Double Tax Treaty Brazil X Ecuator

Date of Conclusion: 26 May 1983
Effetive Date: 1 January 1988

 

CONVENTION BETWEEN THE FEDERATIVE REPUBLIC OF BRAZIL AND THE REPUBLIC OF ECUADOR FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME

 

The Government of the Federative Republic of Brazil and the Government of the Republic of Ecuador,

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

Have agreed as follows:

Article 1
Personal scope

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

Article 2
Taxes covered

1. This Convention shall apply to taxes on income imposed by one of the Contracting States, irrespective of the manner in which they are levied.

2. The existing taxes to which this Convention shall apply are:

a) in the case of the Federative Republic of Brazil:

the federal income tax, excluding the tax on excess remittances and on activities of minor importance;

(hereinafter referred to as “Brazilian tax”);

b) in the case of the Republic of Ecuador:

– the income tax, including the additional charges foreseen in the Income Tax Law

(hereinafter referred to as “Ecuadorian tax”).

2.      The present Convention shall also apply to any identical or substantially similar taxes that are imposed in addition to, or in place of, the above-mentioned taxes. The competent authorities of the Contracting States shall notify each other of any significant changes that have been made in their respective taxation laws.

Article 3
General definitions

1. For the purposes of this Convention, unless the context otherwise requires:

a) the term “Brazil” means the Federative Republic of Brazil;

b) the term Ecuador means the Republic of Ecuador;

c) the term “national” means:

I – any individual possessing the nationality of a Contracting State, in accordance with the law of that Contracting State;

II – any legal person, partnership or association deriving its status as such from the laws in force in a Contracting State;

d) the terms “a Contracting State” and “the other Contracting State” mean Brazil or Ecuador, as the context requires;

e) the term “person” includes an individual, a company and any other body of persons liable to tax ;

f) the term “company” means any body Corporate or any entity that is treated as a body Corporate for tax purposes;

g) the term “enterprise” means a organization constituted by one or more persons that performs a profitable activity;

h) the terms “enterprise of a Contracting State” and “enterprise of the other Contracting State” mean respectively an enterprise carried on by a resident of a Contracting State and an enterprise carried on by a resident of the other Contracting State as the context requires;

i) the term “international traffic” means any transport by a ship, boat or aircraft operated by an enterprise that has its place of effective management in a Contracting State, except when the ship, boat or aircraft is operated solely between places in the other Contracting State (coasting trade);

j) the term “tax” means Brazilian tax or Ecuadorian tax, as the context requires;

k) the term “competent authority” means:

I – in Brazil: the Minister of Finance, the Secretary of Federal Revenue or their authorized representatives;

II – in Ecuador: the Minister of Finance and Public Credit, the General Director of Revenue or their authorized representatives.

2. As regards the application of the Convention by a Contracting State, any term not otherwise defined shall, unless the context otherwise requires, have the meaning that it has under the law of that Contracting State relating to the taxes to which the Convention applies. Where the term has contrary or opposed meanings, the competent authorities of the Contracting States shall, by mutual agreement, settle the interpretation to be applied.

Article 4
Fiscal domicile

1. For the purposes of this Convention, the term “resident of a Contracting State” means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature.

2. Where by reason of the provisions of paragraph l an individual is a resident of both Contracting States, then his status shall be determined as follows:

a) he shall be deemed to be a resident 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 to be a resident of the Contracting State with which his personal and economic relations are closer (center of vital interests);

b) if the Contracting State in which he has his center of vital interests cannot be determined, or if he has not a permanent home available to him in either Contracting State, he shall be deemed to be a resident of the State in which he has an habitual abode;

c) if he has an habitual abode in both Contracting States or in neither of them, he shall be deemed to be a resident of the Contracting State of which he is a national;

d) if he is a national of both Contracting States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.

3. Where by reason of the provisions of paragraph l a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident of the Contracting State in which its place of effective management is situated.

