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Convention Between the Government of Canada and the Government of the Kingdom of Denmark for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and on Capital

E102422 - CTS 1998 No. 16

THE GOVERNMENT OF CANADA AND THE GOVERNMENT OF THE KINGDOM OF DENMARK,

DESIRING to conclude a Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital,

HAVE AGREED as follows:

I. Scope of the Convention

Article 1

Persons Covered

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

Article 2

Taxes Covered

This Convention shall apply to taxes on income and on capital imposed on behalf of each Contracting State and in the case of Denmark its political subdivisions and local authorities, irrespective of the manner in which they are levied.
There shall be regarded as taxes on income and on capital all taxes imposed on total income, on total capital, or on elements of income or of capital, including taxes on gains from the alienation of movable or immovable property, as well as taxes on capital appreciation.
The existing taxes to which the Convention shall apply are in particular:
1. in the case of Canada:
  the taxes imposed by the Government of Canada under the Income Tax Act, (hereinafter referred to as “Canadian tax”);
2. in the case of Denmark:
  1. the income tax to the State (indkomstskatten til staten);
  2. the municipal income tax (den kommunale indkomstskat);
  3. the income tax to the county municipalities (den amtskommunale indkomstskat);
  4. the church tax (Kirkeskatten);
  5. the tax on dividends (udbytteskatten);
  6. the tax on interest (renteskatten);
  7. the tax on royalties (royaltyskatten);
  8. taxes imposed under the Hydrocarbon Tax Act (skatter i henhold til kulbrinteskatteloven); and
  9. the capital tax to the State (formueskatten til staten),
(hereinafter referred to as “Danish tax”).
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 substantial changes which have been made in their respective taxation laws.

II. Definitions

Article 3

General Definitions

For the purposes of this Convention, unless the context otherwise requires:
1. 1. the term “Canada” used in a geographical sense, means the territory of Canada, including,
    1. any area beyond the territorial sea of Canada which, in accordance with international law and the laws of Canada, is an area in respect of which Canada may exercise rights with respect to the seabed and subsoil and their natural resources; and
  2. the term “Denmark” means the Kingdom of Denmark including any area outside the territorial sea of Denmark which in accordance with international law has been or may hereafter be designated under Danish laws as an area within which Denmark may exercise sovereign rights for the purpose of exploring and exploiting the natural resources of the seabed, its subsoil and the superjacent waters and the airspace above those waters and with regard to other activities for the economic exploitation and exploration of the area; the term does not comprise the Faroe Islands and Greenland;
2. the terms “a Contracting State” and “the other Contracting State” mean, as the context requires, Canada or Denmark;
3. the term “person” includes an individual, a company, an estate and any other body of persons, and in the case of Canada the term also includes a trust;
4. the term “company” means any body corporate or any entity which is treated as a body corporate for tax purposes;
5. 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;
6. the term “competent authority” means:
  1. in the case of Canada, the Minister of National Revenue or his authorized representative,
  2. in the case of Denmark, the Minister for Taxation or his authorized representative;
7. the term “tax” means Canadian tax or Danish tax, as the context requires;
8. 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;
9. 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.
As regards the application of the Convention by a Contracting State, any term not defined therein shall, unless the context otherwise requires, have the meaning which it has under the law of that State for the purposes of the taxes to which the Convention applies.

Article 4

Resident

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. The term also includes a Contracting State itself, a political subdivision, a local authority and a statutory body thereof. The term does not include any person who is liable to tax in that State in respect only of income from sources in that State.
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:
1. he shall be deemed to be a resident only 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 only of the State with which his personal and economic relations are closer (centre of vital interests);
2. 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 only of the State in which he has an habitual abode;
3. if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident only of the State of which he is a national;
4. 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.
Where by reason of the provisions of paragraph 1 a company is a resident of both Contracting States, then its status shall be determined as follows:
1. it shall be deemed to be a resident only of the State in which it is incorporated;
2. if it is incorporated in neither of the States, it shall be deemed to be a resident only of the State in which its place of effective management is situated.
Where by reason of the provisions of paragraph 1 a person other than an individual or a company is a resident of both Contracting States, the competent authorities of the Contracting States shall by mutual agreement endeavour to settle the question and to determine the mode of application of the Convention to such person. In the absence of such agreement, such person shall not be entitled to claim any relief or exemption from tax provided by the Convention.

