Croatia - France Tax Treaty

Agreement between the Government of the Republic of Croatia and the Government of the French Republic for the avoidance of double taxation and prevention of avoidance of income tax payment This agreement was published in the official gazzette of the Republic of Croatia "Narodne novine Međunarodni ugovori" No. 7/04 Applicable since 1 January 2006

The Government of the Republic of Croatia and the Government of the French Republic desiring to conclude the Agreement for the avoidance of double taxation and for the prevention of avoidance of income tax payment have agreed as follows: Article 1 PERSONS COVERED This Agreement shall apply to persons who are residents of one or both of the Contracting States. Article 2 TAXES COVERED

1. This Agreement shall apply to taxes on income imposed on behalf of a Contracting State or of its local authority; irrespective of the manner they are levied.
2. There shall be regarded as taxes on income all taxes imposed on total income or on elements of income, including tax on gains from alienation of movable or immovable property and tax on the total amounts of wages and salaries paid by enterprises, as well as taxes on capital appreciation.
3. The taxes to which the Agreement shall apply are in particular: a) In case of Croatia: (i) Profit Tax (ii) Personal Income Tax (iii) Surtax on Income Tax and any other additional charges levied on one of these taxes; (hereinafter referred to as: “Croatian tax”); b) In case of France:

(i) Income Tax (l'impôt sur le revenu); (ii) Profit Tax (l'impôt sur les sociétés); (iii) Profit Tax Contribution (la contribution sur l’impôt sur les sociétés); (iv) Tax on salaries (la taxe sur les salaires); (v) General social contributions (contributions sociales generalisées); (vi) Contribution for reimbursement of social debt (contributions pour le remboursement de la dette sociale); including any withholding tax, down payments or advance payments of the abovementioned taxes; (hereinafter referred to as: “French tax”); 4. The Agreement shall also apply to any identical or substantially similar taxes that are imposed after the date of signature of the Agreement in addition to, or in place of, the existing taxes. The competent authorities of the Contracting States shall notify each other of any significant changes that have been made in their taxation laws. Article 3 GENERAL DEFINITIONS

1. For the purposes of this Agreement, unless the content otherwise requires: a) the terms “Contracting State” and “other Contracting State” mean, depending on the content, Croatia or France; b) The term “Croatia” means the state territory of the Republic of Croatia including the territory of sea that is adjacent to the external border of territorial sea, including sea bed and subterranean, under which the Republic of Croatia exercises sovereign rights and jurisdiction in line with international law. c) The term „France“ means European and overseas departments of the French Republic including the territorial sea and all areas outside the territorial sea, under which France has sovereign rights of exploration and exploitation of natural resources of sea bed and subterranean and water pillar above them, in line with international law. d) The term “person” includes a physical person, a company and any other body of persons; e) The term “company” means any legal entity or any organizational unit treated as a legal entity for taxation purposes; f) The term “enterprise of a Contracting State” and “enterprise of the other Contracting State” mean respectively a company managed by a resident of a Contracting State and a company managed by a resident of the other

Contracting State. g) The term “international traffic” means any transport by a ship or aircraft operated by an enterprise that has its place of effective management in a Contracting State, except when the ship or aircraft is operated solely between places in the other Contracting State. h) The term “competent authority” means: (i) in case of Croatia, Minister of Finance or his authorised representative; (ii) In case of France, a minister responsible for the state budget or his authorized representative; i) The term “national” means: (i) any physical person being a national of one of the Contracting States; (ii) any legal person, partnership or association deriving its status as such from the laws in force in one of the Contracting States. 2. As regards the application of this Agreement at any time by the Contracting States, any term not defined therein shall have the meaning that it has at that time under the law of that State for the purposes of taxes to which the Agreement applies. Any meaning under the applicable tax laws of that Contracting State is prevailing over a meaning given to the term under other laws of that State. Article 4 RESIDENT

1. In this Agreement, 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, and also includes that State and its local authority. This term, however, does not include any person who is liable to tax in that State in respect only of income from sources in that State.
2. Where by reason of the provisions of paragraph 1 a physical person is a resident of both Contracting States, then his status shall be determined as follows: a) He shall be deemed to be a resident only of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident only of the State with which his personal and economic relations are closer (centre of vital interests); b) If the state in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either State, he shall be deemed to be a resident only of the State in which he has an habitual abode; c) If he has a habitual abode in both States or in neither of them, he shall be deemed to be a resident only of the