Article 5
Permanent establishment

1. For the purposes of this Convention, the term “permanent establishment” means a fixed place of business through which the business of an enterprise is wholly or partly carried on.

2. The term “permanent establishment” includes especially:

a) a place of management;

b) a branch;

c) an office;

d) a factory;

e) a workshop;

f) a mine, a quarry or any other place of extraction of natural resources;

g) a building site or construction or installation or assembly project which exists for more than twelve months.

3. The term “permanent establishment” shall be deemed not to include:

a) the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to 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 maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;

d) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise or of collecting information, for the enterprise;

e) the maintenance of a fixed place of business solely for the purpose of advertising, for the supply of information, for scientific research or for similar activities which have a preparatory or auxiliary character for the enterprise.

4. A person acting in a Contracting State on behalf of an enterprise of the other Contracting State – other than an agent of an independent status to whom paragraph 5 applies – shall be deemed to have a permanent establishment in the first-mentioned Contracting State if he has, and habitually exercises, in that Contracting State an authority to conclude contracts in the name of the enterprise, unless the activities of such person are limited to the purchase of goods or merchandise for the enterprise.

However, an insurance company of a Contracting State shall be deemed to have a permanent establishment in the other Contracting State provided that, through a representative other than the agents to whom paragraph 5 applies, it receives premiums or secures risks in that other State.

5. An enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that other State through a broker, general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business.

6. The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State, or which carries on business in that other State (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment of the other.

Article 6
Income from immovable property

1. Income from immovable property, including income from agriculture or forestry, may be taxed in the Contracting State in which such property is situated.

2. a) Subject to the provisions of sub-paragraphs b and c the term “immovable property” shall be defined in accordance with the law of the Contracting State in which the property in question is situated;

b) the term shall, in any case, include property accessory to immovable property, livestock and equipment used in agriculture and forestry, rights to which the provisions 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;

c) ships, boats and aircraft shall not be regarded as immovable property.

3. The provisions of paragraph 1 shall apply to income derived from the direct use, letting, or use in any other form of immovable property.

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 professional services.

Article 7
Business profits

1. The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State, but only so much of them as is attributable to that permanent establishment.

2. Subject to the provisions of paragraph 3, where an enterprise of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment the profits which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a permanent establishment.

3. 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 permanent establishment, including executive and general administrative expenses so incurred.

4. No profits shall be attributed to a permanent establishment by reason of the mere purchase by that permanent establishment of goods or merchandise for the enterprise.

5. Where profits include items of income which are dealt with separately in other Articles of this Convention, then the provisions of those Articles shall not be affected by the provisions of this Article.

Article 8
Shipping and air transport

1. Profits from the operation of ships, boats or aircraft in international traffic shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.

2. If the place of effective management of a shipping enterprise is aboard a ship or boat, then it shall be deemed to be situated in the Contracting State in which the home harbor of the ship or boat is situated, or, if there is no such home harbor, in the Contracting State of which the operator of the ship or boat is a resident.

3. The provisions of paragraph 1 shall also apply to profits from the participation in a pool, a joint business or an international operating agency.

4. The provisions of paragraph 1 of Article 16 of the Convention between the Government of the Republic of Ecuador and the Government of the Federative Republic of Brazil on shipping of 9 February 1982 shall cease to apply, in respect of taxes covered by this Convention, in the period during which this Convention applies.

Article 9
Associated enterprises

Where:

a) an enterprise of a Contracting State participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting State, or

b) the same persons participate directly or indirectly in the management, control or capital of an enterprise of a Contracting State and an enterprise of the other Contracting State, and in either case conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly.

Article 10
Dividends

1. Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State.

2. However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but, if the recipient is the beneficial owner of the dividends, the tax so charged shall not exceed 15 per cent of the gross amount of the dividends.

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

3. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends is a resident through a permanent establishment situated therein, and the holding by virtue of which the dividends are paid is effectively connected with such permanent establishment. In such case the provisions of Article 7 shall apply.