Article 5

Permanent Establishment

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.
The term “permanent establishment” includes especially:
1. a place of management;
2. a branch;
3. an office;
4. a factory;
5. a workshop; and
6. a mine, an oil or gas well, a quarry or any other place of extraction of natural resources.
A building site or construction or installation project constitutes a permanent establishment only if it lasts more than twelve months.
Notwithstanding the preceding provisions of this Article, the term “permanent establishment” shall be deemed not to include:
1. the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise;
2. the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery;
3. the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;
4. the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise or for collecting information, for the enterprise;
5. 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;
6. the maintenance of a fixed place of business solely for any combination of activities mentioned in subparagraphs 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.
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 on behalf of an enterprise and has, and habitually exercises, in a Contracting State an authority to conclude contracts on behalf of the enterprise, that enterprise shall be deemed to have a permanent establishment in that State in respect of any activities which that person undertakes for the enterprise unless the activities of such 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.
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.
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.

III. Taxation of Income

Article 6

Income from Immovable Property

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.
For the purposes of this Convention, 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 and shall include any option or similar right in respect thereof. 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, rights to explore for or to exploit mineral deposits, sources and other natural resources and rights to amounts computed by reference to the amount or value of production from such resources; ships and aircraft shall not be regarded as immovable property.
The provisions of paragraph 1 shall apply to income derived from the direct use, letting, or use in any other form of immovable property and to income or profits from the alienation of such property.
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

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 or has carried 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.
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.
In the determination of the profits of a permanent establishment, there shall be allowed those deductible expenses which are incurred for the purposes of the permanent establishment including executive and general administrative expenses, whether incurred in the State in which the permanent establishment is situated or elsewhere.
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.
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.
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.
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

Profits derived by an enterprise of a Contracting State from the operation of ships or aircraft in international traffic shall be taxable only in that State.
Profits derived by an enterprise of a Contracting State from the use or maintenance of containers (including trailers, barges, and related equipment for the transport of containers) used for the transport in international traffic of goods or merchandise shall be taxable only in that State.
Notwithstanding the provisions of paragraphs 1 and 2 and of Article 7, profits derived from the operation of ships used principally to transport passengers or goods exclusively between places in a Contracting State may be taxed in that State.
With respect to profits derived by the Danish, Norwegian and Swedish air transport consortium, known as the Scandinavian Airlines System (SAS), the provisions of paragraphs 1 and 2 shall apply only to such part of the profits as corresponds to the shareholding in the consortium held by Det Danske Luftfartselskab (DDL), the Danish partner of Scandinavian Airlines System (SAS).
The provisions of paragraphs 1, 2, 3 and 4, shall also apply to profits referred to in those paragraphs derived by an enterprise of a Contracting State or by SAS from its participation in a pool, a joint business or an international operating agency.

Article 9

Associated Enterprises

Where:
1. 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
2. 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 income or 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 income or profits of that enterprise and taxed accordingly.
Where a Contracting State includes in the income or profits of an enterprise of that State - and taxes accordingly - income or profits on which an enterprise of the other Contracting State has been charged to tax in that other State and the income or profits so included are income or 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 tax charged therein on that income or those profits. In determining such adjustment, due regard shall be had to the other provisions of this Convention.
A Contracting State shall not change the income or profits of an enterprise in the circumstances referred to in paragraph 1 after the expiry of the time limits provided in its national laws and, in any case, after six years from the end of the year in which the income or profits which would be subject to such change would have accrued to an enterprise of that State.
The provisions of paragraphs 2 and 3 shall not apply in the case of fraud, wilful default or neglect.

Article 10

Dividends

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.
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:
1. 5 per cent of the gross amount of the dividends if the beneficial owner is a company (other than a partnership) which holds directly at least 25 per cent of the capital of the company paying the dividends;
2. notwithstanding the provisions of subparagraph a), 10 per cent of the gross amount of the dividends if the dividends are paid by a nonresident owned investment corporation that is a resident of Canada to a beneficial owner that is a resident of Denmark and that holds directly or indirectly at least 25 per cent of the capital of the company paying the dividends; and
3. 15 per cent of the gross amount of the dividends in all other cases.
The provisions of this paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.
The term “dividends” as used in this Article means income from shares, mining shares, founders’ shares or other rights, not being debt-claims, participating in profits, as well as income 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.
The provisions of paragraphs 1 and 2 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.
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 undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State.
Notwithstanding any provision of this Convention, a company which is a resident of a Contracting State and which has a permanent establishment in the other Contracting State shall, in accordance with the provisions of the law of that other State, remain subject to the additional tax on companies other than corporations of that other State, but the rate of such tax shall not exceed 5 per cent.

