The Double Taxation Relief (Taxes on Income) (Mongolia) Order 1996

Made: 15th October 1996

At the Court at Buckingham Palace, the 15th day of October 1996 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) (Mongolia) Order 1996.

2

It is hereby declared-

• (a) that the arrangements specified in the Convention set out in the Schedule to this Order have been made with the Government of Mongolia 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 Mongolia;

• (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 Mongolia 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 — CONVENTION BETWEEN THE GOVERNMENT OF THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND AND THE GOVERNMENT OF MONGOLIA 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 Mongolia;

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 and with a view to promoting economic co-operation between the two countries;

Have agreed as follows:

Article 1

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

Article 2

Article 3

Article 4

Article 5

Article 6

Article 7

Article 8

Article 9

Article 10

Article 11

Article 12

Article 13

Article 14

Article 15

Article 16

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

Article 17

Article 18

Article 19

Article 20

Article 21

A student, business apprentice or 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 shall be exempt from tax in that first-mentioned State on the following:

Article 22

Article 23

Article 24

Article 25

Article 26

Article 27

Article 28

Article 29

Nothing in this Convention shall affect any fiscal privileges accorded to members of diplomatic or permanent missions or consular posts under the general rules of international law or under the provisions of special agreements.

Article 30

Each of the Contracting States shall notify to the other through diplomatic channels the completion of the procedures required by its law for the bringing into force of this Convention. This Convention shall enter into force on the date of the later of these notifications and shall thereupon have effect:

Article 31

This Convention shall remain in force until terminated by one of the Contracting States. 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:

Signed

N H Nicholls — Clerk of the Privy Council

Explanatory note

(This note is not part of the Order)

The Convention with Mongolia is set out in the Schedule to this 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 derived from the alienation of such property may be taxed in the country in which the property is situated (Articles 6 and 13).

International transport profits are generally to be taxed only in the country of residence 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, in general, exceed 5 per cent. of the gross amount if the recipient is a company controlling at least 10 per cent. of the voting power in the company paying the dividends; and 15 per cent. of the gross amount of the dividends in all other cases (Article 10).

The rate of tax imposed in the country of source on interest derived by a resident of the other country is, in general, not to exceed 10 per cent. of the gross amount flowing to the other country. Where the beneficial owner of the interest is a bank that rate is reduced to 7 per cent. Certain other interest (e.g. interest payable to the Government of the other country) is exempt from tax in the source state (Article 11).

The rate of tax imposed in the source country on royalties is, in general, limited to 5 per cent. of the gross amount of the royalties (Article 12).

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, only to be taxed 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 performed (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 to be taxed only by the paying Government (Article 19). The remuneration of teachers and researchers and payments made to students, business apprentices and trainees are, subject to certain conditions, to be exempt from tax in the country visited (Articles 20 and 21). Other income (with the exception of income from trusts and estates of deceased persons under administration) not specified in the Convention remain taxable only in the recipient’s country of residence (Article 22).

The Capital Article (Article 23) 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. Capital represented by assets of a permanent establishment or fixed base which the taxpayer has in the other country may be taxed in the other country.

Where income continues to be taxable in both countries credit will be given in the taxpayer’s country of residence for tax imposed by the other country. The credit to be given in the United Kingdom for tax imposed in Mongolia includes credit for tax spared under certain provisions of Mongolian law. In the case of dividends, the United Kingdom will give credit for the underlying tax paid in Mongolia 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 24).

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 its legislative procedures. 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, Edinburgh and Belfast Gazettes.

Footnotes

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