4. The term “dividends” as used in this Article means income from shares, “jouissance” shares or “jouissance” rights, mining shares, founders’ shares or other rights, not being debt-claims, participating in profits, as well as income from other Corporate rights which is subjected to the same taxation treatment as income from shares by the laws of the State of which the company making the distribution is a resident.

5. Where a company which is a resident of a Contracting State has a permanent establishment in the other Contracting State, such a permanent establishment may be subject to a tax withheld at source in accordance with the laws of that other Contracting State. However, such a tax shall not exceed 15 per cent of the gross amount of the profits of that permanent establishment determined after the payment of the Corporate tax related to such profits.

6. Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a resident of that other State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or fixed base situated in that other State, nor subject the company’s undistributed profits to a tax on the company’s undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State.

Article 11
Interest

1. Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

2. However, such interest may also be taxed in the Contracting State in which it arises and according to the laws of that State, but, if the recipient is the beneficial owner of the interest, the tax so charged shall not exceed 15 per cent of the gross amount of the interest.

3. Notwithstanding the provisions of paragraphs 1 and 2:

a) interest arising in a Contracting State and paid to the Government of the other Contracting State, a political subdivision thereof or any agency (including a financial institution) wholly owned by that Government or a political subdivision shall be exempt from tax in the first-mentioned State;

b) interest from securities, bonds or debentures issued by the Government of a Contracting State, a political subdivision thereof or any agency (including a financial institution) wholly owned by that Government or a political subdivision shall be taxed only in that State.

4. The term “interest” as used in this Article means income from government securities and income from bonds or debentures, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor’s profits, and income from debt-claims of every kind, as well as other income assimilated to income from money lent by the tax law of the Contracting State in which the income arises.

5. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises through a permanent establishment situated therein and the debt-claim in respect of which the interest is paid is effectively connected with such permanent establishment. In such a case the provisions of Article 7 shall apply.

6. The tax rate limitation provided for in paragraph 2 shall not apply to interest arising in a Contracting State and paid to a permanent establishment of an enterprise of the other Contracting State which is situated in a third State.

7. Interest shall be deemed to arise in a Contracting State when the payer is that State itself, a political subdivision or a resident of that State. Where, however, the person paying the interest, 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 interest is paid was incurred, and such interest is borne by such a permanent establishment or fixed base, then such interest shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.

8. Where, by reason of a special relationship between the payer and the beneficial owner of the interest, or between both of them and some other person, the amount of the interest, having regard to the debt-claim for which it is paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In that 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 Convention.

Article 12
Royalties

1. Royalties arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

2. However, such royalties may also be taxed in the Contracting State in which they arise and according to the laws of that State, but, if the recipient is the beneficial owner of the royalties, the tax so charged shall not exceed:

a) 25 per cent of the gross amount of the royalties arising from the use or the right to use trade marks; and,

b) 15 per cent in all other cases.

3. The term “royalties” as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work (including cinematograph films, films or tapes for television or radio broadcasting), any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial, or scientific equipment, or for information concerning industrial, commercial or scientific experience.

4. Royalties shall be deemed to arise in a Contracting State when the payer is that State itself, a political subdivision, a local authority or a resident of that State. Where, however, the person paying the royalties, 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 obligation to pay the royalties was incurred, and such royalties are borne by such a permanent establishment or fixed base, then such royalties shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.

5. 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 in the other Contracting State in which the royalties arise through a permanent establishment situated therein, and the right or property in respect of which the royalties are paid is effectively connected with such a permanent establishment. In such a case the provisions of Article 7 shall apply.

6. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the royalties, having regard to the use, right or information for which they are paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such a 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 Convention.

Article 13
Capital gains

1. Gains from the alienation of properties may be taxed in both Contracting States according to the internal law of each of those States.

2. Notwithstanding the provisions of paragraph 1, gains from the alienation of ships, boats or aircraft, including movable property pertaining to such ships, boats or aircraft, operated in international traffic, pertaining to a company referred to in Article 8, shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.