Article 11

Interest

Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.
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 10 per cent of the gross amount of the interest.
Notwithstanding the provisions of paragraph 2, interest arising in a Contracting State and paid to a resident of the other Contacting State who is the beneficial owner thereof shall be taxable only in that other State to the extent that such interest:
1. is a penalty charge for late payment;
2. is paid by the central bank of a Contracting State to the central bank of the other Contracting State;
3. is paid with respect to indebtedness in connection with the sale on credit by a resident of that other State of any equipment, merchandise or services, except where the sale or indebtedness was made between associated enterprises within the meaning of Article 9, paragraph 1 a) or b); or
4. is paid to a person which was constituted and is operated exclusively to administer or provide benefits under one or more pension, retirement or other employee benefits plans provided that:
  1. such person is generally exempt from tax in the other State; and
  2. the interest is not derived from carrying on a trade or business or from a related person.
Notwithstanding the provisions of paragraph 2,
1. interest arising in a Contracting State and paid in respect of indebtedness of the government of that Contracting State or of a political subdivision or local authority thereof shall, provided that the interest is beneficially owned by a resident of the other Contracting State, be taxable only in that other State;
2. interest arising in Denmark and paid to a resident of Canada shall be taxable only in Canada if it is paid in respect of a loan made, guaranteed or insured, or a credit extended, guaranteed or insured by the Export Development Corporation; and
3. interest arising in Canada and paid to a resident of Denmark shall be taxable only in Denmark if it is paid in respect of a loan made, guaranteed or insured, or a credit extended, guaranteed or insured by the Eksportkreditraadet or by such lending institution as is specified and agreed in letters exchanged between the Contracting States.
The term “interest” as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage, and in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures, as well as income which is subjected to the same taxation treatment as income from money lent by the laws of the State in which the income arises. However, the term “interest” does not include income dealt with in Article 10.
The provisions of paragraphs 1, 2, 3 and 4 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.
Interest shall be deemed to arise in a Contracting State when the payer is 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.
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, for whatever reason, 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

Royalties arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.
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.
Notwithstanding the provisions of paragraph 2,
1. copyright royalties and other like payments in respect of the production or reproduction of any literary, dramatic, musical or artistic work (but not including royalties in respect of motion picture films nor royalties in respect of works on film or videotape or other means of reproduction for use in connection with television broadcasting); and
2. royalties for the use of, or the right to use, computer software or any patent or for information concerning industrial, commercial or scientific experiences (but not including any such information provided under a rental or franchise agreement),
arising in a Contracting State and paid to a resident of the other Contracting State who is the beneficial owner thereof shall be taxable only in that other State.
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, patent, trade mark, design or model, plan, secret formula or process or for the use of, or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience, and includes payments of any kind in respect of motion picture films and works on film or videotape or other means of reproduction for use in connection with television.
The provisions of paragraphs 1, 2 and 3 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.
Royalties shall be deemed to arise in a Contracting State when the payer is 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 fixed base in connection with which the obligation 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.
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, for whatever reason, 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 13

Capital Gains

Gains derived by a resident of a Contracting State from the alienation of immovable property situated in the other Contracting State may be taxed in that other State.
Gains from the alienation of movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or of movable property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, including such gains from the alienation of such a permanent establishment (alone or with the whole enterprise) or of such a fixed base may be taxed in that other State.
Gains from the alienation of ships or aircraft operated by an enterprise of a Contracting State in international traffic and movable property pertaining to the operation of such ships or aircraft, shall be taxable only in that State.
Gains derived directly or indirectly by a resident of a Contracting State from the alienation of shares of a company which is a resident of the other Contracting State and of which the first-mentioned resident owns at least 25 per cent of the value of the capital stock, or, in the case of Canada, of an interest in a partnership or trust established under the law of that other State and of which the first-mentioned resident’s total interest was at least 25 per cent of the value of all such interests, may be taxed in that other State if at least 50 per cent of the value of the share or interest, as the case may be, is derived from immovable property situated in that other State.
Gains from the alienation of any property, other than that referred to in paragraphs 1, 2, 3 and 4 shall be taxable only in the Contracting State of which the alienator is a resident.
The provisions of paragraph 5 shall not affect the right of either of the Contracting States to levy, according to its law, a tax on gains from the alienation of any property derived by an individual who is a resident of the other Contracting State and has been a resident of the first-mentioned State at any time during the six years immediately preceding the alienation of the property.

