DTC agreement between Bahrain and Brunei Darussalam

8/7/2019 DTC agreement between Bahrain and Brunei Darussalam

http://slidepdf.com/reader/full/dtc-agreement-between-bahrain-and-brunei-darussalam 1/22

AGREEMENT

BETWEEN

THE GOVERNMENT OF THE KINGDOM OF BAHRAIN

AND

THE GOVERNMENT OF illS MAJESTY THE SULTAN AND YANG

DI-PERTUAN OF BRUNEI DARUSSALAM

FOR THE A VOIDANCE OF

DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION

WITH RESPECT TO TAXES ON INCOME AND ON CAPITAL



PREAMBLE

The Governmentof the Kingdom of Bahrain and the Government f His Majesty he SultanandYang Di-Pertuanof Brunei Darussalam,

Desiring to concludean Agreement or the Avoidance of Double Taxation and the PreventionofFiscal Evasionwith Respecto Taxeson ncomeand on Capital,

Haveagreedas ollows:

ARTICLE 1PersonsCovered

This Agreement hall apply o personswho are esidentsof one or both of the ContractingStates.

ARllCLE 2Taxes Covered

1. This Agreementshall apply to taxes on income and on capital imposed on behalf of aContracting State or of its political subdivisionsor local authorities, rrespectiveof themanner n which they are evied.

2 Thereshall be regarded s axeson ncomeand on capitalall taxes mposedon total ncome,on total capital, or on elementsof income or of capital ncluding taxes on gains from thealienation of movable or immovable property, taxes on the total amountsof wages orsalaries aid by enterprises, swell as axes on capitalappreciation:

3 The existing axes o which his Agreement hall applyare n particular:

(a) in the caseof Bahrain ncome ax payableunderAtniri DecreeNo. 22 of 1.979

(hereinafter eferred o as "Bahrain ax"); and

(b) in the caseof BruneiDarussalam:

(i)(ii)

income ax mposedunder he IncomeTax Act (Cap. 35); andpetroleumprofits tax imposedunder he Income Tax (petroleum)Act (Cap,

119)

(hereinafter eferred o as "Brunei Darussalamax").

4 This Agreement shall apply also to any identical or substantially similar taxes which are

imposed after the date of signat,lire of this Agreement in addition to, or in place of, the

existing taxes. The competent authorities of the Conti-acting States shall notify each other of

significant changesmade to their tax laws within a reasonableperiod of time.

Page2 of22



ARTICLE 3General Definitions

1. For the purposes f this Agreement,Wlless he contextotherwise equires:

(a) (i) the term "Bahrain" means the territory of the Kingdom of Bahrain as well as

the maritime areas, seabed and subsoil over which Bahrain exercises, inaccordance with international law, sovereign rights and urisdiction;

(ii) the teffil "Brunei Darussalam" means the territory of Brunei Darussalam

including its territorial sea, extending to the airspace above such territory,

over which it exercises sovereignty, and the maritime area beyond its

teqitorial sea, including sea-bed and subsoil, which has been or mayhereafter be designated under the laws of Brunei Darussalam, over which it

exercises its sovereign rights and jurisdiction in accordance with

intemationallaw;

(b) the tenD "company" means any body corporate or any entity incorporated orrecognised under the laws of one or other of the Contracting States or that is treatedas a body corporate for tax purposes;

(c) the term "competent uthority"means:

(i) in the case of Bahrain, the Minister of Finance or his authorized

representative; and

(ii) in the caseof Brunei Darussalam,he Minister of Finance or his authorizedrepresentative. "

(d) the tenns "a Contracting State" and the "other Contracting State" mean Bahrain or

Brunei Darussalam as the context requires;

(e)

(f)

the terms "enterpriseofa ContractingState"and "enterprise f the other ContractingState"mean espectively n enterprise arried on by a residentof a ContractingStateand an enterprise arried on by a residentof the otherContractingState;

the term "international raffic" meansany transportby a ship or aircraft operatedbyan enterprise hat has its place of effective managementn a Contracting State,except when the ship or aircraft is operated solely betweenplaces in the other

ContractingState;

the term "national" means:g)

(i) any individual posses~inghe nationality of a Contracting State under theapplicable aws of that ContractingState;

(Ii) any legal person,partnershipor association eriving its statusas such fromthe aws in force in a ContractingState.

(h) the teml "person" includes an individual, a company and any other body of persons;

(i) the term "tax" means Bahrain tax or BfWlei Darussalam tax, as the context requires.

Page3 of 22



2. As regards he applicationof this Agreementat any ime by a ContractingState,any termnot defmed hereinshall, unless he contextotherwise equires,have he meaning hat t hasat that time under he law of that ContractingState or the purposesof the taxes o whichthis Agreementapplies,anymeaningunder he applicable ax laws of that ContractingState

prevailing over a meaninggiven o the term underother aws of that ContractingState.

ARTICLE 4Resident

1 For the purposes of this Agreement, the term "resident of ~ Contracting State" means any

person who, under tile, laws of that Contracting State, s domiciled or resident in, a citizenof, or having their place of incorporation or managementwithin that Contracting State or is

liable to tax therein by reasonof his domicile, residence, place of management or any other

criterion of a similar nature, and also includes that Contracting State and any political

subdivision or local authority thereof. This term, however, does not include any person who

is liable to tax in that Contracting State in respect only of income from sources in thatContracting State or capital situated therein.