Article 14
Independent personal services

1. Income derived by a resident of a Contracting State in respect of professional services or other independent activities of a similar character shall be taxable only in that State, unless the remuneration for such activities and services is paid by a permanent establishment or a fixed base situated in the other Contracting State or by a company which is a resident of that other State. In such a case, the income may also be taxed in that other State.

2. The term “professional services” includes especially independent scientific, technical, literary, artistic, educational or teaching activities as well as the independent activities of physicians, lawyers, engineers, architects, dentists and accountants.

Article 15
Dependent personal services

1. Subject to the provisions of Articles 16, 18, 19, 20 and 21, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxed only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.

2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if:

a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in the fiscal year concerned, and

b) the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State, and

c) the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State.

3. Notwithstanding the preceding provisions of this Article, remuneration derived in respect of an employment exercised aboard a ship or aircraft operated in international traffic by an enterprise mentioned in Article 8 shall be taxed only in the Contracting State in which the place of effective management of the enterprise is situated.

Article 16
Directors’ fees

Directors’ fees and other similar payments derived by a resident of a Contracting State in his capacity as a member of the board of directors or of any other council of a company which is a resident of the other Contracting State may be taxed in that other State.

Article 17
Artistes and sportsmen

1. Notwithstanding the provisions of Articles 14 and 15, income derived by a resident of a Contracting State as an entertainer, such as a theatre, motion picture, radio or television artiste, or a musician, or as a sportsman, from his personal activities as such exercised in the other Contracting State, may be taxed in that other State.

2. Notwithstanding the provisions of this Convention, where the services mentioned in paragraph 1 of this Article are rendered in a Contracting State by an enterprise of the other Contracting State, the income derived by the enterprise from the rendering of such services may be taxed in the first-mentioned Contracting State in which the activities are exercised.

Article 18
Pensions and annuities

1. Subject to the provisions of Article 19, pensions and other similar remuneration in consideration of the rendering of personal services, as well as annuities and other similar income, shall be taxed only in the Contracting State from which the payment is made.

2. As used in this Article:

a) the term “pensions and other similar remuneration” means periodic payments made after retirement in consideration of past employment or by way of compensation for injuries received in connection with past employment;

b) the term “annuities and other similar income” means a stated sum paid periodically at stated times during life, or during a specified or ascertainable period of time, under an obligation to make the payments in return for adequate and full consideration in money or money’s worth (other than services rendered).

Article 19
Governement remuneration and social security payments

1. a) Remuneration, other than a pension, paid by a Contracting State or a political subdivision or a local authority thereof to an individual in respect of services rendered to that State or subdivision or local authority shall be taxable only in that State.

b) However, such remuneration shall be taxable only in the other Contracting State if the services are rendered in that State and the individual :

i) – is a national of that State; or

ii) – not being a national of that State, was a resident of that State in the period before rendering the services.

2. 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 State or subdivision or local authority shall be taxed only in that State.

3. Pensions paid to an individual out of funds from a social security system of a Contracting State shall be taxed only in that State.

4. The provisions of Articles 15, 16 and 18 shall apply to remuneration and to pensions, paid in respect of services rendered in connection with a business carried on by a Contracting State or a political subdivision or a local authority thereof.

Article 20
Teachers and researchers

An individual who is or was immediately before visiting a Contracting State a resident of the other Contracting State and who, at the invitation of the first-mentioned Contracting State or a university, college, school, museum or other cultural institution in that first-mentioned Contracting State or under an official program of cultural exchange, is present in that State for a period not exceeding two years solely for the purpose of teaching, giving lectures or carrying out research at such institution shall be exempt from tax in that State on his remuneration for such activities, provided that the payment of such remuneration is derived by him from outside that State.