State of which he is a national; d) If he is a national of both 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 1 a person other than a physical person is a resident of both Contracting States, then it shall be deemed to be a resident only of the State in which its place of effective management is situated. 4. The term „resident of a Contracting State“includes any joint venture or any enterprise that has its place of effective management in that Contracting State, which is not subjected to corporation tax, in case of France, and to profit tax, in case of Croatia, as well as all joint entrepreneurs or other members that are personally liable to pay tax on their share of profit equal to their rights or interests in that joint venture or body of persons. Article 5 PERMANENT ESTABLISHMENT

1. For the purposes of this Agreement, 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, and f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources.
3. A building site or construction or installation project constitutes a permanent establishment only if lasts more than twelve months.
4. Notwithstanding the preceding provisions of this Article, 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 carrying on, for the enterprise, any other activity of a preparatory or auxiliary character; f) the maintenance of a fixed place of business solely for any combination of activities mentioned in subparagraphs a) to e), provided that the overall activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary character. 5. Notwithstanding the provisions of paragraphs 1 and 2, where a person - other than an agent of an independent status to whom paragraph 6 applies – is acting on behalf of an enterprise and has, and habitually exercises, in a Contracting State an authority to conclude contracts in the name of the enterprise, that enterprise shall be deemed to have a permanent establishment in that State in respect of any activities which that person undertakes for the enterprise, unless the activities of such person are limited to those mentioned in paragraph 4 which, if exercised through a fixed place of business, would not make this fixed place of business a permanent establishment under the provisions of that paragraph. 6. An enterprise shall not be deemed to have a permanent establishment in a Contracting State merely because it carries on business in that 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. 7. 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 (where 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 derived by a resident of a Contracting State from immovable property (including income from agriculture or forestry) situated in the other Contracting State may be taxed in that other State.
2. For the purposes of this Agreement, the term „immovable property“ has, under the laws of a Contracting State in which the property concerned is located; a meaning shall in any case include property accessory to immovable property, livestock and equipment used in agriculture and forestry, actual rights to which the provisions of general law respecting landed property apply, usufruct of immovable property and right to variable or fixed payments as consideration for the working of, or the right to work, mineral deposits, sources and other natural resources; ships, boats and aircraft shall not be regarded as immovable property.

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 in use for the purposes of independent business activity. 5. Where shares or other rights in a company, trust or any other comparable institution provide the right of usufruct of immovable property located in a Contracting State and owned by that company, trust or a comparable institution, income derived from direct use, letting or any other form of exercising of the right of usufruct may be taxable in that Contracting State, irrespective of the provisions of Articles 7 and 14. 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 a business in the other Contracting State through a permanent establishment situated herein. If the enterprise carries on a business 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 a 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 determining the profits of a permanent establishment, there shall be allowed as deduction expenses which are incurred for the purpose of the permanent establishment, including executive and general administrative expenses so incurred, whether in the State in which the permanent establishment is situated or elsewhere.
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. For the purposes of preceding paragraphs of this Article, the profits attributed to the permanent establishment shall be determined by the same method year by year unless there is good and sufficient reason to the contrary.
6. Where profits include items of income which are dealt with separately in other Articles of this Agreement, then the provisions of those Articles shall not be affected by the provisions of this Article. Article 8 MARITIME AND AIR TRAFFIC
7. Profits from the operation of ships 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. That profit also includes the profit of an enterprise derived from other business activities, especially from use, maintenance or letting containers for transport of goods or merchandise in international traffic, if these activities derive from use of ships or aircraft by an enterprise in international traffic. 2. If the place of effective management of a shipping enterprise aboard a ship, then it shall be deemed to be situated in the Contracting State in which the home harbour of the ship or boat is situated, or, if there is no such home harbour, in the Contracting State of which the operator of the ship 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. Article 9 ASSOCIATED ENTERPRISES