Where by reason of the provisions of paragraph 1 an individual is a, resident of both

Contracting States, hen his statusshall be determined as ollows:

(a) he shall be deemed o be a resident only of the Contracting State in which he has a

permanent home available to him; if he has a permanent home available to him in

both Contracting States, he shall be deemed o be a resident only of the Contracting

State with which his personal and economic relations are closer (centre of vital

interests);

(b) if the Contracting State n which he has his centre of vital interests cannot be

determined,or f he has not a permanent omeavailable o him in eitherContractingState,he shall be deemedo be a residentonly of the ContractingState n which hehas an habitualabode;

(c)'~~:if he hasanhabitualabode n both ContractingStatesor in neitherof them, he shallbe deemedo be a r~sid~nt nly of the ContractingStateof which he s a national;

'-, \

R¥;"".statesr of nei~er of them, the competentsnausettle he questIon y mutualagreement.

~~i!e~15Y"'reaSbnof the provisions of paragraph 1 a person other than an individual is a

resident of both Contracting States, then it shall be deemed to be a resident only of the

Contracting State n which its place of effective management s situated.

ARTICLE 5Permanent Establishment

1. For the purposes of this Agreement, the term "permanent establishment" means a fIXed

place of business hrough which the businessof an enterprise s wholly or partly carried on.

The term "permanent establishment" shall include especially

Page 4 of 22



(a)(b)

(c)(d)

(e)(f)(g)(h)

(i)

(j)

(k)

(1)

a place of management;

a branch;

an office;

a store, warehouse or premises used as a sales outlet unless the activities fall within

paragraphs 3(a) or (b);

a factory;a workshop;

a farm or plantation;

a mine, an oil or gas well, a quarry or other place of extraction of natural resources,

including timber or other forest produce;

a drilling rig or working ship or refinery used for the exploration of natural

resources~

a building site or construction project or supervisory activities in connection

therewith, provided such site, project or activity continues for a period of more than

183 days;

an assembly or installation project which exists for more than 183 days; and

the furnishing of services, including consultancy services by an enterprise throughemployees or other personnel engaged by the enterprise for such purpose, but only

where activities of that nature continue (for the same or a connected project) within

the country for a period or periods aggregating more than, 183 days within any

twelve-month period.

3 Notwithstanding the preceding provisions ofestablishment" hall not be deemedo include:

this Article, the term "permanent

(a) the useof facilities solely for the purposes f storage,display or delivery of goodsormerchandise elonging o the enterprise;

(b) the maintenance of a stock of goods or merchandise belonging to the enterprise

solely for the purpose:of storage, display or delivery;

(c) the maintenanceof a stock of goods or merchandise elonging to the enterprisesolely for the purposes f processing y anotherenterprise;

(d) the maintenance f a fixed place of businesssolely for the purposebf purchasinggoodsor merchandise, r for collecting nformation or the enterprise;

the maintenance f a fixed place of businesssolely for the purposeof advertising,

for the supply of information, for scientific researchor for similar activities whichhavea preparatory r auxiliary character, or the enterprise;

(e)

(f) the maintenance f a fixed place of business olely for any combinationof activitiesmentioned n subparagraphsa) to (e), provided that the overall activity of the fixedplace of business esulting from this co~bination is of a preparatoryor auxiliarycharacter.

Notwithstanding the provisions of paragraphs 1 and 2, where a person -other than an agent

of an independent status to whom paragraph 7 applies -is acting in a Contracting State on

behalf of an enterprise of the other Contracting State, that enterprise shall be deemed to

have a permanent establishment in the rust-mentioned Contracting State in respect of anyactivities which that person undertakes for the enterprise, if such a person:

Page5 of 22



(a) has and habitually exercises n that Contracting State an authority to concludecontracts n the name of the enterprise,unless he activities of such person arelimited to thosementioned n paragraph4 which, if exercised hrougha fixed placeof business,would not make hjs fixed placeof business permanent stablishmentunder he provisionsof thatparagraph; r

(b) has no suchauthority, but habitually maintains n the first-mentionedContractingState a stock of goods or merchandise rom which he regUlarlydelivers goods ormerchandise n behalfof the enterprise.

5. Notwithstanding he preceding provisions of this Article, an insuranceenterpriseof aContractingStateshaJ1,?exceptith regard o re-insurance, e deemed o havea permanentestablishmentn the other ContractingState f it collectspremiwns n the territory of thatother ContractingStateor insures isks situated herein hrougha personother han an agentof an independent tatus o whom paragraph applies.

An enterprise f a ContractingStateshall not be deemedo havea permanent stablishmentin the otherContractingStatemerelybecauset carrieson businessn that otherContractingState through a broker, general commission agent or any other agentof an independent

status, provided that such persons are acting in the ordinary course of their business.However, when the activities of such an agent are devoted wholly or almost wholly onbehalf of that enterprise, nd conditionsare made or imposedbetween hat enterpriseandthe agent n their commercialand fmancial relations which differ from those which wouldhave beenmadebetween ndependent nterprises, e will not be coiisideredan agentof an

independent tatuswithin the meaningof this paragraph.

7. The fact that a companywhich is a residentof a ContractingStatecontrols or is controlled

by a company which is a residentof the other Contracting State, or which carries onbusiness n that other Contracting State (whether hrough a permanentestablishment rotherwise),shall not of itself constitute either companya permanentestablishment f theother.

ARTICLE 6,I.,come from Immovable Property

Income derived -by a resident of a Contracting S"tate rom immovable property (including

income from agriculture, forestry or fishery) situated in the other Contracting State may be

taxed fu that other Contracting State.

The term "immovable property" shall have the meaning which it has under the law of the

Contracting State in which the property in question is situated. The term shall in any case

include property accessory to immovable property, livestock and equipment used in

agriculture, forestry and fishery, rights to which the:- rovisions of general law respecting

landed property apply, usufruct of immovable property and rights to variable or fixed

payments as consideration for the working of, or the right to work, mineral deposits, sources

and other natural resources; ships, boats and aircraft shall not be regarded as immovable

property.

