Income Tax (International Agreements) Amendment Act 1980 (Cth)

Income Tax (International Agreements) Amendment Act 1980 No. 23 of 1980 An Act to amend the Income Tax (International Agreements) Act 1953 [Assented to 1 May 1980] BE IT ENACTED by the Queen, and the Senate and the House of Representatives of the Commonwealth of Australia, as follows: Short title, &c. 1. (1) This Act may be cited as the Income Tax (International Agreements) Amendment Act 1980. (2) The Income Tax (International Agreements) Act 1953 is in this Act referred to as the Principal Act. Commencement 2. This Act shall come into operation on the day on which it receives the Royal Assent. Interpretation 3. Section 3 of the Principal Act is amended— (a) by inserting in sub-section (1), after the definition of "the New Zealand agreement", the following definition: "'the Philippine agreement' means the Agreement between the Government of Australia and the Government of the Republic of the Philippines for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, being the agreement a copy of which is set out in Schedule 14;"; (b) by inserting in sub-section (1), after the definition of "the Singapore agreement", the following definition: "'the Swiss agreement' means the Agreement between the Government of Australia and the Swiss Federal Council for the avoidance of double taxation with respect to taxes on income and the protocol to that agreement, being the agreement and protocol a copy of each of which in the English language is set out in Schedule 15;"; and (c) by omitting from sub-section (1) the definition of "the United Kingdom agreement" and substituting the following definitions: "'the United Kingdom agreement' means the Agreement between the Government of the Commonwealth of Australia and the Government of the United Kingdom for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains (being the agreement a copy of which is set out in Schedule 1), as amended by the United Kingdom protocol; "'the United Kingdom protocol' means the Protocol between the Government of the Commonwealth of Australia and the Government of the United Kingdom amending the agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains, being the protocol a copy of which is set out in Schedule 1a;". 4. After section 5 of the Principal Act the following section is inserted: Protocol with the Government of the United Kingdom "5a. (1) Subject to this Act, on and after the date of entry into force of the United Kingdom protocol, the provisions of the protocol, so far as those provisions affect Australian tax, have, and shall be deemed to have had, the force of law. "(2) As soon as practicable after the entry into force of the United Kingdom protocol in accordance with Article III of the protocol, the Treasurer shall cause to be published in the Gazette a notice specifying the date on which the protocol entered into force, and the date so notified shall, for the purposes, of this Act, be conclusively presumed to be the date of entry into force of the protocol. "(3) Where an amount of tax credit is to be treated as assessable income of a taxpayer in accordance with paragraph (2) of Article 8 of the United Kingdom agreement— (a) the amount of the tax credit shall be included in the assessable income of the taxpayer of the year of income in which the dividend to which the tax credit relates is paid; and (b) the amount of the tax credit shall be added to the amount of the dividend to which the tax credit relates and the sum of the two amounts shall be deemed to be one dividend for the purposes of this Act and the Assessment Act.". 5. (1) After section 11c of the Principal Act the following sections are inserted: Agreement with the Republic of the Philippines "11d. (1) Subject to this Act, on and after the date of entry into force of the Philippine agreement, the provisions of the agreement, so far as those provisions affect Australian tax, have, and shall be deemed to have had, the force of law— (a) in relation to withholding tax—in respect of dividends or interest derived on or after 1 January in the calendar year in which the agreement enters into force and in relation to which the agreement remains effective; and (b) in relation to tax other than withholding tax—in respect of income of any year of income commencing on or after 1 July in the calendar year in which the agreement enters into force and in relation to which the agreement remains effective. "(2) As soon as practicable after instruments of ratification have been exchanged in accordance with Article 29 of the Philippine agreement, the Treasurer shall cause to be published in the Gazette a notice specifying the date of the exchange of instruments of ratification and the date so notified shall, for the purposes of this Act, be conclusively presumed to be the date of entry into force of the agreement. Agreement with the Swiss Federal Council "11e. (1) Subject to this Act, on and after the date of entry into force of