CONVENתON

BE1WEEN

11-IE GOVERNMENT OF 11-IE STATE OF ISRAEL

AND

11-IE GOVERNMENT OF CANADA

FOR 11-IE AVOJDANCE OF DOUBLE TAXATION

AND 11-IE PREVENTJON OF FISCAL EVASJON

Wl111 RESPECT TO TAXES ON INCOME

THE GOVERNMENT OF THE STATE OF ISRAEL AND THE GOVERNMENT

OFCANADA;

DF.SIRING to corוclude 11 convention for thc nvoidance ofdouble tnxation and the

prevention of &cul evasion ,vith respect to tuxes on income;

HA VE AGREED as folk>ws:

2

SCOPE OF THE CONVENTION .ו

ARTICLE 1

Penons Covered

1. This Conventiח נ shall apply to persons who are residents o f one or both of the

Contrn.cting Stntes.

2. For the purposes ofthis Conventiנn, income of a company, partnership, �t or

other entity of a Contracting Stnte that is treated as ,vho\ly or partly fiscally tmnsparent

x bw of eithcr Contrncting State shall be considered to be income of aש der theוש

resident ofa Contracting State but only 10 the extent that the income is trented, for

purposes ofשxaliנn by thal State, as the income ofa resident ofthat State,

ARTICLE 2

Ta:זes Covered

1. This Convention shall apply to taxes on income imposed חס behalf of 11

Contracting Stnle, irrespective of the mושner in which they are levied.

2. There shaU be regarded ns taxes on income nU שxes imposed חס total income, or

on elements ofincome, inclooi ng וaxes on gains Jiיom the alienaliנn ofmovable or

invnowble properוy.

3. The exis1ing taxes 10 ,vhich this Convention shaU apply are in particular:

(a) in the case of lsrae�

(i) the income tax ושd company וax (including tax חס capitnl gains);

(ii) the tax imposed on gains Jiיom the alienalion ofproperty according

lo the Rea/ Estate Taxation Lmv,

(hereinafier referred 10 as "lsroeli וnx'וש ;ךd

(b) in the case of Caתada, the taxes imposed by the Government of Caתada

.ך'nadiwI taxסder the lnco111e Tax Act (hereinafier referred to as "Cוש

3

4. Thiי; Conventiנn shaU 11pply also to ושy identi:111 or substantially similיש taxes

that סre imposed afler the date of signature of this Convention in additiנn lo, or iת place

o� the exic;ting taxes. The competent authorities ofthe Contracting States shaU notify

each other of ושy significant chnתges that have been שיחde in their tnxatioח laws.

4

11. DEFINITIONS

ARTICLE 3

General Definitions

1. For the purposes oftlm Conventi>n, unless the coתtext othenvise requires:

(a) the teזm "lsruef' meaתs the Stnte oflsrue\ aתd whcת used in a

gו:ognוphical seתse iתcludes its וerritorial sea, ns weU ns toose maritime

dתcluding seabed aתer limit ofthe territorial sea, iוo the ouו ens adjacentיש

subsoה thereof over ,vhich the State oflsrae� iת nccordance with

iותematiכnnl lnw aתd the lnws ofthe Stnte oflsrae� exerciscs its sovereign

rights or jurndiction;

(b) the temו ''Cnnndn", used iת n gו:ognוphicnl sense, menתs:

(i) the lnתd teחitory, iתtema\ ,vnוcrs aתd territorial sen, includiתg the

nir space nbove these nreas, of Cnתnda;

(ii) the exclwive ecooomic rone of Caתndn, ns detemוined by its

domestic tn,v, consisteתt ,vith Pnrt V ofthe Uniוed Nalions

Convenliסnon וhe Laוv ofוhe Sea, done nt Moתte� Bay חס

10 December 1982 (UNCLOS); aתd

( iii) the coחtinentnl she\f ofCaחadn, as deteזmined by its domestic b,v,

consistent with Pnrt VJ ofUNCLOS;

(c) the teזms "n Coחtracting State" aתd ·'tlוe other Coחtractiחg State" mean

Israe\ or Cnnndn, ns the coתtext requires;

(d) the temו "'person" iחc\udes aח iחdividua� n compזשy, a trust, n parתוership

aתd זשy other body ofpersoחs;

(e) the temו "compזשy" menתs זשy body corporuוe or זשy eתtity וhat is trented

os a body corporute lor tnx purposes;

(0 the teזm "enterprise" npplies to the canying חס ofזשy bwiness;

5

(g) herוhe oוerprise ofוd ''enוש "eוerprise of a Contracting Staוhe tenns "enו

Coחtractiוg State" meaח respectively aח enוerprise cnrried oח by a resident

of a Conוrnctiחg State תסd aח erterprise caחied oח by a resident ofthe

oוher Contractiחg Slnte;

(h) sport by a ship or nircraftחy traוש sחbnal traffic" meaוemaוחhe tenn "iו

operated by aח enterprise of a Conוractiחg State, except when וhe ship or

aircrafi is operated solely between p\aces in the other Contracting Sוate;

(Q וhe tenn "competent authority" means:

(Q in the case oflsrae� וhe Minister ofFiחance or the Minister's

authorized representntive; aחd

(ii) in the case ofCoתada, thc Minister ofNationnl Reveחue or the

Minister's authorized representative;

0) the tenn "תational", in relatiכn to a Contractiחg State, means:

(Q aתy mividunl possessiחg וhe natiכnality ofthat Contnגctiחg State;

dוש

( i i) aתy legul person, partrוership or associaוiכn deriving its status ns

such liטm וhe וa,vs in rorce iח that Contnגcting Stnte;

(k) dחס he perfonnance ofprofessional servicesו cludesחhe tenn "business" iו

ofother activities ofתט iוxtependent charncוer;

(1) the tenn "recognizcd pensioח p\aח" means:

( Q in the case of Coתada, a plan, זשaחgement or contrnct described iח

paragmph (a) ofthe defiחitioח of"pension" uחder Article 5 ofthe

lncome Tax Convenוions lnוerpreוaוion Acו;

(ii) iו the case oflsrae� a pension plaח that has beeח approved iח

accordance ,vith the proviskנns ofthe Conוrol of Financial

Services Acו (providentfunds) 2005, as a Pension provעent fuחd;

dוש

6

(iii) any other pcnsiנn plun agrecd by the compctent autoorities ofboth

Contmcting Statcs.

2. As regnrds the applicatiנn ofthis Conventiנn at any time by a Contmcting Stnte,

any teחn oot defined therein shall, unless the context otheזwise requires, have the

meaning that it has at that time under the law ofthat Stnte for the purposes ofthe tnxes to

,vhich this Conventiנn applies, any meaning under the applicable tnx laws ofthat State

prevailing over a meaning given to the teחn undcr other la,vs of that State.

ARTICLE 4

Resident

1. For the purposes ofthis Convention, thc teחn "זesident of11 Contracting State"

meaתs any person woo, under the la,vs ofthat State, is liable to tnx therein by reuson of

the person's domicile, residence, place ofmanagemenl, place ofincorporntiנn or any

other criterion ofa similar nature. This teחn also includes that State and any politicol

subdivision or k>cal autoorily thcreor, or רשy ngency or instrumentality of that Stnte,

subdivision or local autoority. This tenn, tn,vever, does oot include any person ,voo is

liDble to tnx in that Stnte in respect only of income liטm sources in that Stnte.

2. Where by reason ofthe provisions ofpnragraph רש ו mividual is a resident of

both Contracting States, וhen the mividual's status shall be detcrmincd as lollows:

(o) the mividual shall be deemed to be a resident only ofthe State in ,vhich

the iוdividual lוas a perrmnent oome ovoiloble and if the individual lוas a

pemוuncnt oome availoble in both Stntes, the individual shall be dcemed to

be a resident only ofthe State wilh ,vhich וhe individuol's personal and

ccooomic relatbns ore closer (centre ofvital iתterests);

(b) if the State in ,vhich the mividual's centre ofvital interests is situated

connot be determincd, or if there is oot 11 pennanent oome avoiloble to the

individual in either Staוe, the individual shall bc deemed to be a resident

only ofthe Stnte in which the individual lוas an hobitual abode;

(c) if the individual has an hobitual obode in both States or in neitlוer ofthern,

the roividual shall be deemed to be a resident only of the State of which

the individual is a natbna�

7

(d) if the individשl is a nntional ofboth States or ofneither ofthem, the

competent autrnrities of the Contrncting Staוes shall settle the question by

muוual ngreement.