1. 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.
2. Where a Contracting State includes in the profits of an enterprise of that State - and taxes accordingly – profits on which an enterprise of the other Contracting State has been charged to tax in that other State and the profits so included are profits which would have accrued to the enterprise of the first-mentioned State if the conditions made between the two enterprises had been those which would have been made between independent enterprises, then that other State shall make appropriate adjustment to the amount of the tax charged therein on those profits, when the other Contracting State considers the adjustment justified. In determining such adjustment, the other provisions of this Agreement shall be taken into consideration and the competent authorities of the Contracting States shall if necessary consult each other. Article 10 DIVIDENDS
3. 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.
4. 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 beneficial of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed: a) 0 per cent of gross amount of the dividends if the beneficial owner is a company which holds directly or indirectly at least 10 per cent of the capital of the company paying the dividends; b) 15 per cent of the gross amount of the dividends in all other cases. This paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid. 3. A resident of Croatia who receives a dividend paid by a company resident of France may obtain the refund of down-payment (précompte) in proportion with actual payment made by an enterprise to that dividend. For the purpose of this Agreement, the gross amount of down-payment refund (précompte) shall be deemed a dividend. The provisions of paragraph 2 shall apply on that gross amount. 4. The term “dividends” means income from shares, "actions de jouissance“ type of shares (shares which grant the right to participate in the net profit of the company without conferring ownership rights) or „jouissance“ type of rights (the right to participate in the net profit of the company without conferring ownership rights), mining shares, equity or other rights, not being debt-claims, participating in profits, as well as income which is deemed to be distribution in line with the laws of the State of which the company making the distribution is a resident. It is implicit that the term „dividend“shall not include the income as mentioned in Article 16. 5. The provisions of paragraphs 1, 2 and 3 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 or carries on an independent business activity in that other State from a permanent establishment located in that State and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment. In such case the provisions of Article 7 or Article 14 shall apply. 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 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 profits or income arising in such other State. 7. The provisions of this Agreement shall apply only if a beneficial owner of the dividends, being a resident of a Contracting State proves, if Tax Administration of the other Contracting State requests him to do so, that a primary reason or one of the reasons for possessing a holding in respect of which the dividends are paid is not to take an advantage of this Article. Article 11 INTEREST

1. Interest arising in a Contracting State and paid to a resident of the other Contracting State shall be taxed only in that other State, if the resident is the beneficial owner of the interests. 2. The term “interest” means income from debt-claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor’s profits, and in particular, income from government securities or income from bonds or debenture, including premiums and prizes attaching to such securities, bonds or debentures. Overdue payment interests shall not be regarded as interest for the purpose of this Article. The term „interests” shall not include any kind of income that is deemed to be dividends, in line with the provisions of Article 10. 3. The provisions of paragraph 1 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 or he carries on an independent business activity in that other State through a fixed base located therein and the debt-claim in respect of which the interest is paid is effectively connected with such permanent establishment. In such case the provisions of Article 7 or Article 14 shall apply. 4. Interest shall be deemed to arise in a Contracting State when the payer is 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 in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment, then such interest shall be deemed to arise in the State in which the permanent establishment is situated. 5. 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 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 such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement. Article 12 ROYALTIES

1. Royalties arising in a Contracting State and paid to a beneficial owner being a resident of the other Contracting State shall be taxed only in that other State, if the resident is the beneficial owner of the royalties.
2. 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 computer software, cinematograph films or radio and television films and tapes of any kind, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience (know-how).
3. The provisions of paragraph 1 shall not apply if the beneficial owner of the royalties, being a resident of a Contracting State, carries on a business in the other Contracting State in which the royalties arise through a

permanent establishment situated therein or he carries on an independent business activity in that other State from his fixed base situated therein and the rights or property in respect of which the royalties are paid is effectively connected with such permanent establishment. In such case the provisions of Article 7 or Article 14 shall apply. 4. Royalties shall be deemed to arise in a Contracting State when the payer is a resident of that Contracting 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 in connection with which the indebtedness on which the royalties are paid was incurred, and such royalties are borne by such permanent establishment, then such royalties shall be deemed to arise in the State in which the permanent establishment is situated. 5. 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 case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement. Article 13 CAPITAL GAINS