Article 14

Independent Personal Services

Income derived by an individual who is a resident of a Contracting State in respect of professional services or other activities of an independent character shall be taxable only in that State unless he has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities. If he has or had such a fixed base, the income may be taxed in the other State but only so much of it as is attributable to that fixed base.
The term “professional services” includes especially independent scientific, literary, artistic, educational or teaching activities as well as the independent activities of physicians, lawyers, engineers, architects, dentists and accountants.

Article 15

Dependent Personal Services

Subject to the provisions of Articles 16, 18 and 19, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.
Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if:
1. the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in any twelve month period commencing or ending in the calendar year concerned, and
2. the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State, and
3. the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State.
Notwithstanding the preceding provisions of this Article, remuneration derived in respect of an employment exercised aboard a ship or aircraft operated by an enterprise of a Contracting State in international traffic may be taxed in that State.
Where a resident of Denmark derives remuneration in respect of an employment exercised aboard an aircraft operated in international traffic by the Scandinavian Airlines System (SAS) consortium, such remuneration shall be taxable only in Denmark.

Article 16

Directors’ Fees

Directors’ fees and other similar payments derived by a resident of a Contracting State in his capacity as a member of the board of directors or a similar organ of a company which is a resident of the other Contracting State, may be taxed in that other State.

Article 17

Artistes and Sportsmen

Notwithstanding the provisions of Articles 7, 14 and 15, income derived by a resident of a Contracting State as an entertainer, such as a theatre, motion picture, radio or television artiste, or a musician, or as a sportsman, from his personal activities as such exercised in the other Contracting State, may be taxed in that other State.
Where income in respect of personal activities exercised by an entertainer or a sportsman in his capacity as such accrues not to the entertainer or sportsman himself but to another person, that income may, notwithstanding the provisions of Articles 7, 14 and 15, be taxed in the Contracting State in which the activities of the entertainer or sportsman are exercised.
The provisions of paragraph 2 shall not apply if it is established that neither the entertainer or the sportsman nor persons related thereto, participate directly or indirectly in the profits of the person referred to in that paragraph.

Article 18

Pensions

Pensions and social security payments, arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in the State in which they arise.
Alimony and other similar payments arising in a Contracting State and paid to a resident of the other Contracting State who is subject to tax therein in respect thereof, shall be taxable only in that other State.

Article 19

Government Service

1. Salaries, wages and other similar remuneration, other than a pension, paid by a Contracting State or a political subdivision or a local authority thereof to an individual in respect of services rendered to that State or subdivision or authority shall be taxable only in that State.
2. However, such salaries, wages and other similar remuneration shall be taxable only in the other Contracting State if the services are rendered in that State and the individual is a resident of that State who:
  1. is a national of that State; or
  2. did not become a resident of that State solely for the purpose of rendering the services.
The provisions of Articles 15 and 16 shall apply to salaries, wages and other similar remuneration in respect of services rendered in connection with a business carried on by a Contracting State or a political subdivision or a local authority thereof.

Article 20

Students

Payments which a student, apprentice or business trainee who is, or was immediately before visiting a Contracting State, a resident of the other Contracting State and who is present in the first-mentioned State solely for the purpose of his education or training receives for the purpose of his maintenance, education or training shall not be taxed in that State, provided that such payments arise from sources outside that State.

Article 21

Other Income

Subject to the provisions of paragraph 2, items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Convention shall be taxable only in that State.
However, if such income is derived by a resident of a Contracting State from sources in the other Contracting State, such income may also be taxed in the State in which it arises, and according to the law of that State. Where such income is income from an estate or a trust, other than a trust to which contributions were deductible, the tax so charged shall, provided that the income is taxable in the Contracting State in which the beneficial owner is a resident, not exceed 15 per cent of the gross amount of the income.

