personal (including professional) services.

(6) In so far as it has been customary in a Contracting State to determine according to its law the profits to be attributed to a permanent establishment on the basis of an apportionment of the total profits of the enterprise to its various parts, nothing in paragraph (2) shall preclude that Contracting State from determining the profits to be taxed by such an apportionment as may be customary; the method of apportionment adopted shall, however, be such that the result shall be in accordance with the principles contained in this Article.

(7) For the purposes of the preceding paragraphs, the profits to be attributed to the permanent establishment shall be determined by the same method year by year unless there is good and sufficient reason to the contrary.

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article 7

(1) Profits which a resident of one of the Contracting States derives from the operation of ships or aircraft in international traffic shall be taxable only in that State.

(2) Where profits within paragraph (1) of this Article are derived by a resident of a Contracting State from participation in a pool, a joint business or an international operating agency, the profits attributable to that resident shall be taxable only in the Contracting State of which he is a resident.

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article 7A

(1) In this Article:

(a) the term "Treaty" means the Treaty between the United Kingdom of Great Britain and Northern Ireland and the French Republic concerning the Construction and Operation by Private Concessionaires of a Channel Fixed Link signed at Canterbury on 12 February 1986;

(b) the term "Fixed Link" has the meaning given by paragraph (2) of Article

1 of the Treaty;

development, financing, construction and operation of a fixed link across the English Channel signed at Paris on 14 March 1986 between the Secretary of State for Transport in the Government of the United Kingdom of Great Britain and Northern Ireland and Le Ministre de l’Urbanisme, du Logement et des Transports representing the French State of the one part, and The Channel Tunnel Group Limited and France-Manche SA of the other part;

(d) the term "Concessionaire(s)" means The Channel Tunnel Group Limited

and France-Manche SA or any transferee or successor permitted in accordance with the Concession;

(e) the term "holding companies" means:

(i) the company which is a resident of the United Kingdom and beneficially

owns all the issued share capital of the Concessionaire which is an enterprise of the United Kingdom; and

(ii) the company which is a resident of France and holds all the issued share capital of the Concessionaire which is an enterprise of France, with the exception of shares held compulsorily by other shareholders in accordance with French commercial law; and

(f) the term "associated company" means:

(i) either of the holding companies; or

(ii) a company in which one of the Concessionaires owns directly or indirectly more than 50 per cent either of the voting power or of the ordinary share capital; or

(iii) a company in which one of the holding companies owns directly or indirectly more than 50 per cent either of the voting power or of the ordinary share capital; and for this purpose" ordinary share capital" means:

(iv) in the United Kingdom all the issued share capital in the company, other than share capital the holders of which have a right to a dividend at a fixed rate but have no other right to share in the profits of the company;

(v) in France all the issued share capital in the company the holders of which have no special right to a dividend nor a special voting right.

(2) The provisions of this Article shall apply for the purposes of the taxation by the Contracting States of profits derived from the construction and operation of the Fixed Link, notwithstanding anything to the contrary in Article 6, so long as:

(a) one of the Concessionaires is an enterprise of one Contracting State and the other Concessionaire is an enterprise of the other Contracting State; and

(b) the Concession provides for the application by the Concessionaires of the principle of equal sharing of costs and revenues between the two Concessionaires; and

(3) The Contracting States shall for the purposes of their taxation laws compute the profits of each of the Concessionaires separately (whether or not any partnership exists between them) on the basis that the costs and revenues which are shared between them in accordance with paragraph (2)(c) have been respectively incurred and received by each of them in equal shares.

(4) If and so long as the holders of shares in one of the Concessionaires, or in one of the holding companies, are required simultaneously to hold an equivalent number of shares of the same description in the other Concessionaire or, as the case may be, the other holding company, the profits of each of the Concessionaires computed in accordance with paragraph (3) shall be taxable only in the Contracting State of which it is an enterprise.

(5) If at any time the requirements of paragraph (4) are not satisfied, the profits of each of the Concessionaires computed in accordance with paragraph (3) shall be attributable as to one half thereof to a permanent establishment which the Concessionaire has in the Contracting State of which it is not an enterprise and shall be taxable in that Contracting State accordingly.

(6)(a) Notwithstanding the provisions of Article 15, salaries, wages and other

similar remuneration received by an employee of one of the Concessionaires or

an associated company in respect of an employment which is exercised within the

Fixed Link in both Contracting States may be taxed in the Contracting State in

which the place of effective management of that Concessionaire or associated

company is situated.

(b) For the purposes of paragraph (2) of Article 15, remuneration shall not be

regarded as borne by a permanent establishment which a Concessionaire has in the Contracting State of which it is not an enterprise by reason only that a partnership exists between the two Concessionaires.

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article 8

Where

(a) an enterprise of a Contracting State participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting State;

(b) the same persons participate directly or indirectly in the management, control or capital of an enterprise of a Contracting State and an enterprise of the other Contracting State;

and in either case conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly.

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article 9

A - DIVIDENDS PAID BY COMPANIES WHICH ARE RESIDENTS OF THE UNITED KINGDOM

(1)(a) Dividends paid by a company which is a resident of the United Kingdom to a resident of France may be taxed in France.

(b) Where a resident of France is entitled to a tax credit in respect of such a dividend under paragraph (2) of this Article tax may also be charged in the United Kingdom, and according to the law of the United Kingdom, on the aggregate of the amount or value of that dividend and the amount of that tax credit at a rate not exceeding 15 per cent.

(c) Except as provided in sub-paragraph (b) of this paragraph, dividends which are paid by a company which is a resident of the United Kingdom to a resident of France who is the beneficial owner of those dividends shall be exempt from any tax in the United Kingdom which is chargeable on dividends.

