The Double Taxation Relief (Taxes on Income) (Belarus) Order 1995

Made: 18th October 1995

At the Court at Buckingham Palace, the 18th day of October 1995 Present, The Queen’s Most Excellent Majesty in Council

Now, therefore, Her Majesty, in exercise of the powers conferred upon Her by section 788 of the said Act, and of all other powers enabling Her in that behalf, is pleased, by and with the advice of Her Privy Council, to order, and it is hereby ordered, as follows:—

1

This Order may be cited as the Double Taxation Relief (Taxes on Income) (Belarus) Order 1995.

2

It is hereby declared—

• (a) that the arrangements specified in the Convention set out in Part I of the Schedule to this Order and in the Exchange of Notes constituting an Agreement set out in Part II of that Schedule have been made with the Government of the Republic of Belarus with a view to affording relief from double taxation in relation to income tax, corporation tax or capital gains tax and taxes of a similar character imposed by the laws of Belarus;

• (b) that those arrangements include provisions with respect to the exchange of information necessary for carrying out the domestic laws of the United Kingdom and the laws of Belarus concerning taxes covered by the arrangements including, in particular, provisions about the prevention of fiscal evasion with respect to those taxes; and

• (c) that it is expedient that those arrangements should have effect.

SCHEDULE

PART I — CONVENTION BETWEEN THE GOVERNMENT OF THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND AND THE GOVERNMENT OF THE REPUBLIC OF BELARUS FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND CAPITAL

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

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

Have agreed as follows:

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 by the Convention

• (1) This Convention shall apply to taxes on income and on capital imposed on behalf of a Contracting State irrespective of the manner in which they are levied.

• (2) There shall be regarded as taxes on income and on capital all taxes imposed on total income, on capital, or on elements of income or of capital including taxes on gains from the alienation of movable or immovable property.

• (3) The existing taxes which are the subject of this Convention are:

• (a) in the case of the United Kingdom:

• (i) the income tax;

• (ii) the corporation tax; and

• (iii) the capital gains tax;

(hereinafter referred to as “United Kingdom tax”);

• (b) in the case of Belarus:

• (i) the tax on income and profits of legal persons;

• (ii) the income tax of individuals; and

• (iii) the tax on immovable property

(hereinafter referred to as “Belarus tax”).

• (4) This Convention shall also apply to any identical or substantially similar taxes which are imposed by either Contracting State after the date of signature of this Convention in addition to, or in place of, the taxes of that Contracting State referred to in paragraph (3) of this Article. The competent authorities of the Contracting States shall notify each other of any substantial changes which have been made in their respective taxation laws.

Article 3 — General definitions

Article 4 — Residence

Article 5 — Permanent establishment

Article 6 — Income from immovable property

Article 7 — Business profits

Article 8 — Shipping and air transport

• (1) Profits derived by a resident 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 from the operation of ships or aircraft in international traffic include:

• (a) income from the rental on a bareboat basis of ships or aircraft; and

• (b) profits from the use, maintenance or rental of containers (including trailers and related equipment for the transport of containers) used for the transport of goods or merchandise;

where such rental or such use, maintenance or rental, as the case may be, is incidental to the operation of ships or aircraft in international traffic.

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

Article 9 — Associated enterprises

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 recipient is the beneficial owner of the dividends and subject to tax in respect of the dividends in that 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 controls, directly or indirectly, at least 20 per cent of the voting power in the company paying the dividends;

• (b) 10 per cent of the gross amount of the dividends in all other cases.

This paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.

• (3) The term “dividends” as used in this Article means income from shares, or other rights, not being debt-claims, participating in profits, as well as income from other corporate rights assimilated to income from shares by the taxation laws of the State of which the company making the distribution is a resident and also includes any other item (other than interest relieved from tax under Article 11 of this Convention) which, under the laws of the Contracting State of which the company paying the dividend is a resident, is treated as a dividend or distribution of a company.

• (4) The provisions of paragraphs (1) and (2) of this Article 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 of this Convention, as the case may be, shall apply.

• (5) 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 that other State.

Article 11 — Interest

Article 12 — Royalties

Article 13 — Capital Gains

• (1) Gains derived by a resident of a Contracting State from the alienation of immovable property referred to in Article 6 of this Convention and situated in the other Contracting State may be taxed in that other State.

• (2) Gains derived by a resident of a Contracting State from the alienation of:

• (a) shares, other than shares quoted on an approved Stock Exchange, deriving more than half of their value directly or indirectly from immovable property situated in the other Contracting State, or

• (b) an interest in a partnership or trust the assets of which derive more than half of their value from immovable property situated in the other Contracting State, or of shares referred to in sub-paragraph (a) above,

may be taxed in that other State.

• (3) 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 fixed base, may be taxed in that other State.