IV. Taxation of Capital

Article 22

Capital

Capital represented by immovable property owned by a resident of a Contracting State and situated in the other Contracting State, may be taxed in that other State.
Capital represented by movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or by movable property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, may be taxed in that other State.
Capital represented by ships and aircraft operated by an enterprise of a Contracting State in international traffic and by movable property pertaining to the operation of such ships and aircraft, shall be taxable only in that State.
All other elements of capital of a resident of a Contracting State shall be taxable only in that State.

V. Methods for Prevention of Double Taxation

Article 23

Elimination of Double Taxation

In the case of Canada, double taxation shall be avoided as follows:
1. Subject to the existing provisions of the law of Canada regarding the deduction from tax payable in Canada of tax paid in a territory outside Canada and to any subsequent modification of those provisions - which shall not affect the general principle hereof - and unless a greater deduction or relief is provided under the laws of Canada, tax payable in Denmark on profits, income or gains arising in Denmark shall be deducted from any Canadian tax payable in respect of such profits, income or gains.
2. Where a resident of Denmark derives a gain, referred to in paragraph 6 of Article 13, which may be taxed in Canada, Canada shall, subject to the existing provisions of the law of Canada regarding the deduction from tax payable in Canada of tax paid in a territory outside Canada and to any subsequent modification of those provisions - which shall not affect the general principle hereof - allow as a deduction from any tax payable by that person in respect of such gain, an amount equal to the tax paid in Denmark on that gain.
3. Subject to the existing provisions of the law of Canada regarding the taxation of income from a foreign affiliate and to any subsequent modification of those provisions - which shall not affect the general principle hereof - for the purpose of computing Canadian tax, a company which is a resident of Canada shall be allowed to deduct in computing its taxable income any dividend received by it out of the exempt surplus of a foreign affiliate which is a resident of Denmark.
4. Where in accordance with any provision of the Convention income derived or capital owned by a resident of Canada is exempt from tax in Canada, Canada may nevertheless, in calculating the amount of tax on other income or capital, take into account the exempted income or capital.
The terms “foreign affiliate” and “exempt surplus” shall have the meaning which they have under the Income Tax Act of Canada,
In the case of Denmark, double taxation shall be avoided as follows:
1. Subject to the provisions of subparagraph c), where a resident of Denmark derives income or owns capital which, in accordance with the provisions of this Convention may be taxed in Canada, Denmark shall allow:
  1. as a deduction from the tax on the income of that resident an amount equal to the income tax paid in Canada;
  2. as a deduction from the tax on the capital of that resident, an amount equal to the capital tax paid in Canada.
2. Such deduction in either case shall not, however, exceed that part of the income tax or capital tax, as computed before the deduction is given, which is attributable, as the case may be, to the income or the capital which may be taxed in Canada.
3. Where a resident of Denmark derives income or owns capital which, in accordance with the provisions of this Convention, shall be taxable only in Canada, Denmark may include this income or capital in the tax base, but shall allow as a deduction from the income tax or capital tax that part of the income tax or capital tax, which is attributable, as the case may be, to the income derived from or the capital owned in Canada.
For the purposes of this Article, profits, income or gains of a resident of a Contracting State which may be taxed in the other Contracting State in accordance with this Convention shall be deemed to arise from sources in that other State.