3. Where by reason of the provisions ofparngrnph I a person other than an

iתdividשl is 11 resident of bוסh Contrncting States, the competent autrnrities shall

eooeavour to detennine by mutשl agreement וhe Contracting State ofwhich such person

shaU be considered to be 11 resideחt liכr the purposes of this Convention, having regard to

its place of effi:ctive management, the p1ace ,vhere it is incorporated or otherwise

constituted aoo any other relevant fiוctors. ln the 11bsence ofmutשl ngreement, that

person shaU not be entitled to claim any relief or exemption fiטm tםx provided by this

Convention.

ARTICLE S

Pennanent Establishment

1. For the purposes ofthis Converttion, the temו "penmnent establishment" means 11

tixed place ofbusiness through which the business of an enterprise is wholly or partly

carric:d on.

2. The temו "permaתent establishment" iוcludes especinlly:

(a) a place ofmanagemenו;

(b) 11 branch;

(c) an oflice;

(d) a mctory;

(e) a workshop; aoo

( f) a mine, an oה or giגs ,vell, a quany or any other place relating to the

exp\oraוb n for or the exploitation (includ ing extractbn) of nntural

resources.

3. A buikJing siוe or construction or instal\ati>n project constitutes a pennnnent

establishmeחt only if it \asts more than twelve monוhs.

8

4. Notwithstaתding the preceding provisions ofthis Article, the tenn 'ילennanent

establishment" slוaU be deemed תot to include:

(a) the use ofmcilities solely for the purpose of stornge, display or deliveוy of

goods or merclוaתdise beloחging to the enterprise;

(b) the mainוenance of a stock of goods or merclוaתdise belonging to the

enterprise solely for the purpose of stornge, display or delivery;

(c) the maintenance of a stock of goods or merclוaתdise belonging to the

eתterprise solely lסr the purpose of processing by another enterprise;

(d) the maintenance of a fixed place ofbusincss solely for the purpose of

purclוasing goods or merclוaתdise, or of coUecting infonnation, fסr the

enterprise;

(e) the maintenance of a fixed place ofbtL'iiness solely lor the purpose of

carrying on, fסr the enlerprise, any other activity ofa preparatoוy or

auxiliary clוarncter;

(f) the mainוenance of a fixed place ofbusiness solely for any combinatioח of

activit ies meחtioned in subparogroph<. a) to e ), provided that the overall

activity ofthe fixed place ofbusiness resuhing Jrom this combination is of

a preparatory or auxiliary character.

5. Not\vithstaתding the provisbns ofpnrngrnphs 1 and 2, where a person - othcr

than an agent of an iחdependent status to whom parngrnph 6 applies - is acting on belוalf

of an enterprise and lוas, nnd hnbitually exercises, in a Contrncting Stnte תם authority to

coתclude coחtracts חס behalf ofthe entcrprise, that enterprise shnll be deemed to hnve a

pennaתeחt establishmeתt in that State in respect of any nctivities ,vhich thnt person

undertakes lor the enterprise, ז.mless the activities ofsuch persoח are limited to tmse

mentioned in paragזnph 4 ,vhich, if exercised through a fixed pbce ofbusiness, ,vould

ot make this fixed place ofbusiness a pennanent establishment under the provisbns ofת

thnt paragזnph.

6. Aת eחlerprise shnU תot be deemed to hnve a pennanent establishment in a

Coחtracting State merely because it carries חס business in thnt State through a broker,

general commission agent or any other agent ofnת iרנdependeחt status, provided thnt such

persons are acting in the ordinary course oftheir business.

9

7. The lact that a company which is 11 resident of a Contrncting State controls or is

controlled by 11 compaתy which is a resident ofthe other Contrncting State, or which

carries on business in that other State (,vhether through a pennanent establishment or

otherwise), shaU not of itself constitute either compaתy a pemוanent establishment ofthe

other.

10

111. TAXATION OF INCOME

ARTICLE 6

lncome from lmmovable Property

1. Jncome derived by 11 resident of a Contזacting State Jium immovable property

(inchנd ing income liיom ngriculture or lorestry) situated in the other Contracting State

may be taxed in וhat other State.

2. For the pנןשoses ofthis Conventi>n, the teחn "immovable property'' shaO have

the meaning which it hns for the purposes ofthe relevant tax law ofthe Contmcting Sוate

in which the property in question is sitשted. The וenn shaU in any case include property

accessory to immovable property, livesוock nnd equipment used in agriculture nnd

furestry, righls to which the provisiוns ofgeneral law respecting landed property apply,

nny option or similar right to ncquire immovable property, usu&uct of immovable

property and rights to variable or fixed payments os corL'iidemtion for the ,vorking o� or

the right to work, mineral deposits, sources nnd other naוural resources; ships nnd aircraf!

shall not be regarded os immםvable propeוty.

3. The provisions ofpamgrnph I shaU apply to income derived liיom the direct usc,

letting. or use in nny other fonn of immovable property שx1 to income fiיom the alienation

ofsuch property.

4. The provisions ofpamgrnphs 1 nnd 3 shal[ 11L0.י apply to the income Jiסm

immovable property of חס enוerprise.

ARTICLE 7

Bשiness Profits

1. Profits ofan enterprise ofa Corttrocting State shaU be lnxable only in וhat State

unless the enterprne carries חס business in the other Contracting State lhrough a

pennanent establishment situnted therein. Jfthe enוerprise carries on business os

aloresaid, the profits וhat are attributable to the pemוanent establishment in accordסnce

,vith the provisions ofparagraph 2 may be taxed in that other State.

t ו

2. For the purposes ofthis Article and Article 21 (Eliminatתמ ofDouble Taxatמn),

the prolits that are attribuוnble iת each Contractiתg State וo the permaתent establishment

referred to in paragraph ו are the prolils it might be expected to make, in pשticular in its

dea� with other pnrts ofthe enterprise, if it ,vere a separate and independent enterprisc

engaged in the same or similar activities under the same or similar conditמrn, taking into

account the functions peוi>rmed, ossets used and risks assumed by the enterprise through

the permanent establishment and through the other pnrts ofthe enterprise.

3. Where, in accordaתce with paragraph 2, a Contractiתg State adjusts the prolits that

are attributnble to a pennanent cstnbli<;hment ofaת cnterprise ofone ofthe Contracting

Stntes ושd taxes accordingly prolils ofthe enterprise that have becn charged to tax in the

other State, the other State smll, to the extent necessשy וo eliminate double taxation on

these profits, make nת appropriate adjustmcn t to the aroouתt ofthe tax charged on those

profits. ln determining such adjustmenו, the competent authorities ofthe Contracting

States shall if necessnry consult ench other.

4. Where prolits include iוems of income which are dealt with separately in other

Arוicles ofthis Convention, then the proviiions ofthose Arוicles shaU not be affected by

the proviiilns of this Article.

ARTICLE 8

Shipping and Air Tnוnsport

1. Prolits derived by aת enterprise of a Conוracting State fiטm the opemtbn of ships or

aircmfi iת interrשtional trafiic smU betaxable only in that Stnte.

2. Notwith.standing the provisמrn ofparagraph I and Arוicle 7 (Business Profits),

prolits derived by aת enterprise of 11 Contracting Stnte liטm the carriage, by a ship or

aircrafi that it operntes, ofpassengers or goods tnken on board 111 one place iת the other

Contracting Stnte lor discharge at ושother place in that other Contracting State may be

tnxed in that other Contracting State, uתless all or substnתtially aU ofthese passengers or

goods ,vere taken on board 11t a place outside that other Conוracting Stnte.

3. The proviiמns ofparagraphs ו and 2 shaU also apply to prolils liטm the

participation in a poס� a joint business סr aת international operating ngency.

