CONVENTION BETWEEN THE KINGDOM OF THE NETHERLANDS AND THE HASHEMITE KINGDOM OF JORDAN FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME

 The Government of the Kingdom of the Netherlands

and

The Government of the Hashemite Kingdom of Jordan,

Desiring that a convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income be concluded by both States

 Have agreed as follows:

 CHAPTER I

SCOPE OF THE CONVENTION

Article 1

PERSONAL SCOPE

This Convention shall apply to persons who are residents of one or both of the Contracting States.

  Article 2

TAXES COVERED

1.         This Convention shall apply to taxes on income imposed on behalf of a Contracting State or of its political subdivisions or local authorities, irrespective of the manner in which they are levied.

 2.         There shall be regarded as taxes on income all taxes imposed on total income, or on elements of income, including taxes on gains from the alienation of movable or immovable property, as well as taxes on the total amounts of wages or salaries.

 3.         The existing taxes to which the Convention shall apply are in particular:

             a)         in the Netherlands:

                        ‑           de inkomstenbelasting (income tax),

                        ‑           de loonbelasting (wages tax),

                        ‑           de vennootschapsbelasting (company tax) including the Government share in the net profits of the exploitation of natural resources levied pursuant to the Mijnwet 1810 (the Mining Act of 1810) with respect to concessions issued from 1967, or pursuant to the Mijnwet Continentaal Plat 1965 (the Netherlands Continental Shelf Mining Act of 1965),

                        ‑           de dividendbelasting (dividend tax),

 

            (hereinafter referred to as “Netherlands tax”);

 

            b)         in Jordan:

                        ‑           the income tax,

                        ‑           the distribution tax,

                        ‑           the social service tax,

 

            (hereinafter referred to as “Jordanian tax”).

 

4.         The Convention shall apply also to any identical or substantially similar taxes which are imposed after the date of signature of the Convention in addition to, or in place of, the existing taxes. The competent authorities of the Contracting States shall notify each other of any substantial changes which have been made in their respective taxation laws.

 

CHAPTER II

DEFINITIONS

Article 3

GENERAL DEFINITIONS

1.         For the purposes of this Convention, unless the context otherwise requires:

 

            a)         the term “a Contracting State” means the Kingdom of the Netherlands (the Netherlands) or the Hashemite Kingdom of Jordan (Jordan), as the context requires; the term “Contracting States” means the Kingdom of the Netherlands (Netherlands) and the Hashemite Kingdom of Jordan (Jordan);

 

            b)         the term “the Netherlands” means the part of the Kingdom of the Netherlands that is situated in Europe, including its territorial sea, and any area beyond the territorial sea within which the Netherlands, in accordance with international law, exercises jurisdiction or sovereign rights with respect to the seabed, its sub‑soil and its superjacent waters, and their natural resources;

 

            c)         the term “Jordan” means the territories of the Hashemite Kingdom of Jordan, the territorial waters of Jordan, and the seabed and sub­soil of the territorial waters, and includes any area extending beyond the limits of the territorial waters of Jordan, and the seabed and sub‑soil of any such area, which has been or may hereafter be designated, under the laws of Jordan, and in accordance with international law as an area over which Jordan has sovereign rights for the purposes of exploring and exploiting the natural resources, whether living or non‑living;

            d)         the term “person” includes an individual, a company and any other body of persons;

 

            e)         the term “company” means any body corporate or any entity which is treated as a body corporate for tax purposes;

 

            f)          the terms “enterprise of a Contracting State” and “enterprise of the other Contracting State” mean respectively an enterprise carried on by a resident of a Contracting State and an enterprise carried on by a resident of the other Contracting State;

 

            g)         the term “international traffic” means any transport by a ship or aircraft operated by an enterprise of a Contracting State, except when the ship or aircraft is operated solely between places in the other Contracting State;

 

            h)         the term “national” means:

                        1.         any individual possessing the nationality of a Contracting State;

                        2.         any legal person, partnership and association deriving its status as such from the laws in force in a Contracting State;

 

            i)          the term “competent authority” means:

                        1.         in the Netherlands the Minister of Finance or his duly authorised representative;

in Jordan the Minister of Finance or his authorised representative.

 

2.         As regards the application of the Convention at any time by a Contracting State any term not defined therein shall, unless the context otherwise requires, have the meaning which it has at that time under the law of that State for the purpose of the taxes to which the Convention applies, any meaning under the applicable tax laws of that State prevailing over a meaning given to the term under other laws of that State.

 

Article 4

RESIDENT

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 his status shall be determined as follows:

 

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

 

            b)         if the 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 State, he shall be deemed to be a resident of the State in which he has an habitual abode;

 

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

 

d)         if he is a national of both 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 State in which its place of effective management is situated.

 

4.         A pension fund recognized as such in a Contracting State and of which the income is exempt from tax in that State, shall be regarded as a resident of that State. As a recognized pension fund of a Contracting State shall be regar­ded any pension fund recognized and controlled according to statutory provisions of that State.