VI. Special Provisions

Article 24

Non-Discrimination

Nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith, which is other or more burdensome than the taxation and connected requirements to which nationals of that other State in the same circumstances are or may be subjected. This provision shall, notwithstanding the provisions of Article 1, also apply to individuals who are not residents on one or both of the Contracting States.
The taxation on a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favorably levied in that other State than the taxation levied on enterprises of that other State carrying on the same activities. This provision shall not be construed as obliging a Contracting State to grant to residents of the other Contracting State any personal allowances, reliefs and reductions for taxation purposes on account of civil status or family responsibilities which it grants to its own residents.
Except where the provisions of paragraph 1 of Article 9, paragraph 8 of Article, 11, or paragraph 7 of Article 12 apply, interest, royalties and other disbursements paid by a resident of a Contracting State to a resident of the other Contracting State shall, for the purposes of determining the taxable profits of the first-mentioned resident, be deductible under the same conditions as if they had been paid to a resident of the first-mentioned State. Similarly, any debts of a resident of a Contracting State to a resident of the other Contracting State shall, for the purposes of determining the taxable capital of the first-mentioned resident, be deductible under the same conditions as if they had been contracted to a resident of the first-mentioned State.
The provisions of paragraph 3 shall not affect the operation of any provision of the taxation laws of a Contracting State:
1. relating to the deductibility of interest and which is in force on the date of signature of this Convention (including any subsequent modification of such provisions that does not change the general nature thereof); or
2. adopted after such date by a Contracting State and which is designed to ensure that a person who is not a resident of that State does not enjoy, under the laws of that State, a tax treatment that is more favourable than that enjoyed by residents of that State.
Enterprises of a Contracting State, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State, shall not be subjected in the first-mentioned State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which other similar enterprises of the first-mentioned State, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of a third State, are or may be subjected.
In this Article, the term “taxation” means taxes which are the subject of this Convention.

Article 25

Mutual Agreement Procedure

Where a person considers that the actions of one or both of the Contracting States result or will result for him in taxation not in accordance with the provisions of this Convention, he may, irrespective of the remedies provided by the domestic law of those States, address to the competent authority of the Contracting State of which he is a resident or, if his case comes under paragraph 1 of Article 24, to that of the Contracting State of which he is a national, an application in writing stating the grounds for claiming the revision of such taxation.
The competent authority referred to in paragraph 1 shall endeavour, if the objection appears to it to be justified and if it is not itself able to arrive at an appropriate solution, to resolve the case by mutual agreement with the competent authority of the other Contracting State, with a view to the avoidance of taxation not in accordance with the Convention.
A Contracting State shall not, after the expiry of the time limits provided in its national laws and, in any case, after six years from the end of the taxable period in which the income concerned has accrued, increase the tax base of a resident of either of the Contracting States by including therein items of income which have also been charged to tax in the other Contracting State. This paragraph shall not apply in the case of fraud, wilful default or neglect.
The competent authorities of the Contracting States shall endeavour to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the Convention. They may also consult together for the elimination of double taxation in cases not provided for in the Convention.
The competent authorities of the Contracting States may communicate with each other directly for the purpose of reaching an agreement in the sense of the preceding paragraphs.

Article 26

Exchange of Information

The competent authorities of the Contracting States shall exchange such information as is necessary for carrying out the provisions of this Convention or of the domestic laws of the Contracting States concerning taxes covered by the Convention insofar as the taxation thereunder is not contrary to the Convention. The exchange of information is not restricted by Article 1. Any information received by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) involved in the assessment or collection of, the enforcement in respect of, or the determination of appeals in relation to, the taxes covered by the Convention. Such persons or authorities shall use the information only for tax purposes. They may disclose the information in public court proceedings or in judicial decisions.
In no case shall the provisions of paragraph 1 be construed so as to impose on a Contracting State the obligation:
1. to carry out administrative measures at variance with the laws or the administrative practice of that or of the other Contracting State;
2. to supply information which is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State;
3. to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or information, the disclosure of which would be contrary to public policy (ordre public).

Article 27

Activities in Connection with Preliminary Surveys, Exploration or Extraction of Hydrocarbons

Notwithstanding the provisions of Article 5 and Article 14, a person who is a resident of a Contracting State and carries on activities in connection with preliminary surveys, exploration or extraction of hydrocarbons situated in the other Contracting State shall be deemed to be carrying on in respect of those activities a business in that other Contracting State through a permanent establishment or fixed base situated therein.
The provisions or paragraph 1 shall not apply where the activities are carried on for a period or periods not exceeding 30 days in the aggregate in any 12 month period. However, for the purpose of this paragraph, activities carried on by an enterprise related to another enterprise within the meaning of Article 9 shall be regarded as carried on by the enterprise to which it is related if the activities in question are substantially the same as those carried on by the last-mentioned enterprise.
Notwithstanding the provisions of paragraphs 1 and 2, drilling rig activities carried on off-shore constitutes a permanent establishment only if the activities are carried on for a period or periods exceeding 90 days in the aggregate in any 12 month period. However, for the purpose of this paragraph activities carried on by an enterprise related to another enterprise within the meaning of Article 9 shall be regarded as carried on by the enterprise to which it is related if the activities in question are substantially the same as those carried on by the last-mentioned enterprise.
Notwithstanding the provisions of Article 13, a capital gain on drilling rigs used for activities mentioned in paragraph 3 which is deemed to be derived by a resident of a Contracting State when the rig activities cease to be subject to tax in the other Contracting State shall be exempt from tax in that other State.