12

ARTICLE 9

Associated Enteו<ןוises

1, Where:

(a) aת enterprise of a Contracting State participates directly or iחdirectly in the

maתagement, conוrol or capital ofan enterprise ofthe other Contracting

Staוe; or

(b) the sשne persons participate directly or indirectly iח the management,

coחtrol or capitnl of an enterprise of a Coחtractiחg State and an enterprise

ofthe other Coחtracting State;

their חns are made or imposed bet\veen the t\vo enterprises iנeither case conditi וd iוש

commercial or linancial relati>ns which dilfer fiסm trose which would be made between

independent enterprises, then ושy prolits ,vhich ,vould, but lor trose conditions, have

accnנed וo one ofthe enterprises, but, by reason oftrose conditiנns, have חot so 11ccnנed,

may be iחcluded iח the prסlits ofthllt enterprise and tnxed accordiחgly.

2. Where a Contracting State iחcludes iח the prolits ofan enterprise ofthllt State

and - tnxes accordingly - profוזs חס \vhich an enterprise ofthe other Contracting Stllte

has been charged וo tnx iח thllt other State and the profוזs so iחcluded are prolits which

\\lould have accrued to the enterprise ofthe lirst-mentioned State if the conditiנns made

between the t\vo enterprises hlld been trose which would have been made between

independent enterprises, then thllt other Slllte shaU make an appropriate adjustment to the

aזoount ofthe tnx charged thereiח on trose prolits. ln detenniחing such adjustment, due

regard shaט be had to the other provisiכns ofthi<; Conventi>n ושd the competent

autoorities ofthe Contracting States shall if necessary consuk e11ch other.

3. A Contrncting State shall חot change the prolits of an enterprise in the

circumstances rererred to iח paragroph ו nlier the c,qנiזy of the time limits provided iח its

domestic la\VS and, in ושy CllSC, 11fier eight years fiסm the end of the year iח which the

prolits which would be subject tס such chaתge \VOukl have nccrued to an enterprise of

thllt State.

4. The provisiנns of paragrophs 2 ושd 3 shall not 11pply iת the case of lrnud or \\lilful

default.

13

ARTICLE 10

Dividends and Distוibutions by a Real Estate Investrnent Fund

1. Divideחds paid by 11 company which is 11 resident of a Contractiתg State to 11

resident ofthe other Contracting Sוate may be taxed in that other Stועe.

2. However, su=h divideחds may a1so be taxed in the Contracוing Sוnte ofwhich the

company paying the divideחds is 11 resident aחd according וo the hws ofthat Sוate, but if

the beneficial owner ofthe divideחds is a resident ofthe other Contracting Sוnוe, the tax

so charged shall not exceed:

(n) 5 per cent ofthe gross nmounו ofthe divideחds if the beneficial owner of

the divideחds is a compaתy ( other 1וu11 חו pת1שership) \vhich rolds dircctly

nt least 25 per cent ofthe capital ofthe compaתy paying the dividends;

(b) 15 per cent ofthe gross nmount ofthe divideחds in nll other cases.

11m paragrnph shall not nffect the taxation ofthe compnny in respect ofthe profiוs out of

which the divideחds arc p11id.

3. Notwithstaחding the provisions ofparagraph 2, divideחds paid by 11 compaתy ofn

Contracting State to 11 resident ofthe other Contrncting State וhat is the Govemmcnt of

that other Stעte, or ושy porוticnl subdiwiion or bc11I authority thereo� or the Central

Bnnk ofthat other State, slוall be taxable only in the other State if that resident:

(11) is the beneficial o\vner ofthe divideחds; aחd

(b) does not hold dircctly or indirectly more 1וu25 חו per cent of the capital or

25 per cent ofthe voting power ofthe compושy paying the divideחds.

4. Notwithstaחding the provisמns ofparagraph 2, divideחds nrising in 11 Contracting

State aחd beneficial l y O\vned by aת organizntion that \VllS constituted and is operated in

the other Contracting Stעte exclusivel y to adminisוer or provide benelits under one or

more recognrzed pensiכn plans shnU be exempt fiיom tax in the lirst·mentסned Sוnte if.

(a) the organization is the beneficial ס\vner ofthe shares חס which the

divideחds nre paid, holds toose shnres as nn investment and is either

generally exempt fiיom tax in the other State or its income is not subject to

tax in the other Stעte;

14

(b) the organi2.ition does not hold directly or iooirectly more than 10 per cent

ofthe capi!nl or 10 per cent ofthe votiחg po,ver ofthe company paying

the dividends; ond

(c) eoch recogתized pension plan provides benefits primarily to iוdividuals

who are residents ofthe other Contrncting Sוate.

5. Not,vithstonding aתy other provision ofthiי; Conventiנn, distrו"butiנns made by a

real esוate investment fושd ,vhich is o reskient oflsrael to a resident ofCושada mny be

taxed iח Cםnadn. However, such disוributiנns may also be taxed in Jsrael ond according

to the laws of Jsrae� but ifthe beneficial owner ofthese distnbutiנns is n resident of

Cושnda ond holds direct1y less than 10 per cent ofthe capi!nl oftluוt renl estate

investment fושd, the tax so charged shaU not exceed 15 per cent of the gross amount of

the disוributio ns.

This parngraph shaU not nlfect the taxatiנn ofthe real estate investmeחt fund iח respect of

the prolits out ofwhich the disוributioru; are made.

6. The tenn "dividends" as used in thiיi Article means income fiסm shares,

'jouissance" shares or 'jouissance" rights, mining shares, founders' shares, or other

righls, not beiחg debt-claims, participating in prolits, as ,vell as income ,vhich is

subjected to the sשne taxatiחנ treatment as income fiסm shares by the laws ofthe State of

,vhich the compaתy makiחg the disוribution is a resident.

7. The provisiנns ofparagraphs 1, 2, 3, 4 ond 5 shaU not opp1y ifthe beneficiol

o,vner ofthe dividends or ofthe distributions by o real esוaוe investment fund, beiחg o

resident ofa Controcting State, carries on business in the other Contmcting State of

which the company payiחg the dividends or makiחg the disוributiנns is o resident,

through o pemרaneחt establishment situated therein ond the holding in respect ofwhich

the dividends or disוributcru; ore paid is effectively conחected ,vith such permanent

establishment. ln such case the provisiנns of Article 7 (Business Prolits) shaO apply.

IS

8. Where a company which is a residcnt ora Contracting Statc dcrives profils or

income fiיom thc other Contracting State, that othcr Statc may סחt imposc any tax חס thc

dividcnds paid by thc company (or thc distributioru; madc by a real estate investment

fund), except insofar os such dividends nזe paid (or distributions are made) סו a resident

ofthat other State or insofu as thc holding in respect ofwhich the dividends סre paid (or

distributions are made) is effectively coruוecוed with a pemוanent estab\ishment situated

in that other State, סחr subject thc company's ישdistributed profils tס n tax חס thc

company's tתdisוributed profils, even if the dividends pnid (or thc distributions mnde) or

thc undistributed profils consiי;t ,vhoUy or partly of profits or income arising in such other

Statc.

9. Nothiתg in thiי; Convention shaU prevent aConוracting State fiיom imposing its

branch וax. However, thc rate ofthc branch tax applying to a company that is a resident of

thc othcr Contracting State shaU סחt exceed S per cent.

any benefits provided under סt be entitled tסח e shaUוt of a Contrncting StaחA reside .ס ו

this Article in respect ofa dividend if one ofthc main purposes ofany person concemed

with an nssignmcnt or a tronsfer ofthc dividend, or with thc creation, assignment,

acquisition or tronsler orthe shares or othcr righוs in respect ofwhich the dividend is paid,

or ,vith the establishment, acquisioon or maintenance ofthc person that iי; the beneficial

owner ofthc dividend, is lor that resident to obtain the benefits ofthis Article.

ARTICLE 11

lnte�st

1. Jnterest arising in a Contracting State and paid וo a resident of thc othcr

Conוracting State may be taxcd in that othcr State.

2. Ho,vever, such interest may a/so be taxed in thc Coחtracting State in which it

arises and according tס the laws ofthat Stnte, but if the beneficial owner of the interest is

a resident ofthe othcr Contracting State, thc tax so charged shaU סחt exceed ו O per cent

ofthe gזoss סוזשuחt ofthc interest.