(2) A resident of France who receives dividends from a company which is a resident of the United Kingdom shall, subject to the provisions of paragraphs (3), (4) and (5) of this Article and provided that he is the beneficial owner of those dividends, and subject to tax in France in respect of those dividends, be entitled to the tax credit in respect thereof to which an individual resident in the United Kingdom would have been entitled had he received those dividends, and to the payment of any excess of that tax credit over his liability to United Kingdom tax.

(3) For the purposes of paragraph (2) of this Article, if the beneficial owner of the dividends is a pension fund (caisse de retraite) which is a resident of France and which has been approved for tax purposes by France, the pension fund (caisse de retraite) shall be deemed to be subject to tax in France in respect of those dividends.

(4) The provisions of paragraph (2) of this Article shall not apply where the recipient of the dividends is a company which controls the company paying those dividends.

(5) If the beneficial owner of the dividends is a company which owns 10 per cent or more of the class of shares in respect of which the dividends are paid then paragraph (2) of this Article shall not apply to the dividends to the extent that they can have been paid only out of income which accrued to the company paying the dividends in a period ending 12 months or more before the relevant date. For the purposes of this paragraph the term "relevant date" means the date on which the beneficial owner of the dividends became the owner of 10 per cent or more of the class of shares in question.

Provided that this paragraph shall not apply if the shares were acquired for bona fide commercial reasons and not primarily for the purposes of securing the benefit of this Article.

B - DIVIDENDS PAID BY COMPANIES WHICH ARE RESIDENTS OF FRANCE

(6) Dividends paid by a company which is a resident of France to a resident of the United Kingdom may be taxed in the United Kingdom. Such dividends may also be taxed in France but where such dividends are beneficially owned by a resident of the United Kingdom the tax so charged shall not exceed:

(a) 5 per cent of the gross amount of the dividends if the beneficial owner is a company which controls the company paying those dividends;

(b) in all other cases 15 per cent of the gross amount of the dividends.

(7) (a) A resident of the United Kingdom who receives from a company which is a resident of France dividends which, if received by a resident of France, would entitle such resident to a fiscal credit (avoir fiscal), shall be entitled to a payment from the French Treasury equal to such credit (avoir fiscal) subject to the deduction of the tax provided for in sub-paragraph (b) of paragraph (6) of this Article.

(b) The provision of sub-paragraph (a) of this paragraph shall apply only to a resident of the United Kingdom, being either:

(i) an individual; or

(ii) a company or a pension fund approved for tax purposes by the United Kingdom which:

(aa) does not control the company paying the dividends referred to in sub-paragraph (a) of this paragraph; and

(bb) is not entitled in computing the amount of credit to be allowed against United Kingdom tax in respect of tax payable in a territory outside the United Kingdom to take into account the French tax payable on the profits out of which the said dividends are paid.

(c) The provisions of sub-paragraph (a) of this paragraph shall not apply if the recipient of the dividends, being other than a pension fund referred to in sub-paragraph (b)(ii) of this paragraph, is not subject to United Kingdom tax in respect of those dividends.

(d) Payments from the French Treasury provided for under sub-paragraph (a) of this paragraph shall be deemed to be dividends for the purposes of this Convention.

(8)(a) Where the prepayment (précompte) is levied in respect of dividends paid by a company which is a resident of France to a resident of the United Kingdom who is not entitled to the payment from the French Treasury referred to in paragraph (7) of this Article with respect to such dividends, that resident of the United Kingdom shall be entitled to the refund of the prepayment, subject to the deduction of tax with respect to the refunded amount in accordance with paragraph (6) of this Article.

(b) Amounts refunded under the provisions of sub-paragraph (a) of this paragraph shall be deemed to be dividends for the purposes of this Convention

C- GENERAL

(9) The provisions of paragraphs (1), (2), (6) and (7) of this Article shall not apply if the beneficial owner of the dividends, being a resident of a Contracting State, has in the other Contracting State of which the company paying the dividends is a resident, a permanent establishment or performs in that other State independent professional activities from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment or fixed base. In such case, the provisions of Articles 6 or 14 of this Convention, as the case may be, shall apply.

(10) The term "dividends" as used in this Article means income from shares, jouissance shares or jouissance rights, mining shares, founders' shares or other rights, not being debt-claims, participating in profits, as well as income treated as a distribution by the taxation law of the State of which the company making the distribution is a resident.

(11) For the purposes of this Article, a company shall be deemed to control another company when either alone or together with one or more associated companies it controls directly or indirectly at least 10 per cent of the voting power in that other company, and two companies shall be deemed to be associated if one is controlled directly or indirectly by the other, or both are controlled directly or indirectly by a third company.''

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article 10

[Article 10 was deleted by SI87/2055 and ceased to have effect in France from 1 January 1988. The Article read as follows;

Where a company which is a resident of a Contracting State has a permanent establishment in the other Contracting State, it may be subjected therein to any withholding tax provided by the internal law of that other Contracting State but such tax shall not exceed 15 per cent of two-thirds of the profits of the permanent establishment after payment of the corporation tax on those profits.]

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SIGNED 22 MAY 1968

Entered into force 29 October 1969

Effective in United Kingdom from 1 April 1969 for corporation tax and from 6 April 1969 for income tax and capital gains tax

Effective in France from 1 January 1966

1ST PROTOCOL

SIGNED 10 FEBRUARY 1971

Entered into force 7 May 1971

Effective from same date

Entered into force 2 August 1973

Effective from 6 April 1973

Entered into force 7 April 1987

SIGNED 15 OCTOBER 1987

Entered into force 1 April 1988

Article 1

Article 23

Article 24

article 9

A - DIVIDENDS PAID BY COMPANIES WHICH ARE RESIDENTS OF THE UNITED KINGDOM

C- GENERAL

1^ST PROTOCOL