Article 28

Members of Diplomatic Missions and Consular Posts

Nothing in this Convention shall affect the fiscal privileges of members of diplomatic mission or consular posts under the general rules of international law or under the provisions of special agreements.
Notwithstanding Article 4, an individual who is a member of a diplomatic mission, consular post or permanent mission of a Contracting State which is situated in the other Contracting State or in a third State shall be deemed for the purposes of the Convention to be a resident of the sending State if he is liable in the sending State to the same obligations in relation to tax on his total income as are residents of that sending State.
The Convention shall not apply to International Organizations, to organs or officials thereof and to persons who are members of a diplomatic mission, consular post or permanent mission of a third State or group of States, being present in a Contracting State and who are not liable in either Contracting State to the same obligations in relation to tax on their total income as are residents thereof.

Article 29

Territorial Extension

This Convention may be extended, either in its entirety or with any necessary modifications to any part of the territory of the Contracting States which is specifically excluded from the application of the Convention or to any State or territory for whose international relations either of the Contracting States is responsible, which imposes taxes substantially similar in character to those to which the Convention applies. Any such extension shall take effect from such date and subject to such modifications and conditions, including conditions as to termination, as may be specified and agreed between the Contracting States in notes to be exchanged through diplomatic channels or in any other manner in accordance with their constitutional procedures.
Unless otherwise agreed by both Contracting States, the termination of the Convention by one of them under Article 32 shall also terminate, in the manner provided for in that Article, the application of the Convention to any part of the territory of the Contracting States or to any State or territory to which it has been extended under this Article.

Article 30

Miscellaneous Rules

The provisions of this Convention shall not be construed to restrict in any manner any exclusion, exemption, deduction, credit or other allowance now or hereafter accorded by the laws of a Contracting State in the determination of the tax imposed by that State.
Nothing in the Convention shall be construed as preventing a Contracting State from imposing a tax on amounts included in the income of a resident of that State with respect to a partnership, trust or controlled foreign affiliate, in which he has an interest.
Notwithstanding the provisions of Article 10, dividends arising in a Contracting State and paid to an organization that was constituted and is operated in the other Contracting State exclusively to administer or provide benefits under one or more pension, retirement or other employee benefits plans shall be exempt from tax in the first-mentioned State provided that:
1. the organization is the beneficial owner of the shares on which the dividends are paid, holds those shares as an investment and is generally exempt from tax in the other State;
2. the organization does not own directly or indirectly more than 5 per cent of the capital or 5 per cent of the voting stock of the company paying the dividends; and
3. the class of shares of the company on which the dividends are paid is regularly traded on an approved stock exchange.
For the purposes of paragraph 3, the term “approved stock exchange” means:
1. in the case of dividends arising in Canada, a Canadian stock exchange prescribed for the purposes of the Income Tax Act;
2. in the case of dividends arising in Denmark, the Copenhagen stock exchange; and
3. any other stock exchange agreed in letters exchanged between the competent authorities of the Contracting States.
For the purposes of paragraph 3 of Article XXII (Consultation) of the General Agreement on Trade in Services, the Contracting States agree that, notwithstanding that paragraph, any dispute between them as to whether a measure falls within the scope of this Convention may be brought before the Council for Trade in Services, as provided by that paragraph, only with the consent of both Contracting States. Any doubt as to the interpretation of this paragraph shall be resolved under paragraph 4 of Article 25 or, failing agreement under that procedure, pursuant to any other procedure agreed to by both Contracting States.