The provisionsof paragraph shall also apply o incomederived rom the direct use, ettingor use n any other orm of immovableproperty.

Page6 of 22



4 The provisions of paragraphs 1 and 3 shall also apply to the income from immovable

property of an enterprise and to income from immovable property used for the performance

of independent personal services.

ARTICLE 7BusinessProfits

1 The profits of an enterpriseof a ContractingStateshall be taxable only in that ContractingState unless the enterprisecarries on business n the other Contracting State through apennanentestablishment ituated herein. f the enterprise arries on businessas aforesaid,the profits of the ~nterprisemay be taxed n the otherContractingStatebut only so much ofthemas are attributable o:

(a) that permanent stablishment;

(b) sales n that other ContractingStateof goodsor merchandise f the sameor similarkind as hosesold through hat permanent stablishment; r

other businessactivities carried on in that other Contracting~tate of the same orsimilar kind as hoseeffected hrough hat permanent stablishment.

(c)

2, Subject o the provisionsof paragraph , where an enterpriseof a ContractingStatecarrieson business n the other Contracting State through a pemlanent establishment ituatedtherein, here shall in eachContractingStatebe attributed o that pennanentestablishmentthe profits which it might be expected o make f it were a distinct and separate nterpriseengaged n the sameor similar activities under he sameor similar conditionsand dealing

wholly independentlywith the enterprise f which it is a pennanent stablishment.

In the determination of the profits of a permanent establishment, there shall be allowed as

deductions expenses which are incurred for the purposes of the business of the permanent

establishment ncluding executive and general administrative expensesso incurred, whether

in the Contracting State in which the permanent establishment is situated or elsewhere

which are allowed under the provisions of the domestic law of the Contracting State in

which the permanent establishment is situated. However, no such deduction shall be

allowed in respect of amounts, f any, paid.(otherwise than towards reimbursement of actual

expenses) by the permanent establishment to the head office of the enterprise or any of its

other offices, by way of royalties, fees or other similar payments in return for the use of

patents or other rights, or by way of commission, for specific services performed or formanagement, or, except in the case of a banking enterprise, by way of interest on moneys

lent to the permanent establishment. Likewise, no account shall be taken, in the

determination of the profits of a permanent establishment, for amounts charged .( therwise

than towards reimbursement of actu,al expenses), by the permanent establishment to the

head office of the enterprise or any of its other offices, by way of royalties, fees or othersimilar payments in return for the use of patents' or other rights, or by way of commission

for specific services performed or for management, or, except in the case of a banking

enterprise, by way of interest on moneys lent to the head office of the enterprise or any of its

other offices.

3

In so far as it has been customary in a Contracting State to determine the profits to beattributed to a permanent establishment on the basis of an apportionment of the total profits

4

Page 7 of22





and in either caseconditions are made or imposed between he two enterprises n theircommercial or fmancial relations which differ from those which would be made betweenindependententerprises, hen any profits which would, but for those conditions, haveaccrued o one of the enterprises, ut, by reasonsof those conditions,have not so accrued,may be included n the profits of that enterprise nd axedaccordingly.

Where a Contracting State ncludes in the profits of an enterprise of that Contracting State -and taxes accordingly -profits on which an enterprise of the other Contracting State has

been charged to tax in that other Contracting State and the profits so included are profits

which would have accrued to the enterprise of the first-mentioned Contracting State if the

conditions made between the two enterprises had been those which would have been made

between independent enterprises, then t1lat other Contracting State shall make an

appropriate adjuspnent to the amount of the tax charged therein on those profits. In

determining such adjustment, due regard shall be had to the other provisions of this

Agreement and the competent authorities of the Contracting States shall, if necessary,

consult each other.

3. The provisions of paragraph2 shall not apply where judicial, administrative or legalproceedings ave resulted n a fmal ruling that by actions giving rise to an adjustmentofprofits under paragraph , one of the enterprises oncerneds liable to penalty with respectto fraud, grossnegligenceor wilful default.

ARTICLE 10Dividends

Dividendspaid by a company,which s a residentof a ContractingState, o a residentof theotherContractingState,shall be taxable only in that otherContractingState f such esident

is the beneficial owner of the dividends.This paragraph hall not affect he taxation of thecompany n respect f the profits out of which the dividendsarepaid.

1

2 The term "dividends"as used n this Article means ncome from shares, jouissance" haresor "jouissance" rights, mining shares, ounders' shares or other rights, not being debt-claims, participating in profits, as well as income from other corporate rights which issubjected o the same taxation treatment as income from shares by the laws of theContractingStateof which the companymaidng he distribution s a resident. .

The provisionsof paragraph shall not apply f the beneficial ownerof the dividends,beinga residentof a ContractingState,carrieson business n the otherContractingStateof which

the companypaying he dividends s a resident, hrougha permanent stablishment ituatedtherein, or performs in that other Contracting State ndependent ersonalservices rom afixed base situated herein, and the holding in respectof which the dividends are paid iseffectively connectedwith such permanentestablishment r fixed base. n such case heprovisionsof Article 7 or Article 15, as he casemay be, shall apply.

Where a companywhich is a residentof a ContractingStatederivesprofits or income fromthe other Contracting State, hat other Contracting State may not impose any tax on thedividendspaid by the company,except n so far as suchdividendsare paid to a residentofthat other ContractingStateor in so far as he holding in respectof which the dividendsarepaid is effectively connectedwith a permanent stablishment r a fIXedbasesituated n that

other Contracting State, nor subject he company's undistributedprofits to a tax on the

4

Page 9 of 22



company's undistributedprofits, even f the dividendspaid or the undistributed profitsconsistwholly or partly of profits or incomearising n suchotherContractingState.