1. a) Gains derived by a resident of a Contracting State from the alienation of immovable property referred to in Article 6 may be taxed in that other State in which the immovable property is located. b) Gains from alienation of shares or other rights in a company, trust or any similar institution, assets of which represent more than 50 per cent of their value or in respect of which more than 50 per cent of their value may be gained, directly or indirectly through one or more middle companies, trusts or comparable institutions, the immovable property as referred to in Article 6 and located in a Contracting State or any rights connected with the immovable property may be taxable in that Contracting State. For the purposes of this provision, any immovable property connected with industrial, commercial or agricultural activities of an enterprise or its independent services shall not be taken into account.
2. Gains from the alienation of movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or of movable property which a permanent establishment resident of a Contracting State has in the other Contracting State for the purpose of carrying on an independent business activity, including such gains from the alienation of such a permanent establishment (alone or with the whole enterprise), may be taxed in that other State.
3. Gains from the alienation of business property of an enterprise consisting of ships or aircraft operated by that enterprise in international traffic or movable property pertaining to the operation of such ships, aircraft or road transport vehicles shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.
4. Gains from alienation of any property, other than that referred to in paragraphs 1, 2 and 3, shall be taxable only in the Contracting State of which the alienator is a resident.

Article 14 INDEPENDENT BUSINESS ACTIVITY

1. Income derived by a resident of a Contracting State from professional activities or other independent activities shall be taxable only in that State, unless the resident has a permanent establishment in the other State which is regularly available to him for the purpose of carrying on his activities. When a resident has such a permanent establishment, only the portion of income that can be attributed to that permanent establishment may be taxable in the other State.
2. The term “professional activity” includes in particular independent scientific, literary, artistic, educational or teaching work and independent activities of doctors, lawyers, engineers, architects, dentists and bookkeepers.

Article 15 INCOME FROM EMPLOYEMNT

1. Subject to provisions of Articles 16, 18, 19 and 20, salaries and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable 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 in the other Contracting State shall be taxable 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 any subsequent twelve month period commencing or ending 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 which the employer has in the other State.
3. Notwithstanding the preceding provisions of this Article, the remuneration derived in respect of an employment exercised aboard a ship or aircraft operated in international traffic or aboard a boat engaged in inland waterways transport, may be taxable in the Contracting State in which the place of effective management of the enterprise is situated.

Article 16 MANAGEMENT BOARD MEMBERS’ FEES Management board members’ fees and other similar payments derived by a resident of a Contracting State in his capacity of a member of the management board or other similar body 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 theatre, motion picture, radio or television artiste, or a musician, or as a sportsman, from his independent activities as such exercised in the other Contracting State, may be taxed in that other State.
2. Where income in respect of independent activities exercised by an entertainer or a sportsman in his capacity as such accrues not to the entertainer or a sportsman himself but to another person, irrespective of his status of a resident or non-resident of a Contracting State, that income may, notwithstanding the provisions of Articles 7, 14 and 15, be taxable in a Contracting State in which the activities of the entertainer or sportsman are exercised.
3. Notwithstanding the provisions of paragraph 1, any income derived from an independent activity in the other Contracting State by a resident of a Contracting State in his capacity of an artist or sportsman shall be taxable only in the first-mentioned Contracting State when these activities carried on in the other State are usually funded from public funds of the first-mentioned Contracting State, its local authorities or constitutional bodies.

Article 18 PENSIONS Subject to the provisions of paragraph 2 of Article 19, pensions and other similar remuneration paid to a resident of a Contracting State in consideration of past employment shall be taxable only in that State.

Article 19 GOVERNMENT SERVICE

1. a) Salaries and other similar remuneration, other than a pension, paid by a Contracting State, its local authority or constitutional bodies to an individual in respect of services rendered to that State, local authority or body shall be taxable only in that State. b) However, such salaries and other similar remuneration shall be taxable only in the other Contracting State if the services are rendered in that State and the physical person is a resident and national of that State and not a national of the first-mentioned State.
2. a) Any pension paid by, or out of funds created by, a Contracting State, local authority or constitutional bodies thereof to a physical person in respect of services rendered to that State, local authority or bodies, shall be taxable only in that State. b) Such pension shall, however, be taxable only in the other Contracting State if a physical person is a resident of, and a national of, that State and not a national of the first-mentioned State.
3. The provisions of Articles 15, 16 and 18 shall apply to salaries and other similar remuneration, and to pensions, in respect of services rendered in connection with a business carried on by a Contracting State, its

local authority or their constitutional bodies.

Article 20 STUDENTS Payments which a student or business apprentice who is or was immediately before visiting a Contracting State a resident of the other Contracting State and who is present in the first-mentioned State solely for the purpose of his education or training, receives for the purpose of his maintenance, education or training shall not be taxable in that State, provided that such payments arise from sources outside the State.