VII. Final Provisions

Article 31

Entry into Force

The Governments of the Contracting States shall notify to each other that the constitutional requirements for the entry into force of this Convention have been complied with.
The Convention shall enter into force on the date of the later of the notifications referred to in paragraph 1 and its provisions shall have effect:
1. in respect of tax withheld at the source on amounts paid or credited to non-residents on or after 1st January in the calendar year next following that in which the Convention enters into force; and
2. in respect of other taxes for taxation years in the case of Canada and for income years in the case of Denmark beginning on or after 1st January in the calendar year next following that in which the Convention enters into force.
The provisions of the Agreement of 30th September, 1955 between the Government of Canada and the Government of the Kingdom of Denmark for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income, as modified by the Supplementary Convention of 27th November, 1964 (hereinafter referred to as “the 1955 Agreement”) shall cease to have effect:
1. in respect of tax withheld at the source on amounts paid or credited to non-residents on or after 1st January in the calendar year next following that in which the Convention enters into force; and
2. in respect of other taxes for taxation years in the case of Canada and for income years in the case of Denmark beginning on or after 1st January in the calendar year next following that in which the Convention enters into force.
Notwithstanding the provisions of paragraph 3, where any greater relief from tax would have been afforded by the provisions of the 1955 Agreement, any such provision as aforesaid shall continue to have effect:
1. in respect of tax withheld at the source on amounts paid or credited to non-residents on or before the last day of the calendar year next following that in which the Convention enters into force; and
2. in respect of other taxes:
  1. in the case of Canada, for taxation years ending on or before the last day of the calendar year next following that in which the Convention enters into force;
  2. in the case of Denmark, for income years ending on or before the last day of the second calendar year next following that in which the Convention enters into force.
The Agreement dated 18th June, 1929, between Canada and Denmark providing for the reciprocal exemption from income tax on earnings derived from the operation of ships is terminated on the date on which this Convention enters into force.

Article 32

Termination

This Convention shall continue in effect indefinitely but either Contracting State may, on or before June 30 in any calendar year after the year of its entry into force, give to the other Contracting State a notice of termination in writing through diplomatic channels; in such event, the Convention shall cease to have effect:

in respect of tax withheld at the source on amounts paid or credited to non-residents on or after 1st January in the calendar year next following that in which the notice is given; and
in respect of other taxes for taxation years beginning in the case of Canada and for income years in the case of Denmark beginning on or after 1st January in the calendar year next following that in which notice is given.

IN WITNESS WHEREOF the undersigned, duly authorized to that effect, have signed this Convention.

DONE in duplicate at Copenhagen, this 17th day of September 1997, in the English, French and Danish languages, each version being equally authentic.

FOR THE GOVERNMENT OF CANADA
Brian Baker

FOR THE GOVERNMENT OF THE KINGDOM OF DENMARK
Carsten Koch

Protocol

At the moment of signing the Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion With Respect to Taxes on Income and on Capital between the Government of Canada and the Government of the Kingdom of Denmark, the signatories have agreed that the following provisions shall form an integral part of the Convention:

As regards the application of subparagraph i) of paragraph 1 of Article 3 and of Article 8 of the Convention, the terms “transport by a ship” or “operation of ships” means the operation of a ship on a voyage by voyage basis.
For the purposes of subparagraph c) of paragraph 1 of Article 23 of the Convention, the term “Denmark” includes Greenland. However, notwithstanding the provisions of Article 32 of the Convention, Canada may, on or before June 30 in any calendar year, give to Denmark notice of termination of the preceding sentence and in such event the preceding sentence shall cease to have effect for taxation years beginning on or after 1st January of the calendar year next following that in which the notice is given.
Article 26 of the Convention has been extended to apply to Greenland.
As far as Article 26 is concerned, the terms “the Kingdom of Denmark” and “Denmark” shall also apply to Greenland unless the context otherwise requires.
The taxes which in pursuance of this Protocol are the subject of Article 26 of the Convention shall include the following taxes which are levied in Greenland: the provincial and communal income tax, the provincial and communal corporation tax and the provincial and communal taxes on dividends (indkomst-, selskabs- og udbytteskatter til landskassen og kommunerne).
The term “competent authority” means in the case of Greenland the Greenland Local Government or the authority which on behalf of the Local Government has been authorized to handle questions with reference to the Convention.
This Protocol shall enter into force on and have effect from the same date as the Convention.

IN WITNESS WHEREOF the undersigned, duly authorized to that effect, have signed this Protocol.

DONE in duplicate in Copenhagen, this 17th day of September, 1997, in the English, French and Danish languages, each version being equally authentic.

FOR THE GOVERNMENT OF CANADA
Brian Baker

FOR THE GOVERNMENT OF THE KINGDOM OF DENMARK
Carsten Koch

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Date modified:: 2019-03-01