5 The provisionsof this Article shall not apply f it was he main purposeor one of the mainpurposes f any personconcernedwith the creationor assignment f the sharesor rights inrespectof which the dividend is paid to take advantage f this Article by meansof that

creationor assignment.

ARTICLE 11Income from Debt-Claims

1 Income from debt-cll!imsarising n a ContractingStateand paid to a residentof the otherContractingStatemay be taxed n that otherContractingState.

2 However, such income may also be taxed in the Contracting State in which it arises and

according to the laws of that Contracting State, but if the beneficial owner of the income is a

resident of the other Contracting State, the tax so charged shall not exceed five (5) per centof the gross amount of the income.

3 The competentauthoritiesof the ContractingStatesshall by mutual agreement ettle hemodeof applicationof this limitation.

4. Notwithstanding the provisions of paragraph 2, income arising in a Contracting State and

paid to the Government of the other Contracting State or a local authority or statutory body

or agency or authority thereof, or to the National Bank or any wholly owned company of

that other State, shall be exempt from tax in the first-mentioned Contracting State.

5. The erms "income rom debt-claims"or "income" asused n this Article mean ncome romdebt-claimsof everykind, whetheror not securedby mortgageand whetheror not carryinga right to participate n the debtor's profits, and in particular, ncome from governmentsecurities nd ncome rom bondsor debentures,ncludingpremiumsandprizesattaching osuchsecurities, ondsor debentures. enaltycharges or late paymentshall not be regardedas ncome or the purposeof this Article.

6. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of th~ income,

being a resident of a Contracting State, carries on business n the other Contracting State in

which the income arises, through a permanent establishmentsituated therein, or performs in

that other Contracting State independent personal services from a fixed base situated

therein, and the debt-claim in respect of which the income is paid is effectively connected

with (a) such permanent establishment or fixed base, or with (b) business activities referred

to in subparagraph c) of paragraph 1 of Article 7. In such cases he provisions of Article 7

or Article 15, as the case may be, shall apply.

Income from debt-claims shall be deemed o arise in a Contracting State when the payer s a

resident of that Contracting State. Where, however, the person paying the income, 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

income is paid was incurred, and such ncome is borne by such permanent establishment or

fixed base, then such ncome shall be deemed o arise in the Contracting State in which thepermanent establishment or fixed base s situated.

7.

Page10 of 22



8. Where, by reason of a special relationship between the payer and the beneficial owner or

between both of them and some other person, the amoWlt of the income, having regard to

the debt-claim for which it is paid, exceeds he amoWlt which would have been agreed upon

by the payer and the beneficial owner in the absenceof such relationship, the provisions of

this Article shall apply only to the last-mentioned amoWlt. 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 Agreement.

9 The provisions of this Article shall not apply f it was the main purposeor one of the mainpurposesof any person concernedwith the creation or assignment f the debt-claim inrespectof which the income is paid to take advantageof this Article by means of thatcreationor assignment.

ARTICLE 12

Royalties

1. Royaltiesarising in a ContractingStateand paid to a residentof the other ContractingStatemay be taxed n that otherContractingState.

2 However, such oyalties may also be taxed in the ContractingState n which they arise andaccording o the laws of that ContractingState,but if the beneficial ownerof the royalties sa residentof the other ContractingState, he tax so chargedshall not exceed ive (5) percentof the grossamountof the royalties.

3. The competentauthorities of the Contractingstates shall by mutual agreement ettle themodeof applicationof this limitation.

Notwithstanding he provisionsof paragraph , royalties arising n a ContractingStateandpaid to the Government f the other ContractingStateor a local authority or statutorybodyor agencyor authority hereof, or to the National Bank or any wholly owned companyofthat otherState,shall be exempt rom tax in the first mentionedContractingState.

5 The term "royalties" as used in this Article means paymentsof any kind received as aconsiderationor:

(a) the use of, or the right to use, any copyright of literary, artistic, or scientific work but

not including cinematographic films or films or tapes used for radio or television

broadcasting, any patent, trademark, or model, plan, secret ormula or process, or for

the use of, or the right to use, industrial, commercial, or scientific equipment, or forinformation concerning industrial, commercial or scientific experience;

(b) the receiptof, or right to receive,any visual, imagesor sounds,or both, transmittedby satellite, cable, optic fibre or similar technology n connectionwith television,radio or internetbroadcasting;

(c) the supply of any assistance hat is ancillary and subsidiary to and is furnished as a

means of enabling the application or enjoyment of, any such property or right as

mentioned in clauses (a) and (b);

the disposalof anyproperty or right referred o in clauses a) and (b).(d)

Page 11 of 22



The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties

being a resident of a Contracting State, carries on business n the other Contracting State in

which the royalties arise, through a permanent establishmentsituated therein, or performs in

that other Contracting 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 (a) such permanent establishment or fixed base, or with (b) business

activities referred to in subparagraph c) of paragraph 1 of Article 7. In such cases, theprovisions of Article 7 or Article 15, as the casemay be, shall apply.

7 Royaltiesshall be deemedo arise n a ContractingStatewhen he payer s a residentof thatContractingState.Where,however, he person aying he royalties,whetherhe s a residentof a Contracting State or not, has n a ContractingState a permanentestablishment r afixed base n connectionwith which the liability to pay he royaltieswas ncurred,and suchroyalties are borne by suchpermanent stablishment r fixed base, hen such oyalties shallbe deemed o arise n the ContractingState n which the permanent stablishment r fixedbase s situated.