the Swiss agreement, the provisions of the agreement, so far as those provisions affect Australian tax, have, and shall be deemed to have had, the force of law— (a) in relation to withholding tax—in respect of dividends or interest derived on or after 1 January 1979 and in relation to which the agreement remains effective; and (b) in relation to tax other than withholding tax—in respect of income of the year of income that commenced on 1 July 1979 and of a subsequent year of income in relation to which the agreement remains effective. "(2) As soon as practicable after the date of entry into force of the Swiss agreement in accordance with Article 27 of the agreement, the Treasurer shall cause to be published in the Gazette a notice specifying the date on which the agreement entered into force, and the date so notified shall, for the purposes of this Act, be conclusively presumed to be the date of entry into force of the agreement.". (2) The Commissioner may amend an assessment made before the date of entry into force of the Philippine agreement for the purpose of giving effect to sub-section 11d(1) of the Principal Act, as amended by this Act. (3) The provisions of the Swiss agreement shall not have the effect of subjecting to Australian tax interest or royalties paid by a resident of Australia to a resident of Switzerland that, but for that agreement, would not be subject to Australian tax. (4) The Commissioner may amend an assessment made before the date of entry into force of the Swiss agreement for the purpose of giving effect to sub-section 11e(1) of the Principal Act, as amended by this Act (including that section as affected by sub-section (3) of this section). Provisions relating to certain income derived from sources in certain countries 6. (1) Section 12 of the Principal Act is amended— (a) by omitting from paragraph (ag) of sub-section (1) "or" (last occurring); and (b) by inserting after paragraph (ag) of sub-section (1) the following paragraphs: "(ah) income being interest or royalties to which paragraph (1) of Article 11 or paragraph (1) of Article 12 of the Philippine agreement applies, where the income is derived, in the year of income beginning on 1 July in the calendar year in which the agreement enters into force, or a subsequent year of income, from sources in the Philippines; "(ai) income being interest or royalties to which paragraph (1) of Article 11 or paragraph (1) of Article 12 of the Swiss agreement applies, where the income was derived in the year of income that commenced on 1 July 1979, or a subsequent year of income, from sources in Switzerland; or". (2) If a taxpayer derived, on or before 28 February 1980, income to which paragraph 12(1)(ai) of the Principal Act, as amended by this Act, applies, that paragraph in its application in relation to that income shall not operate to increase the Australian tax payable by the taxpayer in respect of the year of income unless there is a decrease, by virtue of the Swiss agreement, in the tax payable under the law of Switzerland in respect of that income and, where there is such a decrease, the amount of the increase shall not exceed the amount of the decrease expressed in Australian currency. (3) The Commissioner may amend an assessment made before the date of entry into force of the Swiss agreement for the purpose of giving effect to paragraph 12(1)(ai) of the Principal Act, as amended by this Act (including that paragraph as affected by sub-section (2) of this section). Deductions for United Kingdom tax not to be taken into account in calculating amount of dividend, interest or royalty 7. Section 13 of the Principal Act is amended— (a) by inserting after sub-section (1) the following sub-section: "(1a) Sub-section (1) does not apply in relation to dividends to which Article 8 of the United Kingdom agreement applies, being dividends derived on or after 6 April 1977 and in relation to which that agreement remains effective."; and (b) by omitting from sub-section (2) "the last preceding sub-section" and substituting "sub-section (1)". Schedules 1a, 14 and 15 8. The Principal Act is amended— (a) by inserting after Schedule 1 the Schedule set out in Schedule 1 to this Act; and (b) by adding at the end thereof the Schedules set out in Schedule 2 to this Act. Transitional provisions with respect to the protocol with the Government of the United Kingdom 9. (1) In this section, "amendments to which this section applies" means the amendments made by paragraph 3(c) and section 4. (2) The amendments to which this section applies do not affect the operation of the Income Tax (International Agreements) Act 1953 with respect to any Australian tax, other than tax in respect of— (a) remuneration to which paragraph (3)(a) of Article 2 of the United Kingdom agreement applies, being income of the year of income that commences on 1 July 1980 and of a subsequent year of income in relation to which the United Kingdom agreement remains effective; or (b) dividends to which Article 8 of the United Kingdom agreement applies, being dividends derived on or after 6 April 1977 and in relation to which the United Kingdom agreement remains effective. (3) Where a taxpayer derived, on or after 6 April 1977 but before 30 January 1980, a dividend in respect of which he is entitled to a tax credit under paragraph (2) of Article 8 of the United Kingdom agreement, the amendments to which this section applies shall not operate to increase the Australian tax payable by the taxpayer in respect of the year of income in which the dividend is derived. (4) The Commissioner may amend an assessment made before the date of entry into force of the United Kingdom protocol for the purpose of giving effect to the amendments to which this section applies (including those amendments as affected by sub-section (3) of this section). —————— SCHEDULE 1 Section 8 SCHEDULE TO BE INSERTED AFTER SCHEDULE 1 TO THE PRINCIPAL ACT —————— SCHEDULE 1a Section 3 PROTOCOL BETWEEN THE GOVERNMENT OF THE COMMONWEALTH OF AUSTRALIA AND THE GOVERNMENT OF THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND AMENDING THE AGREEMENT FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND CAPITAL GAINS, SIGNED AT CANBERRA ON 7 DECEMBER 1967 The Government of the Commonwealth of Australia and the Government of the United Kingdom of Great Britain and Northern Ireland; Desiring to conclude a Protocol to amend the Agreement between the Contracting Governments for the Avoidance of Double Taxation and the prevention of Fiscal Evasion with respect to Taxes on Income and Capital Gains signed at Canberra on 7 December 1967 (hereinafter referred to as "the Agreement"); Have agreed as follows: ARTICLE I The following paragraph shall be added after paragraph (3) of Article 2 of the Agreement. "(3) (a) Where under the law in force in one of the territories an individual's remuneration from an employment is reduced in charging it to tax in consequence of a period or periods of absence by the individual from that territory, or of the place where the employment is exercised, or of the domicile of the individual, by deducting either the whole or a fixed proportion of the amount arising, then (a) where under this Agreement that remuneration would otherwise be relieved from tax in the other territory, the relief shall not extend to the amount so deducted; and (b) the amount so deducted shall be regarded as income in respect of which the individual is exempt from and not subject to tax in the first-mentioned territory." ARTICLE II Article 8 of the Agreement shall be deleted and replaced by the following: "ARTICLE 8 (1) (a) Dividends derived from a company which is resident in the United Kingdom by an Australian resident may be taxed in Australia. (b) Where an Australian resident 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 laws 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 aforesaid dividends derived from a company which is resident in the United Kingdom and which are beneficially owned by an Australian resident shall be exempt from any tax in the United Kingdom which is chargeable on dividends. (2) An Australian resident individual who receives dividends from a company which is resident in the United Kingdom shall, provided he is the beneficial owner of the 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 such credit over his liability to United Kingdom tax. Any such credit shall be treated for the purposes of Australian tax as assessable income from sources in the United Kingdom. (3) Dividends derived from a company which is a resident of Australia and which are beneficially owned by a United Kingdom resident may be taxed in the United Kingdom. Such dividends may also SCHEDULE 1a—continued be taxed in Australia but the tax so charged shall not exceed 15 per cent of the gross amount of the dividends. (4) The term "dividends" as used in this Article includes any item (other than interest or royalties relieved from tax under Article 9 or Article 10 of this Agreement) which— (a) in the case of the United Kingdom is, under the law of the United Kingdom, a distribution of a company; (b) in the case of Australia is, or is deemed to be, under the laws in force in Australia relating to Australian tax, a dividend. (5) If the beneficial owner of dividends being an Australian resident owns 10 per cent or more of the class of shares in respect of which the dividends are paid then paragraphs (1) and (2) of this Article shall not apply to the dividends to the extent that they can have been paid only out of profits which the company paying the dividends earned or other income which it received in a period ending 12 months or more before the relevant date. For the purpose 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 apply only if the shares were acquired primarily for the purpose of securing the benefit of this Article and not for bona fide commercial reasons. (6) The provisions of paragraphs (1) and (2) or, as