16

3. Notwiוhsוnnding the provisbns ofparngraph 2:

(a) interest nrising in 11 Contrncting State and beneficially owned by the

Govemment ofthe other Contracting Staוe, or תסy politicnl subdivisk>n or

local autoority thereo( or by the Centrnl Bank ofthat other State, shaU be

exempt liסm tax in the first-mentioned State;

(b) interest nrising in a Contracting State and paid in respect סf indebtedness

ofthe Govemment ofthat Statc, or any politicnl subdivision or local

autoority thereof; or the Central Bank ofthat State shaU be taxable only in

thc othcr State if the interest is bcnelicially owned by a resident ofthat

other Statc;

(c) interest nrising in lsrael and paid to a rcsidcnt ofCanada shaU be taxable

only iו Canada if it is paid in respect ofn lonn made, guaraחtced or

insured by Export Development Canada and the benelicial ס\mer ofthc

iוtercst is dealing at ann' s leחglh with thc paycr;

(d) intercst arising in Canada and paid to 11 resident oflsrnel shaU be taxable

only in Isrnel if it is paid in rcspect of a lonn made, guaraחteed or insured

by ASHRA - The Isrnel Export lnsuזance Corporation Ltd. and the

beneficial ס\mer ofthe intcrest is dealing nt ann's length \Vith thc payer;

(e) intercst nrising in n Contracting State nnd benefוcially owned by nn

orgaחm1tמn that was constituted nnd is opernted in thc other Contracting

State exch.5ively to ndminisוer or provide benefits under one or rrorc

recognired pensiכn plans shall be exempt liסm tax in the fוrst-mentioned

State if.

(� thc organization is the benelicinl owner ofthe interest nnd is either

generally exempt liסm tax in the other State or its income is not

subject to tax in the other Statc;

( ii) each rccognized pcnsion plan provides benefits primarily to

individuals \Vho nrc rcsident ofthe other Contmcting Staוe; and

( iii) the orgaחm1וion does not hold directly or indirectly rrore thnn

10 per cent ofthe cnpital or 10 per cent ofthe voting power ofthe

company pnying the iחterest;

17

( 0 the tax charged by a Contracting State on iותerest arising iח that Sוate 800

paid וo a resident ofthc othcr Contracting State slוaU oot exceed 5 per cent

ofוhe gross aוrount ofוhe interest if וhe benefוcial O\vחer ofthe interest is

a financial institutiin 800 is dealing at ann's lengוh with thc payer. For the

purposes ofthis subparagraph, the tenn "financial imtitution" meסm 11

bושk or other enterpme substantial ly deriving its prolits by raising debt

finance iת the financial markets or by taking deposits 111 interest 800 using

toose fuoos iח carrying on a business of providing finance.

4. For the purposes ofparagraph 3, 11 person shaU be deemed oot to be dcaling at

ann's lengוh \Vith another pcrson i� based חס aס relcvant facts and circmז;taחces, one

controls directly or indirectly the oוher, or both are under the direct or indirect control of

the same person or persons or, iח the case of individuals, if one person is connected to the

other by blood relationship, marriage or convnon-la,v partnership or adoptiכn.

5. Subparngrnph 3(f) slוall oot apply to iוtcrest, all or זשy portiכn of ,vhich is

corוtingcחt or dependent ו חסhe use of or productiכn fiטm property or is computed by

refi:rence to revenue, profit, cash tb\v, convnodity pricc or זשy other similar criterion or

by refi:rence to dividends paid or paynble to slmcholders of זשy class ofslוares ofthe

capital stock of a compזשy.

6. The tcrm "iוterest" as used iת this Article meaתs income fiטm debt-claiוm of

eveזy kind, ,vhether or oot secured by mortgage, 800 in particular, income fiטm

govemment securities 800 income fiטm bonds or debenוures, including premimוs 800

prm:s 11ttaching to such securities, bonds or dcbentures, as ,vell os income which is

subjected וo the same וaxatiכn treatment as income fiטm money lent by the la,vs ofthe

State in ,vhich the income ames. Ho,vever, the וenn "interest" does not include income

deah ,vith in Articlc 10 (Dividends 800 Distributiכns by 11 Real Estnte lnvestment Fund).

7. The provisiוns of paragraphs 1, 2 and 3 shall not apply if the beneficial o"'ודer of

the interest, being 11 resident of a Contracting Sוate, carries חס business iח the other

Contracting State in which the interest ames, through 11 pcrmanent establishment situated

therein and the dcbt-claim iו respect of \Yhich the interest is paid is effectively connected

with such permanenג estnblishment. In such cosc the provisiכns of Article 7 (Business

Prolits) shall apply.

18

8. Interest shall be deemed to ישise iו a Contracting State when the payer is 11

resident ofthat State. Where, mwever, the person paying thc interest, ,vhethcr the payer

is a resident of a Contrncting State or not, has in 11 Conוracting State a pemוaתent

establishment iת connection ,vith which the indebtedness oת which the interest is paid

,vas incזשed, ושd such interest is bome by such pennaתc:nt establishment, then such

interest shall be deemed to arise iת the State iת which the peוזחaתeתt establishmeתt is

situated.

9. Where, by reason of 11 special re\atiכnship between the payer ושd the beneficial

owner or bet\veen both ofthem ושd some other person, the nmount ofthe interest exceeds

Jor ,vmtever reason the amount which would have been agreed upon by the p11yer ושd the

beneficial owner in the absence of such relationship, the provisi:נns of this Article shaU

apply only to the last-mentioned amouתL lת such case, the excess part ofthe payrnents

shaU remain taxable according to the luws of each Contracting State.

10. A resident of a Conוracting State shall not be entitled to any benefits provided under

this Article in respect ofinterest if one ofthe maiת pשposes ofושy person concemed ,vith

an assignment or 11 וransfer ofthe interest, or with the creatiכn, assignment, acquisition or

ransfer of the debt-claim or other rights in respect of ,vhich the interest is paid, or ,vith theו

establislunent, 11cquisitiנn or maiתtenance ofthe person that is the beneficial o,vner ofthe

interest, is for that resident to o btain the benefits o f this Article.

ARTICLE 12

Royalties

1. Royahies arising in 11 Contracting State ושd paid to 11 resident ofthe other

Contrnctiתg Stale may be taxed in that other Stute.

2. Ho,vever, such royalties may 11ls0 be taxed in the Corוtmcting Staוe in ,vhich they

arise ושd according to the la,vs ofthat State, but ifthe beneficial o,vner ofthe royalties is a

resident of the other Conוracting State, the tax so cmזged shaU not exceed 10 per cent of

the gross amount ofthe royalties.

19

3. Notwithstaתdiחg the pro\i;ions ofpישagוחph 2:

(a) copyright royulties and other like paymc:nוs iח respect ofthe productiחג or

reproduction ofany literary, dramatic, musicat or other ortistic work (but

exc1udiחg roynlties in n:spect of וrotחמ picture films שx\ royalties in

respect of works חס li1m. videotape or other means of reproductiחג lbr use

in connectiגn with televisiגn broadcasting); and

(b) royakies for the use o� or the rig/וt to use, computer sofiwore or any pateתt

or lor information conceming iחdustriai commercial or scieחtific

experience (but not including any such royaky provided in connectiגn

with a renוal or fuuוchise agreement);

arising iח aContractiוg Sוate and paid to a resident ofthe other Contractiתg State ,vtמ is

the beneficial o,vner ofthe royalties shaU be tnxable only iח that other Stnte.

4. The term "roynlties" ns used iח this Article menחs paymc:nוs ofaחy kiחd received

as a consideratiגn fiנr:

(a) the use o� or the right to use, nחy copyright, patent, trade mark, design or

roode� plan, secret lormula or process, or computer sofiware; or

(b) iחlormatbn conceming industriai commercial or scientifוc experience; or

(c) the use o� or the right to use:

( Q וrotion picture fihns; or

( iQ films or videotapes or other means ofreproduction for use iח

connection ,vith televisiסn; or

(d) the use o� or the right to use, industriai commercial or scieחtifוc equipment.

However, lor the purposes ofsubpישagraph d), the lerm "royalties" does סחt include income

dealt with iח Article 8 (Shipping ושd Air Tmnsport).

20

5. The provisions of paragraphs 1, 2 and 3 shaU not apply if the beneficial owner of

the royalties, being a resident ofa Contracting State, carries on busincss in the other

Contracting Stnte in ,vhi:h the royalties nrise, through a pennanent establishment silunted

therein, nnd the right or property in respect of,vhich the royalties are paid iי; effectively

connected ,vith such pennanent establishmeתL ln such case the provic;ions of Anicle 7

(Business Profiוs) shaU apply.