8 Where, by reasonof a special relationshipbetween he payer and the beneficial owner orbetweenboth of them and some otherperson, he amountof the royalties,having regard othe use, right or information for which they arepaid, exceedshe amountwhich would havebeenagreedupon by the payerand he beneficialowner n the absence f such elationship,the provisionsof this Article shall apply only to the last-mentioned mount. n suchcase,the excess part of the payments shall remain taxable according to the laws of eachContractingState,due regardbeinghad o the otherprovisionsof this Agreement.

9. The provisionsof this Article shall not apply f it was he main purposeor one of the mainpurposes f any personconcernedwith the creationor assignment f the shares r rights inrespectof which the royalties are paid to take advantage f this Article by meansof that

creationor assignment.

ARTICLE 13Technical Fees

Technical ees arising in a ContractingStatewhich are derived by a residentof the otherContractingStatemay be taxed n that otherContractingState. .

2 However, such technical fees may also be taxed in the Contracting State in which they arise

and according to the laws of that Contracting State, but if the beneficial owner of the

technical fees is a resident of the other Contracting State, he tax so charged shall not exceed

ten (10) per cent of the gross amount of the technical fees.

The term "technical ees" as used n this Article meanspayments f any kind to anyperson,other than to an employeeof the personmaking the payments, n consideration or anyservicesof a technical,managerialor consultancy ature.

3

The provisionsof paragraphs and 2 shall not apply f the beneficialowner of the technicalfees, being a residentof a ContractingState,carries on business n the other ContractingState n which the technical ees arise hrough a permanent stablishment ituated herein,

or performs n that other ContractingState ndependent ersonal ervices rom a fixed basesituated herein, and the technical ees are effectively connectedwith (a) such permanentestablishment r fixed baseor with (b) business ctivities eferred o in subparagraphc) of

Page12 of22



paragraph of Article 7. In suchcases,he provisionsof Article 7 or Article 15, as he casemay be, shall apply.

5, Technical ees shall be deemed o arise n a ContractingState when he payer s a residentof that ContractingState.Where,however, he personpaying he technical ees, whetherheis a resident of that Contracting State or not, has in that Contracting State a permanent

establishment r a fixed base n connectionwith which the liability to pay he technical eeswas incurred, and such echnical ees are borne by such permanentestablishment r fixedbase, hen such echnical eesshall be deemed o arise n the ContractingState n which thepermanent stablishment r fixed base s situated.

6. Where, by reasonof a special relationshipbetween he payer and the beneficial owner orbetweenboth of themand someotherperson, he amountof the technical eespaid exceeds,for whatever eason, he amountwhich would have beenagreedupon by the payerand thebeneficial owner in the absence f such relationship, he provisions of this Article shallapply only to the last-mentioned mount. n suchcase, he excess art of the payments hallremain axableaccording o the laws of eachContractingState,due regardbeing had o the

otherprovisionsof this Agreement.

The provisions of this Article shall not apply f it was the main purposeor one of the mainpurposes f any personconcernedwith the creationor assignment f the rights in respectofwhich the technical ees are paid to take advantage f this Article by meansof that creationor assignment.

ARTICLE 14Capital Gains

1 Gains derived by a resident of a Contracting State from the alienation of immovableproperty eferred o in Article 6 and situated n the other ContractingStatemay be taxed nthat otherContractingState.

2. Gains from the alienationof movable property orming part of the businessproperty of apermanent establishmentwhich an enterprise of a Contracting State has in the otherContractingStateor of movablepropertypertaining o a fixed baseavailable o a residentofa ContractingState n the otherContractingState or the purposeof performing ndependentpersonal services, including such gains from the alienation of such a permanentestablishmentalone or with the whole enterprise)or of such ixed base,may be taxed inthat otherContractingState.

Gainsderived by an enterprise ra ContractingState rom the alienationof ships or aircraftoperated n international raffic, boatsengaged n inland waterways ransport or movableproperty pertaining to the operationof such ships or aircraft shall be taxable only in theContractingState n which the placeof effective management f the enterprises situated.

3

Gains from the alienationof shares f the capital stockof a company,or of an interest n apartnership, rust or estate, he property of which consistsdirectly or indirectly principallyof immovable property situated n a Contracting State may be taxed in that ContractingState. In particular:

4.

nothing contained in this paragraph shall apply to a company, partnership, trust orestate, other than a company, partnership, trust or estate engaged in the business of

(a)

Page 13 of22



management f immovable properties, he property of which consistsdirectly orindirectly principally of immovable property used by such company,partnership,trust or estaten its business ctivities;

(b) for the purposes of this paragraph, "principally" in relation to ownership ofimmovable property means he value of such mmovable property exceeding50

percentof the aggregate alue of all assets wned by the company,partnership, rustor estate.

5 Gains from the alienationof any property other han that referred o in paragraphs , 2, 3and 4 shall be taxableonly n the ContractingStateof which he alienator s a resident.

ARTICLE 15IndependentPersonalServices

] Income derived by a residentof a ContractingState n respectof professionalservicesor

other activities of an independent haracter hall be taxable only in that ContractingStateexcept n the following circumstances, hen such ncome may also be taxed in the otherContractingState:

(a) if he hasa fixed base egularlyavailable o him in the otherContractingState or thepurposeof performing his activities; n that case,only so much of the incomeas sattributable o that ixed basemay be axed n that otherContractingState;or

(b) if his stay n the other ContractingState s for a period or periodsamounting o orexceeding n the aggregate 83 days n any twelve-monthperiod commencingorending in the fiscal year concerned;n that case,only so much of the income as sderived rom his activitiesperformed n that otherContractingStatemay be taxed nthat otherContractingState.