Article 5

PERMANENT ESTABLISHMENT

1.         For the purposes of this Convention, 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” includes especially:

            a)         a place of management;

            b)         a branch;

            c)         an office;

            d)         a factory;

a workshop;

f)          a warehouse or premises used as a sales outlet;

            g)         a mine, an oil or gas well, a quarry or any other place of extraction of natural resources.

 

a)         A building site or a construction, assembly or installation project or supervisory activities in connection therewith constitute a permanent establishment only if such site, project or activities continue for a period of more than six months;

 

b)         The furnishing of services, including consultancy services, by an enterprise through employees or other personnel engaged by the enterprise for such purpose, but only if the activities of that nature continue (for the same or a connected project) within a Contracting State for a period or periods aggregating more than 9 months within any twelve-month period.

 

 

4.         Notwithstanding the preceding provisions of this Article, the term “permanent establishment” shall be deemed not to include:

 

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

 

            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 of collecting information, for the enterprise;

            e)         the maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, any other activity of a preparatory or auxiliary character;

 

            f)          the maintenance of a fixed place of business solely for any combination of activities mentioned in sub‑paragraphs a) to e), provided that the overall activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary character.

 

5.         Notwithstanding the provisions of paragraphs 1 and 2, where a person - other than an agent of an independent status to whom paragraph 6 applies - is acting in a Contracting State on behalf of an enterprise of the other Contracting State, that enterprise shall be deemed to have a permanent establishment in the first-mentioned State in respect of any activities which that person undertakes for the enterprise if such a person:

 

(a)  has and habitually exercises in that State an authority to conclude contracts on behalf of the enterprise, unless the activities of such a person are limited to those mentioned in paragraph 4 which, if exercised through a fixed place of business, would not make this fixed place of business a permanent establishment under the provisions of that paragraph; or

 

(b)  manufactures or processes in that State for the enterprise goods or merchandise belonging to the enterprise.

6.         An enterprise shall not be deemed to have a permanent establishment in a Contracting State merely because it carries on business in that State through a broker, general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business. However, when the activities of such an agent are devoted wholly or almost wholly on behalf of that enterprise, he will not be considered to be an agent of an independent status within the meaning of this paragraph.

 

7.         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.

 

CHAPTER III

TAXATION OF INCOME

Article 6

INCOME FROM IMMOVABLE PROPERTY

 

1.         Income derived by a resident of a Contracting State from immovable property (including income from agriculture or forestry) situated in the other Contracting State may be taxed in that other State.

 

2.         The term “immovable property” shall have the meaning which it has under the law of the Contracting State in which the property in question is situated. The term 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; ships, boats 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 paragraphs 1 and 3 shall also apply to the income from immovable property of an enterprise and to income from immovable property used for the performance of independent personal services.

 

 

Article 7

BUSINESS PROFITS

1.         The 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 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.         Subject to the provisions of paragraph 3, 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 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 wholly independently with the enterprise of which it is a permanent establishment.

 

3.         In determining the 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. However, no such deduction shall be allowed in respect of amounts, if any, paid (otherwise than towards reimbursement of actual expenses) by the permanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of patents or other rights, or by way of commission, for specific services performed or for management, or, except in the case of a banking enterprise, by way of interest on moneys lent to the permanent establishment. Likewise no account shall be taken in the determination of the profits of a permanent establishment for amounts charged (otherwise than towards reimbursement of actual expenses), by the permanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of patents or other rights, or by way of commission for specific services performed or for management or, except in the case of a banking enterprise, by way of interest on moneys lent to the head office of the enterprise or any of its other offices.

 

4.         Insofar as it has been customary in a Contracting State to determine 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.

5.         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.

 

6.         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.

 

7.         Where profits include items of income which are dealt with separately in other Articles of this Convention, then the provisions of those Articles shall not be affected by the provisions of this Article.

 

Article 8

SHIPPING AND AIR TRANSPORT

1.         Profits of an enterprise of a Contracting State from the operation of ships or aircraft in international traffic shall be taxable only in that State.

 

2.         For the purposes of this Article, profits derived from the operation in international traffic of ships and aircraft include profits derived from the rental on a bare boat basis of ships and aircraft if operated in international traffic if such rental profits are incidental to the profits described in paragraph 1.

 

3.         The provisions of paragraph 1 shall also apply to profits from the participation in a pool, a joint business or an international operating agency.

 

 

Article 9

ASSOCIATED ENTERPRISES

1. 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,

 

                        or

 

            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. It is understood, however, that the fact that associated enterprises have concluded arrangements, such as costsharing arrangements or general services agreements, for or based on the allocation of executive, general administrative, technical and commercial expenses, research and development expenses and other similar expenses, is not in itself a condition as meant in the preceding sentence.