Article 21 PROFESSORS AND SCIENTISTS

1. A physical person who, immediately before visiting the other Contracting State, is a resident of a Contracting State and who pays that other State a visit primarily for the purpose of lecturing or participating in a research at university, college or any other educational or scientific research institution shall be taxed only in the firstmentioned State for the income derived from independent activity for that lecture or research during a period not exceeding 2 years after the date of entry in the other Contracting State.
2. The provisions of paragraph 1 shall not apply to income arising from researches pursued not in the public interest but primarily for individual benefits of particular person or persons.

Article 22 OTHER INCOME

1. Items of income of an effective beneficial, resident of a Contracting State, wherever arising, not dealt with in the preceding Articles of this Agreement, shall be taxable only in that State.
2. The provisions of paragraph 1 shall not apply to income, other than income from immovable property as defined in paragraph 2 of Article 6, if the beneficial owner of such income, being a resident of a contracting State, carries on business in the other Contracting State through a permanent establishment situated therein or he carries on an independent activity from a fixed base situated therein and the right or property in respect of which the income is paid is effectively connected with such a permanent establishment. In such case the provisions of Article 7 or Article 14 shall apply.

Article 23 THE AVOIDANCE OF DOUBLE TAXATION

1. In case of Croatia, double taxation shall be avoided as follows:

a) Income arising in France – with the exception of income under b) – which is taxable in France, in line with the provisions of this Agreement, shall be tax - exempt in Croatia. This exemption shall not affect the right of Croatia to take into account the tax-exempt income in the course of assessment of its tax rate. This provision shall apply on dividends only if the dividends are paid to an enterprise resident of Croatia by an enterprise resident of France, with the minimum of 10 per cent of equity directly owned by the Croatian enterprise and if the dividends are not deductible in the course of determining the profits of the enterprise which is the payer of dividends. b) In line with this Agreement, tax paid in France on the following types of income shall be incorporated into Croatian tax on these types of income: i) Dividends not referred to under a); ii) Income referred to in paragraph 3 of Article 15; iii) Management Board members’ fees as referred to in Article 16; iv) Income of artistes and sportsmen The incorporated amount shall not, however, exceed the amount of Croatian tax on that income. 2. In case of France, double taxation shall be avoided as follows: a) Notwithstanding all the other provisions of this Agreement, income that may be or is taxable only in Croatia in line with the provisions of the Agreement, shall be taken into account in the course of computation of French tax if that tax is not exempt from corporation tax in line with the French domestic laws. In that case, the Croatian tax shall not be deducted from that income, but a resident of France shall be entitled to French tax deduction, under the conditions and with the limitations as mentioned under lines (i) and (ii) The tax deduction shall equal: (i) in case of income, other than income from the line (ii), the amount of French tax that can be attributed to that income under the condition that a resident of France is subjected to Croatian tax on that income; (ii) in case of income subjected to corporate profit tax as from Article 7 and paragraph 2 of Article 13, as well as in the case of income from Article 10, paragraph 1 of Article 13, paragraph 3 of Article 15, Article 16 and paragraphs 1 and 2 of Article 17, amount of tax paid in Croatia in line with provisions of the abovementioned Articles; that tax deduction, however, shall not exceed the amount of French tax that can be attributed to that income. b) (i) It is implicit that the term “amount of French tax that can be attributed to that income” as from line a) means:

• The amount of net income concerned multiplied with the rate effectively applied to income, when the tax is calculated with proportional rate;
• The amount of net income concerned multiplied with the rate incurred from the proportion of effectively payable tax on total net income taxable in line with French laws, when the tax on that income is calculated with

progressive rates applied. (ii) It is implicit that the term “the amount of tax paid in Croatia” as used in line a) means the amount of Croatian tax effectively and definitively attributed to a French resident for the items of income concerned, in line with the provisions of the Agreement and who is subjected to tax on those items of income in line with French laws.