2. The tenD "professional services" ncludes especially independent scientific, literary, artistic,

educational or teaching activities as well as the independent activities of physicians,

lawyers, engineers, architects, dentists and accountants.

ARTICLE 16DependentPersonal Services

Subject o the provisions of Articles 17, 19 and 20, salaries,wages and other similarremuneration erivedby a residentof a ContractingState n respect f an employment hallbe taxable only in that ContractingStateunless he employment s exercised n the otherContracting State. If the employment s so exercised,such remunerationas is derived

therefrommay be taxed n that otherContractingState.

1

Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a

Contracting State n re.s:pect f an employment exercised n the other Contracting State shall

be taxable only in the fIrst-mentioned Contracting State f:

2

the recipient s present n the other Contracting State or a period or periods notexceeding n the aggregate 83 days n any twelve-monthperiod commencingorending n the fiscal year concerned; nd

(a)

Page 14 of 22



(b) the remunerations paid by, or on behalf of, an employerwho is not a residentof theotherContractingState;and

(c) the remuneration is not borne by a permanent establishment or a fixed base which

the employer has in the other Contracting State.

Notwithstanding he precedingprovisionsof this Article, remuneration erived n respectofan employment exercisedaboard a ship or aircraft operated n international traffic, oraboarda boat engagedn inland waterways ransport,may be taxed n the ContractingStatein which the placeof effective management f the enterprises situated.

ARTICLE 17Directors' Fees and Remuneration of

Top-Level Managerial Officials

1. Directors' fees and other similar paymentsderived by a residentof a Contracting State nhis capacityas a memberof the Board of Directors of a companywhich is a residentof theotherContractingStatemaybe taxed n that otherContractingState.

2 Salaries,wagesand other similar remuneration erived by a residentof a ContractingStatein his capacity as an official in a top-level managerialposition of a companywhich is aresidentof the otherContractingStatemay be taxed n that otherContractingState.

ARTICLE 18Artistes and Sportspersons

1 Notwithstanding he provisions of Articles 15 and 16, income derived by a residentof aContracting State as an entertainer,such as a theatre, motion picture, radio or televisionartiste, or a musician, or as a sportsperson,rom his personalactivities as suchexercised nthe otherContractingState,maybe taxed n that otherContractingState.

2. Where ncome n respectof personalactivities exercisedby an entertaineror a sportspersonin his capacityas suchaccruesnot to the entertaineror sportsperson imself but to anotherperson, hat ncome may, notwithstanding he provisionsof Articles 7, 15 and 16, be taxedin the Contracting State in which the activities of the entertainer or sportsperson reexercised.

Notwithstanding the provisions of paragraphs1 and 2, income derived from activitiesreferred o in paragraph shall be exempt rom tax in the ContractingState n which theactivities are exercised f the visits to that Contracting State are wholly or substantiallysupportedby funds of one or both of the Contracting State, a local authority or public

institution hereof.

3

Page 15 of 22



ARTICLE 19Pensionsand Social Security Payments

] Subject to the provisions of paragraph2 of Article 20, pensions and other similarremuneration aid to a residentof a ContractingState n consideration f past employmentmaybe taxed n that ContractingState.

2 However, such pensionsand other similar remunerationmay also be taxed in the otherContractingState f the payment s made by a residentof that other ContractingStateor apermanent stablishmentituated herein.

3. Notwithstanding he provisions of paragraphs and 2, pensionspaid and other paymentsmade under a public~scheme hich is part of the social security systemof a ContractingState or a political subdivision or a local authority hereof shall be taxable only in thatContractingState.

ARTICLE 20Government Service

1 {a) Salaries,wages and other similar remuneration,other than a pension, paid by aContracting State or a political subdivision or a local authority thereof to anindividual in respect f services endered o that ContractingStateor subdivisionorauthorityshall be axableonly in that ContractingState.

(b) However, suchsalaries,wagesand othersimilar remuneration hall be taxable onlyin the other ContractingState.f the servicesare rendered n that other ContractingStateand he individual s a resident f that ContractingStatewho:

(i) is a nationalof that ContractingState;or

(ii) did not becomea residentof that ContractingStatesolely for the purposeofrendering he services.

2 (a) Any pension paid by, or out of funds created by, a Contracting State or a political

subdivision or a local authority thereof to an individual in respect of services

rendered to that Contracting State or subdivision or authority shall be taxable only in

that Contracting State.

However, such pensionshall be taxable only in the other ContractingState f theindividual is a residentof, and a nationalof, that otherContractingState.

(b)

The provisions of Articles 16, 17, 18 and 19 shall apply to salaries, wages and other similar

remuneration, and to pensions, n respect of services rendered n connection with a business

carried on by a Contracting State or a political subdivision or a local authority thereof.

3

ARTICLE 11Teachersand Researchers

A teacher or researcherwho is a resident of a Contracting State immediately before making

a visit to the other Contracting State and who, at the invitation of any approved university,

Page 16 of 22



college, school, or other similar educational institution or scientific research institution,visits that other Contracting State for a period not exceeding two years from the date of his

arrival in that other Contracting State solely for the purpose of teaching or research or both

at such educational or research institution, shall be exempt from tax in that other

Contracting State on any remuneration derived from such eaching or research.

2 The term "approved" n paragraph refers o the approval given by the ContractingState nwhich the university, college, school or other similar educational nstitution or scientificresearchnstitution s situated.

3. This Article shall not apply to income from research f such research s undertakenprimarily for the private benefitof a specific personor persons.