the case may be, paragraph (3) of this Article shall not apply where a resident of one of the territories has in the other territory a permanent establishment and the holding by virtue of which the dividends are paid is effectively connected with the trade or business carried on through such permanent establishment. (7) Dividends paid by a company which is a resident of one of the territories and which are beneficially owned by a person who is not a resident of the other territory shall be exempt from tax in that other territory except insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment situated in that other territory. Provided that this paragraph shall not apply in relation to any United Kingdom company which is also a resident of Australia or any Australian company which is also resident in the United Kingdom. (8) The Government of one of the territories shall not impose on a company which is a resident of the other territory any tax in the nature of an undistributed profits tax on undistributed profits of the company on a basis that is less favourable than that applicable in the case of a company which is a resident of the first-mentioned territory." ARTICLE III This Protocol, which shall form an integral part of the Agreement, shall enter into force on the date when the last of all such things shall have been done in the United Kingdom and Australia as are necessary to give the Protocol the force of law in the United Kingdom and Australia respectively, and shall thereupon have effect: (a) in the United Kingdom: (i) as regards Article I, for any year of assessment beginning on or after 6 April 1980; (ii) in relation to any dividend paid on or after 6 April 1977; (b) in Australia: (i) as regards Article I, for any year of income beginning on or after 1 July 1980; (ii) in relation to any dividend paid on or after 6 April 1977. In witness whereof the undersigned, duly authorized thereto by their respective Governments, have signed this Protocol. Done in duplicate at Canberra this twenty-ninth day of January, One thousand nine hundred and eighty. JOHN HOWARD DONALD TEBBIT For the Government of the Commonwealth of Australia: For the Government of the United Kingdom of Great Britain and Northern Ireland: SCHEDULE 2 Sections 8 SCHEDULES TO BE ADDED AT THE END OF THE PRINCIPAL ACT ————— SCHEDULE 14 Sections 3 AGREEMENT BETWEEN THE GOVERNMENT OF AUSTRALIA AND THE GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME The Government of Australia and the Government of the Republic of the Philippines, Desiring to conclude an Agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, Have agreed as follows: Chapter 1 SCOPE OF THE AGREEMENT ARTICLE 1 Personal Scope (1) This Agreement shall apply to persons who are residents of one or both of the Contracting States. (2) However, nothing in this Agreement shall prevent the Philippines from taxing its own citizens, who are not residents of the Philippines, in accordance with Philippine law. ARTICLE 2 Taxes Covered (1) The existing taxes to which this Agreement shall apply are— (a) in Australia: the Australian income tax, including the additional tax upon the undistributed amount of the distributable income of a private company; (b) in the Philippines: the income taxes imposed by the Government of the Republic of the Philippines. (2) This Agreement shall also apply to any identical or substantially similar taxes which are imposed by either Contracting State after the date of signature of this Agreement in addition to, or in place of, the existing taxes. At the end of each calendar year, the competent authority of each Contracting State shall notify the competent authority of the other Contracting State of any substantial changes which have been made in the laws of his State relating to the taxes to which this Agreement applies. Chapter II DEFINITIONS ARTICLE 3 General Definitions (1) In this Agreement, unless the context otherwise requires— (a) the term "Australia" means the Commonwealth of Australia and, when used in a geographical sense, includes— (i) the Territory of Norfolk Island; (ii) the Territory of Christmas Island; SCHEDULE 14—continued (iii) the Territory of Cocos (Keeling) Islands; (iv) the Territory of Ashmore and Cartier Islands; (v) the Coral Sea Islands Territory; and (vi) any area adjacent to the territorial limits of Australia or of the said Territories in respect of which there is for the time being in force a law of Australia or of a State or part of Australia or of a Territory aforesaid dealing with the exploitation of any of the natural resources of the sea-bed and subsoil of the continental shelf; (b) the term "Philippines" means the Republic of the Philippines and when used in a geographical sense means the national territory comprising the Republic of the Philippines; (c) the terms "Contracting State", "one of the Contracting States" and "other Contracting State" mean Australia or the Philippines, as the context requires; (d) the term "person" means an individual, an estate, a trust, a company and any other body of persons; (e) the term "company" means any body corporate or any entity which is treated as a company or a body corporate for tax purposes; (f) the terms "enterprise of one of the Contracting States" and "enterprise of the other Contracting State" mean an enterprise carried on by a resident of Australia or an enterprise carried on by a resident of the Philippines, as the context requires; (g) the term "tax" means Australian tax or Philippine tax, as the context requires; (h) the term "Australian tax" means tax imposed by Australia, being tax to which this Agreement applies by virtue of Article 2; (i) the term "Philippine tax" means tax imposed by the Philippines, being tax to which this Agreement applies by virtue of Article 2; (j) the term "competent authority" means, in the case of Australia, the Commissioner of Taxation or his authorized representative, and, in the case of the Philippines, the Minister of Finance or his authorized representative; (k) the term "international traffic", in relation to the operation of ships or aircraft by a resident of one of the Contracting States, means operations of ships or aircraft other than operations of ships or aircraft confined solely to places in the other Contracting State. (2) In this Agreement, the terms "Australian tax" and "Philippine tax" do not include any penalty or interest imposed under the law of either Contracting State relating to the taxes to which this Agreement applies by virtue of Article 2. (3) For the purposes of this Agreement, the carriage of passengers, livestock, mail, goods or merchandise shipped in one of the Contracting States for discharge at another place in that State shall be treated as operations of ships or aircraft confined solely to places in that State. (4) In the application of this Agreement by a Contracting State, any term not defined in this Agreement shall, unless the context otherwise requires, have the meaning which it has under the laws of that Contracting State relating to the taxes to which this Agreement applies. ARTICLE 4 Residence (1) For the purposes of this Agreement, a person is a resident of one of the Contracting States— (a) in the case of Australia, subject to paragraph (2), if the person is a resident of Australia for the purposes of Australian tax; (b) in the case of the Philippines— (i) if the person is a company or an entity which is incorporated, created or organized in the Philippines or under its laws and is treated as a body corporate for purposes of Philippine tax; (ii) if the person, not being a company or an entity treated as a company or body corporate for the purposes of Philippine tax, is a resident of the Philippines for the purposes of Philippine tax. (2) In relation to income from sources in the Philippines, a person who is subject to Australian tax on income which is from sources in Australia shall not be treated as a resident of Australia unless the SCHEDULE 14—continued income from sources in the Philippines is subject to Australian tax or, if that income is exempt from Australian tax, it is so exempt solely because it is subject to Philippine tax. (3) Where by reason of the preceding provisions of this Article an individual is a resident of both Contracting States, then his status shall be determined in accordance with the following rules— (a) he shall be deemed to be a resident solely of the Contracting State in which he has a permanent home available to him; (b) if he has a permanent home available to him in both Contracting States, or if he does not have a permanent home available to him in either of them, he shall be deemed to be a resident solely of the Contracting State with which his personal and economic relations are the closer. (4) For the purposes of the last preceding paragraph, an individual's citizenship of a Contracting State shall be a factor in determining the degree of his personal and economic relations with that Contracting State. (5) 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 solely of the Contracting State in which it is incorporated, created or organized. ARTICLE 5 Permanent Establishment (1) For the purposes of this Agreement, the term "permanent establishment" means a fixed place of business through which the business of an enterprise is wholly or partly carried on. (2) The term "permanent establishment" shall include especially— (a) a place of management; (b) a branch; (c) an office; (d) a factory; (e) a workshop; (f) a mine, oil or gas well, quarry or other place of extraction of natural resources; (g) an agricultural, pastoral or forestry property; (h) a building site or construction, installation or assembly project, or supervisory activities in connection therewith where such site, project or activity continues for more than six months; (i) premises used as a sales outlet; (j) a warehouse, in relation to a person providing storage facilities for others; (k) a place