6. Royakies shaU be deemed to arne in a Contracting State when the payer iי; a

resident ofthat State. Where, however, the person paying the royalties, whether the payer

is a resident of a Contracting State or not, has in a Contractiתg State a pennaבווnt

establishment in connection with which the obl�tioת to pay the royalties was iתcurred,

nnd such royalties ישe bome by such pennanent establishmeתt, then such royalties shaU

be deemed to arne in the State in which the penרשחent establishment is situnted.

7. Where, by reason ofa special re\atמnship betweeת the payer and the beneficial

owner or between both ofthem and some other person, the amount ofthe royalties,

having re@ll'd to the use, right or information for ,vhich they ישe paid, exceeds the amount

,vhich would have been agזeed upon by the payer ושd the benefic ial owner in the absence

of such re\ationship, the provisions ofthis Article shall apply only to the last-mentioned

amount. ln such case, the excess pan ofthe payments shall remain taxable according to

the laws of each Contracting State.

8. A resident of n Contracting State shaU not be eתtitled to ושy benefits provided under

thiי; Anicle in respect ofn royalty if one ofthe maiת pLDןJoses ofושy person coחcemed ,vith

an assignment or 11 transfer of the royalty, or ,vith the creation, assignment, acqui<;itio n or

transfer ofrights in respect of,vhich the royalty is paid, or with the estabrוshment,

acquiי>ition or maintenance ofthe person that is the beneficial O\vחer ofthe royalty, is for

that resident to obtain the benefiוs ofthis Anicle.

ARTICLE 13

Capital Gains

1. Gahi derived by a resident of a Contracting Statc lrom the alienation of

immovnble propeny situnted in the other Contracting Stnte may be taxed in that other

State.

2. Gains lrom the nlienatמn ofmכwble property lonning pan ofthe busincss

property of a peוmanent establishment ,vhi:h an entcrprise of a Contracting Stםte has in

the other Contracting Stnte, inchנding such gains lrom the alienםtion of such a permaחcnt

estnbli<ihment (abne or with the ,vhole enterprise), may be taxed in that other Stnte.

21

3. Gains derived by an enterprise of a Contrncting State fiיom the alienatמn of ships

or 11ircrnft opernted in intemational trnffic or movable property pertainiחg to the operatiנn

of such ships or nircrnft, shaU be tnxable oחly in that Stnte.

4. Gains derived by 11 resideחt ofa Contrncting State fiיom the alierשtiחנ of.

(a) shares, deriving וrore than 50 per cent oftheir value directly or iחdirect ly

fiיom immovable property situated iח the other State (at the time ofthe

alienatמn or at any time during the twelve preceding mחנths); or

(b) an interest in 11 pח1שership, tnנst or other eחtity, deriving וrore than

50 percent ofits value directly or iחdirectly fiיom iוזmovable property

situated iח that other Stnte (at the time ofthe nlierשtiחנ or nt any time

during the twelve preceding mחנths);

may be taxed iח that other State.

5. Gaiחs from the nlienatiגn ofany property, oוher than that referred to iח

pnragraphs 1, 2, 3 ושd 4, shaU be וaxable oחly in the Contrnctiחg Stnte ofwhich וhe

nlienator is a resident

6. Notwilmוnnding paragraph 5, ,vhere an iחdividual:

(a) ceases to be n resident of n Contrncting Stnte ושd by reason וhereof is

treated for וhe purposes oftnxatiגn iח that State as having nlienated ס

property ושd is tסxed iח that Stnte nccordingly; and

(b) nt any time וhereafter becomes n rcsident ofthe oוher Contrnctiחg Stnte;

t thatחly to the exteחrespect ofthe property o וX gains iנg Stnte may Uוhe other Contrnctiו

such gains had חot accnנed \Yhile וhe iחdividual ,vns n resideחt of the lirst-meחtioned

State. However, this provisiגn shall חot apply to propcny, any gaiח from ,vhich the oוher

Contrnctiחg Stnte could have taxed in accordושce with the provisions ofpnragraphs ו to 4

ofthis Article if the iחdividual had realized the gain before becomiחg n resident ofthat

oוher Contrncting Sוnte. 1b: competent authorities shaU endeavour to resolve by mutual

ngreement ושy issue ,vhich mסy urise from the npplicntמn ofthis paragraph ושd ofthe

domestic bws ofthe Coחtrnctiחg States iח situations ,vhere a person ceuses to be n

resident ofn Contrncting State ושd by reason thereof is treated lor the purposes of

taxatחמ iח that Sוnte as having alienated a property and is tסxed iח that Stale nccordingly.

22

7. A resident o f a Contracting State shaU oot be entitled וo ושy benefits provided

under this Anicle in respect ofany gain if one ofthe main purposes סfושy person

concemed with the alienation giving rise to the gain. or ,vith the establiי;hment,

acq�itםn or maintenance of the person that is the beneficial owner of the gain, is fםr

that resident to obtain the benefits o f this Anicle.

ARחCLE 14

lncome from Employment

Subject to .ו the provisions ofAnicles 15(Directors' Fees), 17(Pensions ושd

Annuities), ושd 18 (Govenvnent Services), snlaries, wages ושd other similar remuneration

derived by a resident ofa Contracting State in respect ofan employment shaU be taxable

only in that State unless the employment is exercised in the other Contracוing State. 1 f the

emploינment is sס exercised, such remuneraםוn ns is derived there/iיom mny be taxed in

that other State.

2. Notwithstanding the provisi>ns ofparngmph 1, remuneration derivcd by n

rcsident of a Contracting State in respcct of an empbינmcnt exercised in the other

Contmcting State shaU be taxable only in the first-mcntioned State if.

(a) the recipient is present in the other State for a perbd or periods oot

exceeding in the aggregate 183 days in ושy twe[ve-month perbd

commencing or ending in the fiscal year concemed; ושd

(b) the remuneratםn is paid by, or on behalf o� an emp\oyer who is oot n

resident ofthe other State; nnd

(c) the remושeratמn is oot bome by a permanenו esinbrishmcnt which the

employer has in the other State.

3. Notwithstושding the preceding provisמns ofthis Anicle, remושeratםn derived in

respect of an employment exercised aboard a ship or nircrafi opernted in intematמnal

traffic by an enterprise of a Contracting Stnte may be taxed in that State.

23

ARTICLE 15

Directors' Fees

Directors' rees and other similar payments derived by a resideחt of a Conוrncting

Stnle in that resident's capacity as a member orthe board of directors ofa compושy

which is a resideחt ofthe other Conוrncting Stnte rnay be taxed in that other State.

ARTICLE 16

Enteוtainers and Sponspersons

l. Not\vithstanding the provisiסns of Articles 7 (BLL'iiחess Profiוs) and 14 (lncome

liסיm Employment), income derived by a resident ofa Conוrncting State as an entertniner,

such as n theatre, motion picture, radio or television artiste, or n mLL'iician, or ns o

sportsperson, liסיm that resident's personal octivities ns sו.x:h exercised in the other

Conוrncting State, rnay be taxed in that other State.

2. Where income in respect ofpersonol octivities exercised by nn entertainer or n

sportsperson in that individunl's copacity ns such accrues not to the cnוertniner or

sportsperson personaUy but to another person, that income may, not\Vithstanding the

provisi>ns of Articles 7 (BLL'iiness Prolits) and 14 (lncome liסיm Employment), be taxed

in the Contracting State in \Yhich the octivit ies ס f the entertainer or sportsperson are

exercised.

3. The provisions ofpnragroph 2 shaU not opply if it is established that neither the

eחtertainer or the sportsperson nor persons rehted to them participate directly or indirectly

in the profiוs ofthe person referred to in that pnragraph.

4. The provi<iions ofpnragraphs 1 and 2 shall not npply to income derivcd liסיm

nctivities perlonned in n Conוrncting Sוate by a resident ofthe other Conוrncting Sוate in

the context ofa visit in the first-mcntioned State ofn non-profit organi1lltiסn ofthe other

Stnte, if the viי.it is \vrnlly or mainly suppoזted by public rושds o f one or both of the

Conוrncting Stnוes or political subdivisi>ns or local authorities thereo(

ARTICLE 17

Pensions and Annuities

1. Pensiנns and annuities arising in n Coחtrncting State and paid to n resident of the

other Contracting State may be וaxed in that other Stnte.