ARTIC~E 22Students

Payments which a student or business trainee or apprentice who is or was immediately beforevisiting a Contracting State a resident of the other Contracting State and who is present in the flrst-

mentioned Contracting 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 Contracting State,

provided that such payments arise from sources outside that Contracting State.

Article 23

Other Income

1. Items of income of a residentof a ContractingState,whereverarising, not dealt with in the

foregoingArticles of this Agreement hall be taxableonly in that ContractingState.

The provisions of paragraph 1 shall not apply to income, other than income from

immovable property as defined in paragraph 2 of Article 6, if the recipient of such income,

being a resident of a Contracting State, carries on business in the other Contracting State

through a pemlanent establishment situated therein, or perfomls in that other Contracting

State independent personal services from a fixed base situated therein, and the right or

property in respect of which the incom~ is paid is effectively connect(!d with such

pemlanent establishment or fixed base. In such case the provisions of Article 7 or Article

15, as the case may be, shall apply.

3 Notwithstanding he provisionsof paragraphs and 2, items of income of a residentof aContractingState not dealt with in the foregoing Articles of this Agreementand arising nthe other ContractingStatemay also be taxed in that other ContractingState n accordancewith domestic aws.

ARTICLE 24Methods for the Elimination of Double Taxation

1 Where a resident of a Contracting State derives income or owns capital which, in

accordance with the provisions of this Agreement, may be taxed in the other Contracting

State, the first-mentioned State shall allow as a deduction from the tax on the income of thatresident an amount equal to the income tax paid in that other Contracting State; and as a

Page 17 of 22



deduction rom the tax on he capitalof that resident, n amountequal o the capital ax paidin that otherContractingState.Suchdeduction n eithercaseshall not, however,exceed hatpart of the income ax or capital ax, as computedbefore he deduction s given, which isattributable,as the casemay be, to the income or the capital which may be taxed n thatother ContractingState.

2 Where, in accordancewith any provision of this Agreement, ncome derived or capitalowned by residentof a ContractingState s exempt rom tax in that ContractingState,such

Contracting State may nevertheless,n calculating he amount of tax on the remainingincome or capitalof such esident, ake nto accounthe exemptedncome or capital.

ARTICLE 25N on-Discrimination

1. Nationals of a Contracting State shall not be subjected n 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 Contracting Statein the same circumstances, n particular With r~spect o residence, are or may be subjected.

This provision shall, notwithstanding the provisio~ of Article 1, also apply to persons who

are not residents of one or both of the Contracting States.

2 Stateless ersonswho are residentsof a ContractingState shall not be subjected n eitherContractingState o any taxation or any requirement onnected herewith which is other ormore burdensomehan he taxation and connected equirementso which nationalsof theContracting State concerned n the same circumstances,n particular with respect oresidence, re or maybe subjected.

3. The taxation on a permanent establishment which an enterprise ora Contracting State has in

the other Contracting State shall not be less favourably levied in that other Contracting State

than the taxation levied on enterprises of that other Contracting State carrying on the same

activities. This provision shall not be constructed as obliging a Contracting State o 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.

4 Except where the provisions of paragraph1 of Article 9, paragraph8 of Article 11, orparagraph6 of Article 12 or paragraph6 of Article 13 apply, income from debt-claims,

royalties, fee for technical servicesand other disbursements aid by an enterpriseof aContracting State o a resident of the other Contracting State shall, for the purpose ofdetermining he taxableprofits of suchenterprise, e deductibleunder he sameconditionsas f they had beenpaid to a residentof the first-mentionedContractingState,however, heprecedingprovisionsof this paragraph hall not apply o the disbursements ade withoutwithholding and depositing ax chargeable nder he domestic aw and n accordancewith

the provisionsof this Agreement.

Enterprisesof a Contracting State, the capital of which is wholly or partly owned orcontrolled, directly or indirectly, by one or more residentsof the other ContractingState,shall not be subjected n the fIrst-mentionedContracting State to any taxation or any

requirement onnected herewith which is other or more burdensomehan the taxationandconnected requirements to which other similar enterprises of the first-mentioned

ContractingStateare or may be subjected.

Page 18 of 22



6 Where a Contracting State grants tax incentives to its nationals designed o promoteeconomic or social developmentn accordancewith its national policy and criteria, it shallnot be construed s discriminationunder his Article.

7.

ARTICLE 26Mutual Agreement Procedure

1. 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 Agreement, he

may, irrespective Q£ he remedies provided by the domestic law of those Contracting States,present his case o the competent authority of the Contracting State of which he is a resident

or, if his case comes under paragraph I of Article 25, to that of the Contracting State of

which he is a national. The case must be presented within three years from the first

notification of the action resulting in taxatiQn not in accordance with the provisions of this

Agreement.

2 The competentauthority shall endeavour,f the objectionappearso it to be ustified and fit is not itself able to arrive at a satisfactorysolution, to resolve the case by mutualagreementwith the competentauthority of the other ContractingState, with a view to theavoidanceof taxation which is not in accordancewith this Agreement. Any agreementreachedshall be implementednotwithstandingany time limits in the domestic aw of theContractingStates.

3 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 this

Agreement. They may also consult together for the elimination of double taxation in casesnot provided for in this Agreement.

3 The competent authorities of the Contracting States may communicate with each other

directly, including through a joint commission consisting of themselves or their

representatives, for the purpose of reaching an agreement in the sense of the preceding

paragraphs. The competent authorities, through consultations, shall develop appropriate

bilateral procedures, conditions, methods and techniques for the implementation of the

mutual agreementprocedure provided for in this Article. In addition, a competent authority

may devise appropriate unilateral procedures, conditions, methods and techniques to

facilitate the above-mentioned bilateral actions and the implementation of the mutual

agreementprocedure.