in one of the Contracting States through which an enterprise of the other Contracting State furnishes services, including consultancy services, for a period or periods aggregating more than six months in any taxable year or year of income, as the case may be, in relation to a particular project, or to any project connected therewith. (3) Notwithstanding the preceding provisions of this Article, an enterprise shall not be deemed to have a permanent establishment merely by reason of— (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 purchasing goods or merchandise, or for collecting information, for the enterprise; (e) the maintenance of a fixed place of business solely for the purpose of activities which have a preparatory or auxiliary character for the enterprise, such as advertising or scientific research. (4) An enterprise shall be deemed to have a permanent establishment in one of the Contracting States and to carry on business through that permanent establishment if substantial equipment is being used in that State for more than six months by, for or under contract with the enterprise. SCHEDULE 14—continued (5) A person acting in one of the Contracting States on behalf of an enterprise of the other Contracting State—other than an agent of an independent status to whom paragraph (6) applies—shall be deemed to be a permanent establishment of that enterprise in the first-mentioned State if— (a) he has, and habitually exercises in that State, an authority to conclude contracts on behalf of the enterprise, unless his activities are limited to the purchase of goods or merchandise for the enterprise; or (b) he has no such authority, but habitually maintains on behalf of the enterprise in the first-mentioned State a stock of goods or merchandise from which on behalf of the enterprise he regularly delivers goods or merchandise for use or consumption in that State; or (c) in so acting, he manufactures or processes in that State for the enterprise goods or merchandise belonging to the enterprise. (6) An enterprise of one of the Contracting States 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 that person is acting in the ordinary course of his business as such as a broker or agent. However, when the activities of such an agent are devoted wholly or almost wholly on behalf of the enterprise, he shall not be considered to be an agent of independent status within the meaning of this paragraph if it is shown that the transactions between the agent and the enterprise were not made under arms-length conditions. In such a case, the provisions of paragraph (5) shall apply. (7) The fact that a company which is a resident of one of the Contracting States 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 make either company a permanent establishment of the other. Chapter III TAXATION OF INCOME ARTICLE 6 Income from Real Property (1) Income from real property may be taxed in the Contracting State in which the real property is situated. (2) The term "real property" shall have the meaning which it has under the laws in force in the Contracting State in which the property in question is situated. The term shall in any case include rights to royalties and other payments in respect of the operation of mines, oil or gas wells, or quarries or in respect of the exploitation of any natural resource and those rights shall be regarded as situated where the mines, oil or gas wells, quarries or natural resources are situated. Ships or aircraft shall not be regarded as real property. (3) Income from a lease of land and income from any other direct interest in or over land, whether or not improved, shall be regarded as income from real property situated where the land to which the lease or other direct interest relates is situated. (4) The provisions of paragraphs (1) and (3) shall also apply to income from real property of an enterprise and to income from real property used for the performance of professional services. ARTICLE 7 Business Profits (1) The profits of an enterprise of one of the Contracting States 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 profits of the enterprise may be taxed in the other State, but only so much of them as is attributable to— (a) that permanent establishment; or (b) sales within that other Contracting State of goods or merchandise of the same or a similar kind as those sold, or other business activities of the same or a similar kind as those carried on through that permanent establishment if the sale or the business activities had been made or carried on in that way with a view to avoiding taxation in that other State. (2) Subject to the provisions of paragraph (3), where an enterprise of one of the Contracting States carries on business in the other Contracting State through a permanent establishment situated SCHEDULE 14—continued therein, there shall in each Contracting State be attributed to that permanent establishment the 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