• (4) Gains derived by a resident of a Contracting State from the alienation of ships or aircraft operated in international traffic by an enterprise of that Contracting State or movable property pertaining to the operation of such ships or aircraft, shall be taxable only in that Contracting State.

• (5) Gains from the alienation of any property other than that referred to in paragraphs (1), (2), (3) and (4) of this Article shall be taxable only in the Contracting State of which the alienator is a resident provided that those gains are subject to tax in that Contracting State.

• (6) The provisions of paragraph (5) of this Article shall not affect the right of a Contracting State to levy according to its law a tax on capital 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 Contracting State at any time during the five years immediately preceding the alienation of the property.

Article 14 — Independent personal services

Article 15 — Dependent personal services

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 of a company which is a resident of the other Contracting State may be taxed in that other State.

Article 17 — Artistes and sportsmen

Article 18 — Pensions

Article 19 — Government service

Article 20 — Students

Payments which a student or business apprentice 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 first-mentioned State, provided that such payments arise from sources outside that State.

Article 21 — Other income

Article 22 — Capital

Article 23 — Elimination of double taxation

Article 24 — Limitation of relief

Article 25 — Partnerships

Where, under any provision of this Convention, a partnership or joint venture is entitled, as a resident of Belarus, to exemption from tax in the United Kingdom on any income or capital gains, that provision shall not be construed as restricting the right of the United Kingdom to tax any member of the partnership or joint venture who is a resident of the United Kingdom on his share of such income or capital gains; but any such income or gains shall be treated for the purposes of Article 23 of this Convention as income or gains from sources in Belarus.

Article 26 — Non-discrimination

Article 27 — Mutual agreement procedure

Article 28 — Exchange of information

Article 29 — Diplomatic and Consular Officers

Nothing in this Convention shall affect the fiscal privileges of diplomatic agents or consular officers under the general rules of international law or under the provisions of special agreements.

Article 30 — Entry into force

• (1) This Convention is subject to ratification and the instruments of ratification shall be exchanged as soon as possible.

• (2) The Convention shall enter into force 30 days after the exchange of instruments of ratification and its provisions shall have effect:

• (a) in the United Kingdom:

• (i) in respect of income tax and capital gains tax, for any year of assessment beginning on or after 6th April in the calendar year next following that in which the Convention enters into force;

• (ii) in respect of corporation tax, for any financial year beginning on or after 1st April in the calendar year next following that in which the Convention enters into force;

• (b) in Belarus:

• in respect of income derived on or after 1st January of the year following that of the entry into force of the Convention.

• (3) The Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Union of Soviet Socialist Republics for the Avoidance of Double Taxation of Air Transport Undertakings and their Employees signed at London on 3rd May 1974 and the Convention between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Union of Soviet Socialist Republics for the Avoidance of Double Taxation with respect to Taxes on Income and Capital Gains signed at London on 31st July 1985 shall cease to have effect in respect of the taxes to which this Convention applies in accordance with the provisions of paragraphs (1) and (2) of this Article.

Article 31 — Termination

This Convention shall remain in force until terminated by a Contracting State. Either Contracting State may terminate the Convention, through diplomatic channels, by giving notice of termination at least six months before the end of any calendar year beginning after the expiry of five years from the date of entry into force of the Convention. In such event, the Convention shall cease to have effect:

• (a) in the United Kingdom:

• (i) in respect of income tax and capital gains tax, for any year of assessment beginning on or after 6th April in the calendar year next following that in which the notice is given;

• (ii) in respect of corporation tax, for any financial year beginning on or after 1st April in the calendar year next following that in which the notice is given;

• (b) in Belarus:

• in respect of income derived on or after 1st January of the year following the year in which the notice of termination is given.

In witness whereof the undersigned, duly authorised thereto, have signed this Convention.

Done in duplicate at London this 7th day of March 1995 in the English language. A translation of the Convention into the Byelorussian language shall be made and agreed by the Contracting States before ratification, that text having the same authority as the English text.

For the Government of the United Kingdom of Great Britain and Northern Ireland:

Douglas Hogg

For the Government of the Republic of Belarus:

Sergei Ling

PART II — EXCHANGE OF NOTES

London

7th March 1995

Excellency

I have the honour to refer to the Convention between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Belarus for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital which has been signed today and to make on behalf of the Government of the United Kingdom the following proposals for the purpose of applying:

Article 13: Capital Gains:

Approved Stock Exchange

1

For the purposes of paragraph (2)(a) of Article 13 of this Convention, the term “approved Stock Exchange” in the case of Belarus means a Stock Exchange created in conformity with the laws of the Republic of Belarus.