Article 24 NON-DISCRIMINATION

1. Nationals of a Contracting State in the other Contracting State shall not be subjected to any taxation or any requirement connected therewith, which is other or more burdensome than the taxation and connected requirements to which nationals of that other Contracting State in the same circumstances, in particular with respect to residence, are or may be subjected. Notwithstanding of provisions of Article 1, this provision shall apply to persons who are not residents of one or both of the Contracting States.
2. The taxation of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or of a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of carrying on his independent business activities shall not be less favourably levied in that other State than the taxation levied on enterprises of that Contracting 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. Except where the provisions of paragraph 1 of Article 9, paragraph 5 of Article 11 or paragraph 5 of Article 12 apply, interest, royalties and other disbursements paid by an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable profits of such enterprise, be deductible under the same conditions as if they had been paid to a resident of the first-mentioned State. Similarly, any debts of an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable capital of such enterprise, be deductible under the same conditions as if they had been contracted to a resident of the first-mentioned State.
4. Enterprises of a Contracting State, the capital of which is wholly or partially owned or controlled by one or more residents of the other Contracting State shall not be subjected in the first-mentioned Contracting State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which similar enterprises of the first-mentioned Contracting State are or may be subjected.
5. a) Contributions paid by a physical person employed in a Contracting State into a pension insurance system and recognized for taxation purposes in the other Contracting State shall be deducted in the first-mentioned State in course of assessment of taxable income of that physical person and it shall be treated in that Contracting State the same way and with the same limitations applied to contributions paid into the pension insurance system recognized in the first-mentioned State for the taxation purposes, under the condition that a competent authority of that State acknowledges the pension insurance system generally congruent with the pension insurance system acknowledged for the purposes of taxation in that Contracting State.

b) For the purposes of line a): (i) the term “pension insurance system” means an arrangement in which physical persons participate in order to ensure pension revenues in respect of employment as referred to in line a); and (ii) the pension insurance system shall be “recognized for taxation purposes” in a Contracting State when contributions paid into the system fulfil the conditions for tax relief in that Contracting State. 6. Exemptions and other advantages provided by taxation laws of a Contracting State for the benefit of that State, its local authorities or constitutional bodies not carrying on any business activity shall be applied under the same conditions to the other Contracting State, its local authorities or constitutional bodies carrying on identical or similar activity. Notwithstanding the provisions of paragraph 7, the provisions of this Article shall not apply on taxes or levies paid for services rendered. 7. Notwithstanding the Article 2, the provisions of this Article shall apply on taxes of any kind and name.

Article 25 MUTUAL AGREEMENT PROCEDURE

1. Where a person considers that the actions of one or both of the Contracting States result or will result for him in taxation not in accordance with the provisions of this Agreement, he may, irrespective 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 or, if his case comes under paragraph 1 of Article 24, to that of the Contracting States of which he is a national. The case must be presented within three years from the first notification of the action resulting in taxation not in accordance with the provisions of this Agreement.
2. The competent authority shall endeavour, 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 avoidance of taxation which is not in accordance with this Agreement. Any agreement reached shall be implemented notwithstanding any time limits in the domestic law of the Contracting States.
3. The competent authorities of the Contracting States shall endeavour to resolve by mutual agreement any difficulties arising as to the interpretation or application of this Agreement. Particularly they can consult together for the achieving an agreement on distribution of profits of associated enterprises as mentioned in Article 9. The authorities can also agree on avoidance of double taxation in cases not provided by this Agreement.
4. The competent authorities of the Contracting States may communicate with each other directly, including through a joint commission consisting of themselves or their representatives, for the purpose of reaching an agreement in the sense of the preceding paragraphs of this Article.

Article 26 EXCHANGE OF INFORMATION

1. The competent authorities of the Contracting State shall exchange such information as is necessary for carrying out the provisions of this Agreement or of the domestic laws concerning taxes covered by this Agreement insofar as the taxation thereunder is not contrary to this Agreement. The exchange of information is not restricted by Article 1. Any information received by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that Contracting State and shall be disclosed only to persons or authorities (including courts and administrative bodies) concerned with the assessment or collection of, the enforcement or prosecution in respect of, or the determination of remedies in relation to these taxes. Such persons or authorities shall use the information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions.
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 not obtainable under the laws or in the normal course of 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 order.

Article 27 MEMBERS OF DIPLOMATIC MISSIONS AND CONSULAR POSTS The provisions of this Agreement shall not affect the fiscal privileges of members of diplomatic missions or consular posts under the general rules of international law or under the provisions of special agreements.