Article 21
Students and apprentices

1. An individual who is, or was immediately before visiting a Contracting State, a resident of the other Contracting State and who is present in the first-mentioned Contracting State solely:

a) as a student at a university, college or school in that first-mentioned Contracting State,

b) as the recipient of a grant, allowance or award for the primary purpose of study or research from a religious, charitable, scientific or educational organization,

c) as a member of a technical cooperation program entered into by

the Government of the other Contracting State, or,

d) as a business apprentice, shall be exempt from tax in the first-mentioned Contracting State in respect of the sums received from abroad for the purpose of his maintenance, education or training.

2. An individual who is, or was immediately before visiting a Contracting State, a resident of the other Contracting State and who is present in the first-mentioned Contracting State solely for the purposes of his education or training shall be exempt from tax in that first-mentioned Contracting State for a period not exceeding two years in respect of remuneration received for an employment exercised in that State for the purpose of aiding him in his education or training.

Article 22
Other income

Income of a resident of a Contracting State arising in the other Contracting State and not dealt with in the foregoing Articles, may be taxed in that other State.

Article 23
Methods for the elimination of double taxation

1. Where a resident of a Contracting State derives income which, in accordance with the provisions of this Convention, may be taxed in the other Contracting State, the first-mentioned Contracting State shall allow, subject to the provisions of paragraphs 2 and 3, as a deduction from the income tax of that resident, an amount equal to the income tax paid in the other Contracting State.

Such deduction shall not, however, exceed that part of the income tax, as computed before the deduction is given, which is attributable to the income which may be taxed in the other Contracting State.

2. Dividends paid by a company resident of a Contracting State to a company resident of the other Contracting State owning more than 10 percent of the capital of the paying company, which are taxable in the first-mentioned Contracting State according to the provisions of this Convention, shall be exempt from tax in the other Contracting State.

3. For the deduction mentioned in paragraph 1, the tax on dividends not included in paragraph 2 of this Article, on interest mentioned in paragraph 2 of Article 11, and on royalties mentioned in paragraph 2 of Article 12 shall always be considered as having been paid at the rate of 25 per cent.

Article 24
Non-discrimination

1. Nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith, which is other or more burdensome than the taxation and connnected requirements to which nationals of that other State in the same circumstances are or may be subjected.

2. The taxation on a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favorably levied in that other State than the taxation levied on enterprises of that other State carrying on the same activities. This provision shall not be construed as obliging a Contracting State to grant to residents of the other Contracting State any personal allowances, relieves and reductions for taxation purposes on account of civil status or family responsibilities which it grants to its own residents.

3. Enterprises of a Contracting State, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State, shall not be subjected in the first-mentioned State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which other similar enterprises of the first-mentioned State, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of a third State, are or may be subjected.

4. The provisions of this Article shall apply only to taxes covered by this Convention, as mentioned in Article 2.

Article 25
Mutual agreement procedure

1. Where a resident of a Contracting State 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 Convention, he may, irrespective of the remedies provided by the domestic law of those States, present his case to the competent authority of the Contracting State of which he is a resident within 2 years from the first notification of the action resulting in taxation not in accordance with this Convention.

2. The competent authority shall endeavor, if the objection appears to it to be justified and if it is not itself able to arrive at a satisfactory solution, to resolve the case by mutual agreement with the competent authority of the other Contracting State, with a view to the avoidance of taxation which is not in accordance with the Convention.

3. The competent authorities of the Contracting States shall endeavor to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the Convention. They may also consult together for the resolution of cases not provided for in the Convention.

4. The competent authorities of the Contracting States may communicate with each other directly for the purpose of reaching an agreement in the sense of the preceding paragraphs. When it seems advisable in order to reach agreement to have an oral exchange of opinions, such exchange may take place through a Commission consisting of representatives of the competent authorities of the Contracting States.

Article 26
Exchange of information

1. The competent authorities of the Contracting States shall exchange such information as is necessary for carrying out the provisions of this Convention or of the domestic laws of the Contracting States concerning taxes covered by this Convention insofar as the taxation thereunder is imposed in accordance with this Convention. Any information received by a Contracting State shall be treated as secret and shall be disclosed only to persons or authorities concerned with the assessment or collection of the taxes covered by this Convention (including the competent judicial or administrative courts).