24

2. Pensions arising in a Contracting State ושd paid to 11 resident orthe other

Contractiוg State may also be taxed in the State in which they arise תסd according to the

laws orthat State. However, in the case orperiodic pension payments, the tax so charged

slוaU not exceed the lesser of.

(a) dתס ;tחt ofthe paymeחouוזש S per cent orthe gross ו

(b) the וזשouחt oftax that the recipient ofthe paymeתt would othel'\vise be

required to pay for the year on the total וזשouחt orthe periodic pension

payments received by the individual in the year, if the individual \Vere

resideחt iת the Contracting State in which the paymeתt ariי;es.

3. Annuities arising in a Contracting State and p11id to 11 resident orthe other

Contracting Stnte may nlso be taxed in the State in which they arise and 11ccording to the

law ofthat State, but the tax so charged slוaU not exceed 15 per cent ofthe portion oftmse

annuities that iי; subject to tax in that State. Ho\vevcr, this limitatbn does not app]y to

h.וmp-sשn payments arising on the surrender, caתceUatbn, redemptbn, sale or other

a\ienati>n of an תושuity, or to payments or ושy kind under aתם תnuity contract the cost of

\vhich \VllS deductible, in \vhole or in part, in computing the income ofושy person who

acquired the contracL

4. Notwidוstanding aתything in this Convention:

(a) \Var pensi>ns and allo,vances (including pensiנns תסd allowances paid to

,vnr veוerans or paid as 11 consequence of damages or injuזies suffcred as a

consequcncc ora ,var) arising iת a Contracting State and paid to 11 resident

ofthe other Contracting State shnU be exempt fiטm tax in that other State

to the extent that they would be exempt fiטm tax if received by a resident

ofthe first-mentiנned State;

(b) alimony תסd other similar payments arising in 11 Contracting State and paid

to a resident of the other Contracting Statc who is subject to tax in tlוat

other Contracting State in respect of that alimony and other similar

payments slוaU be taxable only in tlוat other State, but the וזשount taxable

in tlוat other Staוe slוaU not exceed the וזשouחt tlוat ,vould be tnxable iת the

first-mentioned State ifthe recipient were a resident thereof, תסd

2.S

( c) benelits tרםder the social security laws in 11 Coחtracting State, the

contnlכuti:נns iו respect ofwhich (other tlוan employer contnbutions or the

equivalent therelo in the context of self-employmeחt) nre חot deductible

for the purposes oftaxaooח iח that State, paid to a resident of the other

Coחtracting Staוe slוaU be exempt fiטm tax in that other State if they

would be exempt fiטm tnx if received by 11 resident ofthe first-meחti:נned

State.

5. For the purposes ofthe Article, the term "pension" includes benefits tרםder the

socia\ security la,vs of11 Coחtracting Stnte.

ARTICLE 18

Govemment Service

an 11 pension, p11idוS11laries, w11ges and other similar remuneration, other tl (11) ו.

by 11 Contracting State or 11 politic11I subdivisioח or 11 loc11I 11uthority thereof

to ןש iחdividual in respect ofservices rendered to that Stale or subdivision

or authority shall be taxable only in that Stnte,

(b) Ho,vever, such salaries, ,v11ges ושd other similar remuneration shall be

taxable only iח the other Contracting State if the services are rendered iח

that State ושd the iוdividual i<; 11 resideחt ofthat Stnte ,vho:

( � i<שז 11 נoonal of that State; or

(ii) did oot become II resident ofthat State solely tor the purpose of

renderiחg the services.

2. The proV5ioחs of Articles 14 (lחcome fiטm Employment), 15 (Director's Fees),

16 (Eחtertainers and Sportspersons) ושd 17 (Pensi:נns ושd Annuities) slוaU apply to

salaries, wages, ושd other similar remuneration in respect of services rendered in

connection with II business caחied oח by 11 Controcting Sוate or II politic11I subdivision or

a local 11uthority thereot:

26

ARTICLE 19

Students

PaymenlS ,vhich a student or business apprentice ,vho is or wns immediately

before visiting a Contracting Stnte a resident ofthe other Contracting Stnte and who is

present in the first-mentioned Stnte solely lor the p\l'P(Jse ofthat individunl's education

ortraining receives iכr the purpose ofthat iooividual's maintenance, education or

training shall not be tnxed in that Stnte, provided that such paנ-ments arise fiטm sotD'Ces

outside that State.

ARTICLE 20

Other lncome

1. Subject to the provisions ofparngrסph 2, items ofincome ofn resident ofn

Contracting Stnte, wherever arising, oot denlt with in the loregping Articles ofthis

Convention shall be taxable only in that State.

2. Ho,vever, if such income is derived by aresident ofa Contracting State fiטm sotD'Ces

in the other Contracting Stnte, such income mny liliio be taxed in the Stnte in which it arises

and according to the b,v ofthat State. Where such income is income fiטm a tnנst, other

than 11 trust to which coתtn1וutםns were deductiblc, the tax so charged shal� if the income

is taxable in the Contrncting Stnte in which the benelicial o,vncr is a resident, oot exceed

15 per cent ofthe gross שrount ofthe income.

27

IV. METHODS FOR ELIMINATION OF DOUBLE TAXATION

ARTICLE 21

Elimination ofDouble Taxation

:ada, double taxati>n shall be 11voided ns loUo,vsתםln the case ofC .ו

(11) subject to the existing provisions ofthe laws ofCושad11 regarding the

deducti>n lhנm tnx payable in Cושada oftnx paid in 11 terriוoוy outside

Canada and to any subsequent modifוcation oftlxגse provisions - ,vhich

shaU oot atfect the general principle oftoose provisions - and unless 11

greater deduction or relief is provided under the la\vS ofCanada, tnx

payable in lsmel on profits, income or gains nrning in Jsrael shall be

deducted fium any Canadian tnx payable in respect ofsuch profits, income

or gains;

(b) subject to the existing provisions ofthe laws ofCanada regnrding the

alb\vשx:e as a credit agninst Cnnndian tax oftnx payable in a territoוy

outside Cnrnda ושd to any subsequent modifוcation oftlxגse

provisions - which shall oot ntfect the geneml principle hereof -where a

company ,vhich is a resident of lsrael pays a dividcnd to a company which

is a resident of Canad11 and which controls directly or indirectly 11t least

10 per cent ofthe voting power in the first-mentioned company, the credit

shaU tnke into 11ccount the tnx payable in Isracl by that first-mentioned

company in respect ofthe profits out ofwhich such dividend is paid; and

(c) ,vhere, in accordnncc with זשy provision ofthis Convention, income

derived by a resident ofCושada is excmpt fium tax in Cnתada, Canad11

may nevertheless, iת cak:ulating the שroLDוt oftnx on other income, tnke

into nccouתt the exempted income.

2B

2. ln the case o r lsrnel double taxatiכn shan be avoided ns follows:

(a) where a resident oflsrael derives income \vhrh, in accordance with the

proV6ions ofthis Conventbח, may be taxed in Cרשada, lsrael shall

(subject to the laws of lsrael re�ing the allowושce of a credit of loreign

taxes, which shan not affi:ct the general principle contained in this

paragוחph) al.low ns a deduction fiטm the tax on the income of that

resident, an amount equal to the tax paid in Canada;

(b) subject to the existing provisions ofthe laws oflsrael re�ding the

alb\vance as a credit agninst lsrne6 tax oftax payable in a וenitory outside

Jsrael and to any subsequent rrodifוcatbn of those provisions - which

shatl חot affi:ct the geחer.וl principle hereof - \Vheזe 11 company which is a

resident ofCaתada pays a diwiend to a company \vhich is a resident of

lsrael and whrh controls directly or iוdirectly at lenst 25 per cent ofthe

means of control in the first-mentiכned company, the credit shall take into

account the tax payable in Caroda by that first-mentioned company in

respect ofthe profits out of\vhich such dividend is paid; and

(c) such deductiכl1'i shall not, however, exceed that pan ofthe income tax ns

computed beli:וre the deduction is given, \Vhrh is uttributub le to the

income ,vhrh may be taxed in Canadu.

