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Switzerland; Canada

1 February 2012

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Protocol to treaty between Switzerland and Canada enters into force


20 December 2011

According to the Canadian Tax Authorities, the amending protocol, signed on 22 October 2010, to the Canada - Switzerland Income and Capital Tax Treaty (1997), entered into force on 16 December 2011. The protocol generally applies from 1 January 2012.

Treaty between Finland and Uruguay – details
21 December 2011

Details of the Finland - Uruguay Income and Capital Tax Treaty (2011), signed on 13 December 2011, have become available. The treaty was concluded in the Finnish, Spanish and English languages, each text having equal authenticity. In the case of divergence, however, the English text prevails. The treaty generally follows the OECD Model (2008).

The maximum rates of withholding tax are:

-   dividends:
-   15% in general; and
-   5% if the beneficial owner is a company (other than a partnership) which controls directly at least 25% of the capital of the company paying the dividends;
-   10% on interest subject to the common exemptions for interest paid by or to public bodies, etc.; and
-   royalties:
-   10% in general; and
-   5% for the use of, or the right to use, industrial, commercial or scientific equipment or for the use of, or the right to use any software.

Deviations from the OECD Model include that:

-   a building site, or construction, installation or assembly project or supervisory activities in connection therewith, constitute a permanent establishment (PE) if it lasts more than 6 months (article 5(3)(b));
-   the furnishing of services, including consultancy services, by an enterprise through employees or other personnel engaged for such purpose constitute a PE if the activities for the same or a connected project continue within a contracting state for a period or periods aggregating more than 9 months within any 12-month period (article 5(3)(b));
-   profits of an enterprise from the use, maintenance or rental of containers (including trailers, barges and related equipment for the transport of containers) used for the transport of goods or merchandise are taxable only in that state, except where such containers are used for the transport of goods or merchandise solely between places within the other contracting state (article 8(2));
-   the term "royalties" includes payments for films or tapes for television or radio broadcasting (article 12(3)(b));
-   the term "for the use of, or the right to use any software" in article 12 (royalties) is interpreted according to the Commentary to the OECD Model (2008) (protocol article 2);
-   the Commentaries to the OECD Model (2008) are an authentic means of interpretation provided that the treaty provision corresponds to the provision of the OECD Model (protocol article 6);
-   the provisions on dividends do not apply if the main purpose or one of the main purposes of any person concerned with the creation or assignment of the shares or other rights in respect of which the dividends are paid to take advantage of this article by means of that creation or assignment (protocol article 3 (a));
-   the provisions on interest do not apply if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the debt claim in respect of which the interest is paid to take advantage of this article by means of that creation or assignment (protocol article 3(b));
-   the provisions on royalties do not apply if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the use, rights or information in respect of which the royalties are paid to take advantage of this article by means of that creation or assignment (protocol article 3(c)); and
-   the source country may tax benefits (including pensions) received under the social security legislation or any other public scheme organized by a contracting state for social welfare purposes (article 17(2)).

Both states provide for exemption-with-progression and credit methods to avoid double taxation. Finland, furthermore, exempts dividends paid by a company resident in Uruguay to a company resident in Finland provided that the Finnish company controls directly at least 10% of the voting power in the company paying the dividends (article 22(1)(b)).

The treaty does not apply to Uruguayan free zones in respect of financial services (protocol article 3(d)).

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