Article 23: Elimination of double taxation:

Interest Payable By A Permanent Establishment Of A Resident Of A Contracting State

2

In computing tax payable on its profits, there shall be allowed to a permanent establishment of a resident of a Contracting State, a deduction for interest incurred for the purpose of its trade or business whether paid to a bank or other person and without regard to the period of the loan, but that deduction shall not be available to the extent that the interest paid exceeds, for whatever reason, the amount which would have been agreed upon in the absence of a special relationship between the payer and the beneficial owner of the interest.

Wages, Salaries And Other Remuneration For Personal Services Payable By A Permanent Establishment Of A Resident Of A Contracting State

3

In computing tax payable on its profits, there shall be allowed to a permanent establishment of a resident of a Contracting State, a deduction for actual wages, salaries and other remuneration for personal services paid by the permanent establishment and incurred for the purpose of its trade or business.

Interest Payable By A Company Or Other Taxable Entity Which Is A Resident Of A Contracting State

4

In computing tax payable on its profits, there shall be allowed, to a company or other taxable entity which is a resident of a Contracting State and which is at least 50 per cent owned by a resident or residents of the other Contracting State, a deduction for interest incurred for the purpose of its trade or business whether paid to a bank or other person and without regard to the period of the loan, but that deduction shall not be available to the extent that the interest paid exceeds, for whatever reason, the amount which would have been agreed upon in the absence of a special relationship between the payer and the beneficial owner of the interest.

Wages, Salaries And Other Remuneration For Personal Services Payable By A Company Or Other Taxable Entity Which Is A Resident Of A Contracting State

5

In computing tax payable on its profits, there shall be allowed, to a company or other taxable entity which is resident of a Contracting State and which is wholly or partly owned by a resident or residents of the other Contracting State, a deduction for actual wages, salaries and other remuneration for personal services paid by the company or other entity and incurred for the purpose of its trade or business.

Withholding Tax

6

Each Contracting State shall endeavour to establish procedures to enable taxpayers to receive income dealt with under Articles 10, 11 and 12 without the imposition of withholding taxes where the Convention provides for taxation only in the state of residence. Where the Convention provides for taxation in the State where the income arises each State shall endeavour to establish procedures to enable taxpayers to receive income under deduction of tax at the rate provided for in the Convention. Where a claim is made by a taxpayer, tax withheld at source in a Contracting State at the rate provided for under domestic law shall be repaid in a timely manner where that tax is withheld at a rate in excess of that provided for under the terms of the Convention.

On behalf of the Secretary of State for Foreign and Commonwealth Affairs

Douglas Hogg

London

7th March 1995

Excellency

I am in receipt of your note dated 7th March 1995 which states as follows:

I have the honour to refer to the Convention between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Belarus for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital which has been signed today and to make on behalf of the Government of the United Kingdom the following proposals for the purpose of applying: (1) For the purposes of paragraph (2)(a) of Article 13 of this Convention, the term “approved Stock Exchange” in the case of Belarus means a Stock Exchange created in conformity with the laws of the Republic of Belarus. (2) In computing tax payable on its profits, there shall be allowed to a permanent establishment of a resident of a Contracting State, a deduction for interest incurred for the purpose of its trade or business whether paid to a bank or other person and without regard to the period of the loan, but that deduction shall not be available to the extent that the interest paid exceeds, for whatever reason, the amount which would have been agreed upon in the absence of a special relationship between the payer and the beneficial owner of the interest. (3) In computing tax payable on its profits, there shall be allowed to a permanent establishment of a resident of a Contracting State, a deduction for actual wages, salaries and other remuneration for personal services paid by the permanent establishment and incurred for the purpose of its trade or business. (4) In computing tax payable on its profits, there shall be allowed, to a company or other taxable entity which is a resident of a Contracting State and which is at least 50 per cent owned by a resident or residents of the other Contracting State, a deduction for interest incurred for the purpose of its trade or business whether paid to a bank or other person and without regard to the period of the loan, but that deduction shall not be available to the extent that the interest paid exceeds, for whatever reason, the amount which would have been agreed upon in the absence of a special relationship between the payer and the beneficial owner of the interest. (5) In computing tax payable on its profits, there shall be allowed, to a company or other taxable entity which is a resident of a Contracting State and which is wholly or partly owned by a resident or residents of the other Contracting State, a deduction for actual wages, salaries and other remuneration for personal services paid by the company or other entity and incurred for the purpose of its trade or business. (6) Each Contracting State shall endeavour to establish procedures to enable taxpayers to receive income dealt with under Articles 10, 11 and 12 without the imposition of withholding taxes where the Convention provides for taxation only in the state of residence. Where the Convention provides for taxation in the State where the income arises each State shall endeavour to establish procedures to enable taxpayers to receive income under deduction of tax at the rate provided for in the Convention. Where a claim is made by a taxpayer, tax withheld at source in a Contracting State at the rate provided for under domestic law shall be repaid in a timely manner where that tax is withheld at a rate in excess of that provided for under the terms of the Convention. If the foregoing proposals are acceptable to the Government of the Republic of Belarus I have the honour to suggest that the present Note and Your Excellency’s reply to that effect shall be regarded as constituting an agreement between the two Governments in this matter which shall enter into force at the same time as the entry into force of the Convention.