3. Forthe purposes ofthis Artו:le, profits, income orgains ofa resident ofa

Contrncting State whrh may be taxed in the other Contrncting State in accordושce with

this Conventiכn shaU be deemed to arise fiטm solD'Ces in that other State.

29

V. SPECIAL PROVISIONS

ARחCLE 22

Non-Disc:riminatio n

1. Natiomts of n Conוrncting State shaU not be subjected in the other Contmctiתg

State to זשy taxnti>n or זשy requirement connected therewith that is זrore bw-denwme

than the taxntion and connected requirements to which nationals of that other State in the

snme circודשstances, in p1שicular wiוh respect to residence, nre or may be subjecוed.

2. The taxntמn on a pemוaתent esוabliי;hment wlוich an enterprise ofס Contmcting

Stסte has in the other Contracting State shall not be less filvourably levied in that other

Stסte than the וaxnti:נn levied on enterprises ofthat other State canying on the same

activities.

3. Nothing in this Article shall be constנתed סs obligjng a Conוrncting State to grant to

residents ofthe oוher Conוrncting Stסte זשy persona\ allowסnces, reliels and reducti:נns for

o itsו ccount of civil status or fumily responsibilities ,vhich it grantsס axnti>n purposes onו

own residents.

4. Except ,vhere the provisמns ofparagraph 1 of Anicle 9 (Associated Enterprnes),

puragraph 9 of Article 11 (lnterest) or paragraph 7 of Article 12 (Royahies) סpply,

interest, royakies and other disbursements paid by תס enterprise ofס Contmcting Sוate to

a resident ofthe other Conוrnctiתg Sוate shaU, lor the purpose of detennining the taxnb\e

profits ofsuch enterprise, be deductible under the snme coooitions as if they had been

paid to a resident ofthe lirst-mcntמned Stסte.

5. Enterprises ofa Conוrncting Sוate, the capital of ,vhich is wholly or p1שly owned or

controlled, directly סr indirectly, by one or זrore residents ofthe oוher Conוrnctiתg State,

shaU not be subjected in the lirst-mentioned Staוe to זשy taxntiכn or תסy requirement

connected therewith ,vlוich is more burdensome than the taxntמn and connectcd

requirements to ,vhi:h other similar enterprnes ,vhich are residents ofthe lirst-mentioned

State, the capital of,vhich is wholly or p1שly owned or controlled, directly or indirectly, by

onc or זrore residents ofn third Stnte, nre סr may be subjected.

6. The provisמns ofthis Article shall סpply to the taxes reli:rred to in Article 2 (Taxes

Covered) ofthis Conventi:נn.

30

ARTICLE 23

Mutual Agreement Proו:edure

Whc:re a person considers that the nctions of one or both ofthe Contracting States .ו

resuh or will resuh for that person in taxation oot in nccordance with the provisions of

this Conventi>n, that person may, irrespective ofthe remedies provided by the domestic

hority ofthe Contrncting State of,vhichנוi,v ofthose Stntes, nddress to the competent a.ו

that person is n resident nn npplicntion in writing statiוg the gזoשxls for c\aiming the

reviskנn ofsuch taxation. To be ndnmsible, the npplicntkנn must be submitted within tlvee

years from the first ootifוcntion ofthe nctkנn resuhing in וaxnti>n not in accordnnce with

the provisbns of too Convcnti>n.

2. The competent aנוhority referred to in paragraph 1 shaU endeavoיש, if the

objection nppears to it to be justilied and if it is not itself nble to nrrive nt n satisfנctory

solution, to resolve the case by mutual ngrecment with thc compelent aנוhority ofthe

other Contmcting State, with n vie,v to the nvoidance oftaxatkנn ,vhich is oot in

nccordnnce ,vith too Convention. Any agreement reachc:d shaU be implemented

ootwithstanding any time limits in the domestic J.iw ofthc Coתtrncting States.

3. A Contracting Stnte shaU not, nlter the expiry of thc time limits providcd in its

domestic laws and, in any case, nlter eight years from the end of the וaxnble perkנd in

which the income concemed has nccnוed, incrense the וnx base ofa resident ofeither of

the Contracting Stntes, ,vhc:re the nmount ofsuch increase has nlso been charged to וnx in

the other Contracting Stnte in thc hands of that resident. The pזeceding sentence shaU not

npply in case offuוud or ,vilful defauh.

4. The competent nutoorities ofthc Contracting States shaU endeavoיש to resolve by

mutual agreement any diffוculties or doubts nrising ns to thc interpretatkנn or applicatbn

oftoo Convention. They may also consuh togethcr Jor the elimination of double וnxntion

in cases not provided for in tm; Convention.

5. The competent nuoorities ofthe Contracting States may comm1שicate with each

other dת:ctly for thc purpose ofnpplying this Convention.

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ARTICLE 24

Exchange of lnfonnation

1. The competent nutmrities of the Contracting Stntes shall exchange such

iחformation ns is foreseeably relevant for canying out the provisions oftoo Convention

or to the admiוistration or enlסrcement ofthe domestic laws conceming taxes covered by

too Convention imposed on behalf ofthe Contrncting States, insofur ns the taxntion

thereunder is not contnuy to too Convention. The cxcmתge ofinlonnation is not

restricted by Article 1 (Persorl!i Covered).

2. Any inJonnation received under parngrnph I by a Contrncting State shaU be

treated as secret in the same manner as inlסrmation obtnined under the domestic laws of

thnt Stnte and shaO be disclosed on\y to persons or autmrities (inc1uding courts and

the enforcement or )ס t or collectionחdministrative bodies) concemed ,vith the assessmeם

prosecutiנn in respect o( the detennination of appeals in relation to taxes of every kind

nnd description, or the oversight ofthe above. Such persons or autrorities shaU use the

information only lor such purposes. They may disclose the infonnation in public coשt

proceeding, or in judicial decisi:נns. Notwithstnnding the fore�ing. inlonnation received

by a Contracting Stnte may be used for other purposes when such inlomוation may be used

lor such other purposes under the וa,vs of both States and the competent nutmrity ofthe

supplying State autmrizcs such use.

3. ln no case shaU the provisions of parngraphs I nnd 2 be construed so as to impose

on n Contracting Stnte the oblig;וtion:

(a) to caתy out administrative measures nt V!ITiance with the וa,vs nnd the

ndministrntive prnctice of that or ofthe other Contracting State;

(b) to supply inlormation which is not obtaJnable under the laws or in the

nonוזal course ofthe ndministratbn ofthat or ofthe other Contracting

State;

(c) to supply inlormation ,vhich \\'ould disclose ושy trade, business, irוdustria�

commercial or professioתal secret or trade process, or inlormation the

disclosure of,vhich would be contrary lס public policy (ordre public).

32

4. lf infonnation is requested by a Contracting State in accordance ,vith this Article,

the other Contracting State shaU use its in!omוation gathering measures to obtaiח the

requested information, even tmugh tlוat other State may not need such information lor its

own tax purposes. The obligation contained in the pזeceding sentence iי, subject lo the

limitatiorL'i of paragroph 3 but iו no case shaU s11:h limitations be construed to pennit 11

Contracting State to decline to supply in!ormation solely because it hםs סח domestic

interest in such infonnntion.

5. ln סח case shaU the proviיibns of paragraph 3 be construed to pennit 11 Conוrncting

State to decline to supply inloחn11tbn solely because the inlחסnation is held by a bank,

other financ ial institution, nominee or person acting in וש agency or a fiduc iary capacity

or because the informatio ח relates to ownership interests in a person.

ARTICLE 25

Other Umitations

Nothing in this Convention shall prevent a Contracting State fiטm applying ושy

provisbn ofits laws ,vhich are designed lס prevent avoidance or evasion oftaxes.

ARTICLE 26

Members orDiplomatie Missions and Consular Posts

1. Nothing in this Conventbn shaU nffect the fוscnl privileges ofmembers of

dipk>matic miיisמns or consular posts uחder the genernl nוles of lntematמnal Law or

under the proviיiions ofspecial agreements,

2. Notי.vithstnתding the provisions of Aחicle 4 (Resident), an iוdividual ,vho is n

member ofa dipk>mntic nmsi>n, consular post or pennanent miיision of11 Contracting Sוate

,vhich is situated in the other Contracting State or in a third State shaU be deemed for the

p\l'])Oses ofthis Convention to be a resident only ofthe sending State ifthat individual is

liable in the sending State to the sשne obligatמns in relatbn to tax חס tolal income ns nre

residents ofthat sending State.