ARTICLE 27Exchange of Information

1 The competent authorities of the Contracting States shall exchange such information as is

necessary for carrying out the provisions of this Agreement or of the domestic laws of the

Contracting States concerning taxes covered by this Agreement, in so far as the taxation

there under is not contrary to this Agreement, in particular for the prevention of fraud or

evasion of such taxes. 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

Page 19 of 22



information obtained under the domestic laws of that Contracting State. However, if the

information is originally regarded as secret in the transmitting State it shall be disclosed

only to persons or authorities (including courts and administrative bodies) concerned with

the assessmentor collection of, the enforcement or prosecution in respect of, or the

determination of appeals n relation to, the taxes which are the subject of this Agreement.

Such persons or authorities shall use the information only for such purposes but may

disclose the information in public court proceedings or in judicial decisions. The competentauthorities shall, through consultation, develop appropriate condi~ions, methods and

techniques concerning the matters in respect of which such exchangesof information shallbe made, including, where appropriate, exchangesof information regarding tax avoidance.

In no caseshall he provisionsof paragraph be construed o as o imposeon a ContractingState the obligation: ~,

(a) to carry out administrativemeasuresat variance with the laws and administrativepracticeof that or of the otherContractingState;

(b) to supply information which is not obtainable under the laws or in the normal courseof the administration of that or of the other Contracting State;

(c) to supply infornlation which would disclose any trade, business, ndustrial,

commercial or professional secret or trade process, or information, the disclosure of

which would be contrary to public policy; and

(d) to supply nfonnation, which is neitherheld by its authoritiesnor in the possessionor control of personswho are within its territorial urisdiction.

ARTICLE 28Members of Diplomatic Missions and Consular Posts

Nothing in this Agreementshall affect he fiscal privilegesof members f diplomatic missions orconsular posts under the general rules of international aw or under the provisions of special

agreements.

ARTICLE 29Entry Into Force

This Agreement hall enter nto force on the thirtieth day after he dateof receiptof the laterof the two notifications through diplomatic channelsby which either Contracting Statenotifies the other Contracting State that its internal legal requirements or the entry intoforce of this Agreement ave been ulfilled.

This Agreement hall have effect

(a) in the caseof Bahrain;

in respect f Bahrain ax for the year of assessmenteginningon or after 1st Januaryin the calendar ear immediately ollowing the year n which this Agreemententersinto force and subsequentearsof assessment;nd

fage 20 of 22



(b) in the caseof Brunei Darussalam;

in respect of Brunei Darussalam tax for the year of assessment eginning on or after

1st January in the calendar year immediately following the year in which this

Agreement enters nto force and subsequentyears of assessment.

ARTICLE 30Termination

This Agreementshall remain n force until terminatedby a ContractingState. Either ContractingStatemay terminate his Agreement, hrough diplomatic channels,by giving notice of terminationat least six months before he end of any calendaryear starting ive years after the year in whichthis Agreement ntered nto force. In suchevent, his Agreement hall cease o haveeffect:

in the caseof B$ain;)

in respectof ~ain tax for the year of assessment"~;on o( ~er 1s1 anuary n thesecondcale~g~ subsequent earsof assessmtn" aild ',cc" ; "t" f\ cf

,,", " c "

b). th ("n .

D alll e case G cDtuIlel atuss am;

in respect of Bvunei D~ssa1~ tax Jor the year Qf asse~sme~tbbginning on or after 1 st

January in thf/'~ear ;~!,~hi~~ t~ notice is given andhi "' " ,c " ., " "'!'!'

su sequentyears"o "'~s~$smet1t." ; ,,' t { ~ it""",:;

.1; ,c. '; c.

IN WITNESS WHE~OF 't~& undersigned,being duly au\flb{ii~d ;,thereto, ave signed thisAgreement. ;,' ;1 ,;; I~':;,\;

CCFor he~ ~nmenL-

,.-aWlt!-Majes-ity the Sultan and YangDi-Pertuan of Brunei Darussalam

Page21 of 22

and English anguages.n th~'e'¥nt,<\f!~ivergenceetwee~jth~~~s'pfthis Agreement, he Englishh 11 01 " "c" c" p

text s a PrevaI 0 1"'c"j; j "1 11"..'1, \:'" ,



PROTOCOL TO THE AGREEMENT BETWEEN

THE GOVERNMENT OF THE KINGDOM OF BAHRAIN

AND

THE GOVERNMENT OF ms MAJESTY THE SULTAN

AND YANG DI-PERTUAN OF BRUNEI DARUSSALAM

FOR THE AVOIDANCE OF

DOUBLE T1\;xATION AND THE PREVENTION OF FISCAL EVASION

WITH RESPECT TO TAXES ON INCOME AND ON CAPITAL

On signing the Agreement between the Government of the Kingdom of Bahrain and the

Government of His Majesty the Sultan and Yang Di-Pertuan of B~ei Darussalam, heundersigned epresentativesave, n addition, agreedon the following provisions which shall forman ntegralpart of the Agreement:

1. Proviso to Article 17

It is understood hat a ContractingState shall accord o a residentof the other ContractingState,acting n his capacityas director or a top level managerial fficial of the companyunderArticle 17of the aforesaidAgreement, reatmentwhich shall not be less avourable han that accorded o theresidentsof any hird Stateacting n the same apacity.

\For the Governmentof the Kingdom of Bahrain of His Majesty the Sultan and Yang Di-

Pertuan of Brunei Darussalam

Documents

DTC agreement between Bahrain and Brunei Darussalam