The foregoing proposals being acceptable to the Government of the Republic of Belarus, I have the honour to confirm that Your Excellency’s Note and this Reply shall be regarded as constituting an agreement between the two Governments in this matter which shall enter into force at the same time as the entry into force of the Convention.

I take this opportunity to renew to Your Excellency the assurances of my highest consideration.

On behalf of the Government of the Republic of Belarus

Sergei Ling

Signed

N. H. Nicholls — Clerk of the Privy Council

Explanatory note

(This note is not part of the Order)

The Convention with Belarus is set out in the Schedule to the Order.

The Convention provides for business profits not arising through a permanent establishment to be taxed only in the country of the taxpayer’s residence. Profits attributable to a permanent establishment may be taxed in the country in which the permanent establishment is situated (Articles 5 and 7).

Income from immovable property and gains from the alienation of such property may be taxed in the country in which the property is situated (Articles 6 and 13).

Shipping and air transport profits are to be taxed only in the residence state of the operator (Article 8).

The Convention includes rules for determining taxable profits when a company in one country is related to a company in the other (Article 9).

The rate of tax imposed in the country of source on dividends derived by a resident of the other country shall not exceed 5 per cent of the gross amount of the dividends when the beneficial owner is a company controlling at least 20 per cent of the voting power in the company paying the dividends. In all other cases the rate of tax shall not exceed 10 per cent of the gross amount of the dividends (Article 10).

The rate of tax imposed in the country of source on interest derived by a resident of the other country is not to exceed 5 per cent of the gross amount of the interest flowing to the other country. Certain categories of interest (e.g. interest paid to the Government of the other country or interest paid to an enterprise of the other country owed from the credit sale, by the recipient, of industrial, commercial or scientific equipment) will be exempt from tax in the source state (Article 11).

The rate of tax imposed in the country of source on royalties flowing to the other country shall not exceed 3 per cent of the gross amount of royalties paid in respect of the use or right to use any patent, secret formula or process, or for information (know-how) concerning industrial, commercial and scientific experience. In all other cases, such royalties may also be taxed in the source country, but, in general, at a rate not exceeding 5 per cent of the gross amount (Article 12).

Capital gains arising from the disposal of movable property are normally to be taxed only in the country of the taxpayer’s residence. Gains arising from the disposal of assets of a permanent establishment or fixed base which the taxpayer has in the other country may be taxed in that other country (Article 13).

The earnings of temporary business visitors and some other individuals are, subject to certain conditions, to be taxed only in the country of the taxpayer’s residence (Articles 14 and 15). Fees received by a resident of one country in his capacity as a director of a company resident in the other country may be taxed in the latter country (Article 16). Income derived from the activities of artistes and sportsmen may be taxed in the country in which those activities are exercised, with certain exemptions (Article 17). Occupational pensions (other than those paid in respect of Government Service) and annuities are to be taxed only in the recipient’s country of residence (Article 18). Government Service remuneration and pensions are normally taxable only by the paying Government (Article 19). Certain payments made to visiting students and business apprentices are to be exempt from tax in the country visited (Article 20). Other income not specified in the Convention (with the exception of income paid out of trusts or the estates of deceased persons in the course of administration) shall be taxable only in the taxpayer’s country of residence, as long as it is not associated with a permanent establishment in the country of source (Article 21).

The Capital Article (Article 22) reflects the existence of a capital tax in Belarus and provides that capital represented by immovable property may be taxed in the country in which the property is situated. Capital represented by movable property is normally to be taxed only in the country of residence.

Where income continues to be taxable in both countries, credit will be given in the taxpayer’s country of residence for tax imposed in the other country. In the case of dividends, the United Kingdom will give credit for underlying tax paid in Belarus where the shareholder is a United Kingdom company which controls at least 10 per cent of the voting power in the company paying the dividends (Article 23).

There are provisions safeguarding nationals and enterprises of one country against discriminatory taxation in the other country (Article 26), and for consultation (Article 27) and exchanges of information (Article 28) between the taxation authorities of the two countries.

The Convention will enter into force on the date of the later of the notifications by each country of the completion of the procedures required by its law to bring the Convention into force. The Convention is to take effect in the United Kingdom on or after 1st April in respect of corporation tax and on or after 6th April for income tax and capital gains tax in the calendar year next following that in which it enters into force. The date of entry into force will in due course be published in the London, Edinburghand Belfast Gazettes.

Footnotes

[^f00001]: 1988 c. 1; section 788 is extended by section 277 of the Taxation of Chargeable Gains Act 1992 (c. 12).