 

2.         Where a Contracting State includes in the profits of an enterprise of that State ‑ and taxes accordingly ‑ profits on which an enterprise of the other Contracting State has been charged to tax in that other State and the profits so included are profits which would have accrued to the enterprise of the first‑mentioned State if the conditions made between the two enterprises had been those which would have been made between independent enterprises, then that other State shall make an appropriate adjustment to the amount of the tax charged therein on those profits. In determining such adjustment, due regard shall be had to the other provisions of this Convention and the competent authorities of the Contracting States shall if necessary consult each other.

 

3.         The provisions of paragraph 2 shall not apply in the case of fraud or wilful default.

 

Article 10

DIVIDENDS

1.         Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State.

 

2.         However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but if the beneficial owner of the dividends is a resident of the other Contracting State, 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 holds directly at least 10 per cent of the capital of the company paying the dividends;

 

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

 

3.         However, the provisions of paragraph 2 will not be applicable if the relationship between the company paying the dividends and the person receiving the dividends is established or maintained virtually only for the purpose of taking advantage of this Article and not for bona fide commercial reasons. In case a State intends to apply this paragraph, its competent authority shall in advance consult with the competent authority of the other State.

 

4.         The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of paragraph 2.

 

5.         The provisions of paragraph 2 shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.

6.         The term “dividends” as used in this Article means income from shares, “jouissance” shares or “jouissance” rights, mining shares, founders' shares or other rights participating in profits, as well as income from debt‑claims participating in profits and income from other corporate rights which is subjected to the same taxation treatment as income from shares by the laws of the State of which the company making the distribution is a resident.

 

7.         The provisions of paragraphs 1, 2 and 9 shall not apply if the beneficial owner of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated therein, or performs in that other State‑independent personal services 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 Article 7 or Article 14, as the case may be, shall apply.

 

8.         Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a resident of that other State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other State, nor subject the company's undistributed profits to a tax on the company's undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State.

 

9.         Notwithstanding the provisions of paragraphs (1), (2) and (8), dividends paid by a company whose capital is divided into shares and which under the laws of a State is a resident of that State, to an individual who is a resident of the other State may be taxed in the first-mentioned State in accordance with the laws of that State if that individual — either alone or with his or her spouse — or one of their relations by blood or marriage in the direct line directly or indirectly holds at least 5 per cent of the issued capital of a class of shares in that company. This provision shall apply only if the individual to whom the dividend is paid has been a resident of the first-mentioned State in the course of the last ten years preceding the year in which the dividend is paid and provided that, at the time he became a resident of the other State, the above-mentioned conditions regarding share ownership in the said company were satisfied.

 

            In cases where, under the domestic laws of the first-mentioned State, an assessment has been issued to the individual to whom the dividend is paid in respect of the alienation of the aforesaid shares deemed to have taken place at the time of his emigration from the first-mentioned State, the above shall apply only as long as part of the assessment is still outstanding.

 

Article 11

INTEREST

1.         Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

 

2.         However, such interest may also be taxed in the Contracting State in which it arises and according to the laws of that State, but if the beneficial owner of the interest is a resident of the other Contracting State, the tax so charged shall not exceed 5 per cent of the gross amount of the interest.

 

3.         Notwithstanding the provisions of paragraph 2, interest arising in one of the Contracting States and paid to a resident of the other Contracting State who is the beneficial owner thereof shall be taxable only in that other Contracting State if the payer or the recipient of the interest is the Contracting State itself, a statutory body, a political subdivision, or a local authority thereof, or the Central Bank of a Contracting State.

 

4.         The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of paragraphs 2 and 3.

 

5.         The term “interest” as used in this Article means income from debt‑claims of every kind, whether or not secured by mortgage, but not carrying a right to participate in the debtor's profits, and in particular income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures. Penalty charges for late payment shall not be regarded as interest for the purpose of this Article.

6.         The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein and the debt‑claim in respect of which the interest is paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

 

7.         Interest shall be deemed to arise in a Contracting State when the payer is that State itself, a political subdivision, a local authority or a resident of that State. Where, however, the person paying the interest, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment or fixed base, then such interest shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.

 

 

 

8.         Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the interest, having regard to the debt‑claim for which it is paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last‑mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Convention. ­

 

 

Article 12

ROYALTIES

1.         Royalties arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

 

2.         However such royalties may also be taxed in the Contracting State in which they arise and according to the laws of that State, but if the beneficial owner of the royalties is a resident of the other Contracting State, the tax so charged shall not exceed 10 per cent of the gross amount of the royalties.

 

3.         The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of paragraph 2.

 

4.         The term “royalties” as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience.

 

5.         The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties arise, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the royalties are paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

 

6.         Royalties shall be deemed to arise in a Contracting State when the payer is that State itself, a political subdivision, a local authority or a resident of that State. Where, however, the person paying the royalties, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the liability to pay the royalties was incurred, and such royalties are borne by such permanent establishment or fixed base, then such royalties shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.

 

7.         Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the royalties, having regard to the use, right or information for which they are paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last‑mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Convention.