33

ARTICLE '1.7

Miscellaneous Rules

1. This Convention shaU not 11/fei:t the taxati>n by a Contracting State of its residents

(as determined ושder Article 4 (Resident)). Ho,vever, oothing in this paragraph shaU 11ffi:ct

the ob�ti>ns of11 Contracting Stnte ושder paragropm 2 וmd 3 of Article 9 (Associated

Eתterprises), paragroph 6 of Article 13 (Capitnl Gains), paragraph 4 of Article 17 (Pensi>ns

d Annuities), Article 18 (Govemment Services), Article 21 (Elimination ofDoubleוש

Taxation), Arוicle 22 (Non-Discrimination) וmd paragraph 3 of Article 23 (Mutual

Agreement Procedure).

2. Nothing in this Convention shaU prevent a Contracting State fiטm npplying the

provisbns ofiוs laws relating to thin capitnlizatbn.

3. For the purposes ofparagraph 3 of Article XXII (Consultתtion) ofthe Genera/

Agreement סn Trade in Services ofthe Agreement Estab/ishing the JVorld Trade

Organizat ion, done at Mnrrakesh 15 חס April 1994, the Conוrncting States agree that,

notwithstnתding that paragrnph, ושy dispute between them םs to whether n measure fuUs

,vithin the scope ofth6 Conventi>n may be brought before the Council lor Trnde in

Services, as provided by that paragraph, only ,viוh the consent ofboth Conוrncting States.

Any doubt as to the iוterpretation ofth6 paragraph shaU be resolved ושder paragrnph 4 of

Article 23 (Mutwl Agreement Procedun:) or, fuiling 11greement ושder that procedure,

pursתשt to ושy other procedure 11greed to by both Contracting Statcs.

34

VI. FINAL PROVISIONS

ARחCLE 28

Entנy into Force

,writing תtrncting Stnte iחg States shall notily the other CoתractiוEach ofthe Con .ו

through diplomntic channels, or the completion or the procedures required by its law lor

the bringing into force ofthis Convention. This Convention shall enter iתto Jorce on the

date ofthe later ofthese notirנcations and iגs provisions shall have elfect:

(a) in respect oftaxes \Vithheld מt soת.ו:e, on שnounts paid or credited to

oon-residents, on or al!er the first day or January ofthe calendnr yenr

lolbwing that in which this Convention enters iתto Jorce; and

(b) in respect of other taxes, lor taxation yenrs beginning חס or afler the first

day of January or the calendar year folbwing that in \vhich this

Convention enters iתto force.

2. The Convention be11veen Canada and וhe State of lsrael for וhe Avoidance o/

Double Taxaוion and the Prevenוion of Fiscal Evasion 1t1ith respect to Taxes on lncome

and Capital, done at Ottawa on 21 July 1975 (refeזנed to herein as the

"1975 Convention'ך shall cease to have efJ'ect lrom the dates חס which this Convention

becomes effective in accordושce with paragrnph 1.

3. The 1975 Convention shall tenninate חס the last date חס \Vhich it has efii:ct in

accordance with panוgroph 2.

4. Notwi1hstanding the prow.ions ofthis Article, the provisi<נnי; of Article 23

(Mutual Agזeement Procedure) and Article 24 (Exchangc oflnfomוation) ofthis

Conventi<נn shall have elfect lrom the date ofentזy into force ofthis Convention, \Vithout

regard to the taxable period to which the matter rebtes.

3S

� �

STA TE F ISRAEL

ARTICLE 29

Tennination

1. This Conventio ח shall continue in elfect unti] termiתDted by n Contnוcting State.

Either Contracting State may terminate this Conventiנn, through dipbmatic chanתe�. by

giving a written mtice of termination at least six months before the eoo of any cnleoonr

year beginning on ornfier the expirutiנn ofn peri>d offive years 1mm the date ofits

entry into Jorce. ln such eveחt, this Convention shall ceסse to have efrect:

(a) in respect oftnxes withheld nt source, on amounts paid or credited to

mn-residents, oת or nfier the lirst day of January of the caJendnr year

folbwing that in wm:h the mtice has been given; ושd

(b) in respect of other tnxes, lor taxation years beginning on or nfier the lir.it

dny ofJanuary ofthe cnleooar yenr lolbwing that in \vhich the mtice has

been given.

2. This Conventiנn shall tenniתate on the lסst dnte oת ,vhich it has efrect in

nccordance with paragrnph 1, unJess the Contnוcting States ngrec othcr\vise.

IN WITNFSS WHEREOF the undersigned, duly nuthorized to that elfect, havc s�d

this Convention.

DONE "1 duplkate ך >יtנ..ו *,, ,f1 "ת-/ <;( day or �1,4'(21)16,

\vm:h correspooos to the [ ift\ �"

dny'bY!ס1 דד ofthe Hebre\v Caleoonr, in the Eng)ish,

French ושd Hebrew lnngunges, each versiנn being cqשUy authentic.

36

FOR THE GOVERNM ENT OF

CANADA

PROTOCOL

At the time ofsigning ofthe Cסnvention between the Government o/Canada and

the Government ס/ the State of /srael for the Avoidance ס/ Double Taxation and the

Prevention of Fiscal Evasion וviוh respect to Taxes on Jncסme (the "Convention'ך, the

Govemment ofCתסada and the Govemment ofthe State oflsrael have ngזeed upon the

folbwing provisions \Vhich shall be an integral p1ש of this ConventiונL

:nנWith reference to the Conventi .ו

lt is understood that the provisbns ofthic; Conventiנn shaU oot be constnנed to

restrict in ושy mnnner זשy exemptbn, allo\vaחce, credit or other deduction accorded

by the laws ofa Contractiוg Stale in the detennination ofthe tax imposed by that

State.

2. With reference to Article 2 (Taxes Covered) ofthe Convention:

lt ic; underslood that the taxes described in clause 3(a)(i) include taxes imposed

under the Petroleum Profiוs Taxaוion Laוv 5771-20/ 1.

3. With reference to paragraph ו of A11icle 4 (Residenl) ofthe Conventמn:

(a) lt is understood that the term "agency", in relatמn to ט State or זשy

politic11l subdivisiנn סr bcal autoority thereo� includes 11 body

empowered to perform functמns or duties ofu govemmental nature on

behalf ofchat State or any political subdivisמn or bcal 11utoority thereof.

(b) lt is understood that the lerm "imtrumentality" includes a person that is

wholly o,vned, direclly or indirectly, by a Contracting State or by 11

political subdivisמn or local autoorily of 11 Contracting State.

4. Wilh refi:rence to Article 10 (Dividends and Dic;tributions by a Renl Estate

lnvestment Fund):

(a) lt is understood that, in the case of lsrae� 11 Real Estate lnvesttnent Fund

means 11 real estnte iחvestment fund which meets the conditions in

sectiנn 64A3 ofthe lsraeli lncome Tax Ordinance.

37

b/bk כ.-�FOR THE GOVERNMENT OFCANADA

(b) lt is understood that the tenn "brnתch tax" mcans, in the case ofCanada, thetax imposed in accordושce with the provisiגns of Part XIV (Additiגnal Taxon Non-Resident Corpomtiגn) ofthe lncome Tax Act, as שnended fiumtime to time without afrecting the geneml principle hereo(

5. With rerereoce to paragrnph ו of Article 14 (lncome fium Empbyment):

lt is understood that the tenn "similar remunemtiגn" includes stock-optionsbenefזts.

6. With rerereocc to Article 23 (Mutual Agזeement Procedurc):

lt is understood that the tenn "increase the tax base" refers to adjustmenוs thatresuh in the inclusbn of an item of income or a redu:tion of an expense or adeductiגn for tax purposes.

7. With relerence to Article 24 (Exchangc oflnlonnation):

lt is understood that inlonnatiגn nlso includcs documenוs.

(/\L DONE in duplicnte ntfL.lJJL( � ')J s.f day of S,�Yנ¼fo16, ,vhich corresponds to the ,.� day C!fד� �fthe Hebrcw Cnlendar, in the Eng\ish,French and Hebre,v bnguages, each vcrsiגn being cqwlly authentic.

38