2. In no case shall the provisions of paragraph 1 be construed so as to impose on a Contracting State the obligation:

a) to carry out administrative measures at variance with the laws and administrative practice of that or of the other Contracting State;

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

c) to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or information, the disclosure of which would be contrary to public policy.

Article 27
Diplomatic and consular officials

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

Article 28
Entry into force

1. This Convention shall be ratified and the instruments of ratification shall be exchanged at Quito as soon as possible.

2. The Convention shall enter into force on the date of the exchange of instruments of ratification and its provisions shall have effect for the first time:

a) in respect of taxes withheld at source, on amounts paid on or after the first day of January of the calendar year immediately following that in which the Convention enters into force;

b) in respect of other taxes covered by the Convention, to the fiscal year beginning on or after the first day of January of the calendar year immediately following that in which the Convention enters into force.

Article 29
Termination

Either Contracting State may terminate this Convention after a period of five years from the date on which the Convention enters into force by giving to the other Contracting State, through diplomatic channels, a written notice of termination, provided that any such notice shall be given only on or before the thirtieth day of June of any calendar year. In such a case the Convention shall apply for the last time:

a) in respect of taxes withheld at source, to amounts paid before the expiration of the calendar year in which the notice of termination is given;

b) in respect of other taxes covered by this Convention, to the fiscal year beginning in the calendar year in which the notice of termination is given.

In witness whereof the Plenipotentiaries of the Contracting States have signed this Convention and have affixed their respective seals.

Done in duplicate in Quito on 26 May 1983, in the Portuguese and Spanish languages, both texts being equally authentic.

 

P R O T O C O L

 

As an integral part of the Convention between the Federative Republic of Brazil and the Republic of Ecuador for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, the respective Governments have agreed on the following provisions:

1. In this Convention, the term “resident” means, in the case of Ecuador, a person domiciled in Ecuador.

2. With reference to Article 5, paragraph 3 “d”:

It is understood that the provisions of Article 5, paragraph 3 “d”, do not include the maintenance of a fixed place of business for the purpose of acquiring goods or merchandise destined to sale to third persons.

3. With reference to Article 5, paragraph 5:

It is understood that where the representative performs all or almost all his activities in the name of the enterprise, he shall not be deemed to be an independent representative in the sense of that paragraph.

4. With reference to Article 10, paragraph 4

It is understood that, in the case of Brazil, the term “dividends” also includes any distribution corresponding to certificates of an investment fund that is resident of Brazil.

5. With reference to Article 12, paragraph 3:

It is understood that the provisions of paragraph 3 of Article 12 are applicable to income from the rendering of technical services and from technical, scientific, administrative or similar assistance.

6. With reference to Article 14:

It is understood that the provisions of Article 14 shall apply even if the activities are exercised by a company.

7. With reference to Article 17, paragraph 1:

It is understood that the provisions of Article 17, paragraph 1, are applicable whatever the duration of the stay in the Contracting State in which the activity is excercised.

8. With reference to Article 24, paragraph 2:

It is understood that the provisions of paragraph 5 of Article 10 are not in conflict with the provisions of paragraph 2 of Article 24.

9. With reference to Article 24, paragraph 3:

It is understood that the provisions of Brazilian tax law that do not allow the deduction of royalties as defined in paragraph 3 of Article 12, paid by a company resident of Brazil to a resident of Ecuador that owns at least 50% of the voting capital of that company, at the moment of the determination of the taxable income of the above referred company resident of Brazil, are not in conflict with the provisions of paragraph 3 of Article 24 of this Convention.

In witness whereof the Plenipotentiaries of both Contracting States have signed this Protocol and have affixed their respective seals.

Done in duplicate in Quito on 26 May 1983, in the Portuguese and Spanish languages, both texts being equally authentic.

 

For the Government of the Republic of Equator.

For the Government of the Federative Republic of Brazil


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