Article 28 THE MANNER OF APPLICATION

1. The competent authorities of the Contracting States can jointly or independently define the manner of application of this Agreement.
2. In particular, aiming to exercise the advantages from Articles 10, 11 and 12 in a Contracting State, unless competent authorities define otherwise, the residents of the other Contracting State shall be obliged to submit a certification of their residential status which shall particularly determine the nature, amount or value of income, including any form of certification issued by Tax Administration of that other State.

Article 29 ENTRY INTO FORCE

1. This Agreement shall enter into force on the first day of the second month after the date of receipt of the last notification through diplomatic channels by which a Contracting State notifies the other that all its internal legal requirements for the entry into force of this Agreement have been fulfilled.
2. The provisions of the Agreement shall apply: a) To withholding income tax, to amounts taxable after the fiscal year in which the Agreement enters into force; b) To income tax not withheld on source, to income in connection with, depending on the case, any calendar year or accounting period commencing after the calendar year in which the Agreement enters into force; c) To other taxes, for taxation of a taxable event which occurs after the calendar year in which the Agreement enters into force.
3. As regards the relationship between the Government of the French Republic and the Government of the Republic of Croatia, after the day of the initial entry of appropriate provisions of this Agreement into force, the provisions of the Contract entered into between the Government of the French Republic and the Government of the Socialistic Federative Republic of Yugoslavia on avoidance of double taxation in the area of income tax, signed in Paris, on March 28, 1974 shall cease to be valid.

Article 30 TERMINATION

1. This Agreement shall remain into force until one of the Contracting States submits, through diplomatic channels, a written notice of termination of the Agreement to the other Contracting State minimum six months before the end of any calendar year after the expiration of a period of five years from the date of its entry into force.
2. In that case the Agreement shall cease to apply: a) To withholding income tax, for amounts subjected to taxation after the fiscal year in which the notice of termination was submitted; b) To income tax not withheld at source, for income related, depending on the case, to any calendar year or accounting period commencing after the calendar year in which the notice of termination was submitted; c) To other taxes, for taxation of a taxable event which occurs after the calendar year in which the notice of termination was submitted.

PROTOCOL In the procedure before signing the Agreement between the Government of the French Republic and the

Government of the Republic of Croatia for the avoidance of double taxation and for the prevention of avoidance of income tax payment, the governments have agreed upon the following provisions that shall be incorporated into this Agreement.

1. With reference to line b), paragraph 3 of Article 2, the provisions of the Agreement covering profit from business or income arising from independent business activities, depending on the case, shall be applied to tax on salaries.

2. It is implicit that the term “immovable property”, as defined in paragraph 6 of Article 2, includes options, sales commitments and similar rights in connection with that property.

3. With reference to Article 7: a) Where an enterprise of a Contracting State sells merchandize or products or carries on an activity in the other Contracting State through a permanent establishment located in that State, profits of that permanent establishment shall not be determined on the basis of total amount received by the enterprise, but only on the basis of remuneration attributable to the effective activity of permanent establishment for that sale or activity; b) When there is a contract, especially for the purpose of inspection, procurement, installation or construction of industrial, commercial or scientific equipment or objects, or public works, and when there is a permanent establishment of an enterprise, profits of that permanent establishment shall not be determined on the basis of total value of the contract, but only on the basis of the portion thereof which is effectively carried on by the permanent establishment in the Contracting State in which it is located. Profits arising from the portion of contract carried on in a Contracting State in which an effective management of the enterprise is located shall be taxable only in that State.

4. With reference to Article 12, amounts received as remuneration for technical services, including studies or scientific, geological or technical researches or engineering contracts, including designs thereof, or for consultancy or inspection services, shall not be deemed amounts received as remuneration for information concerning industrial, commercial or scientific experience.

5. The provisions of Article 16 shall be applied to income as stated in Article 62 of the French tax law (Code général des impost) gained by a physical person resident of Croatia in his capacity of an associate (associé) or manager (gérant) in an enterprise resident of France and subjected to profit tax in that State.

6. With reference to paragraph 1 of Article 24, it is implicit that a physical person, associate entrepreneurs, body of persons or association resident of a Contracting State shall not be in the same position as a physical person, legal entity, associate entrepreneurs or association not being a resident of that State; this is valid irrespective of definition of nationality, even though legal entities, bodies of persons or associations are deemed to be nationals

of a Contracting State of which there are residents.

7. The provisions of the Agreement shall not in any case limit France in application of provisions of Article 212 of its tax law (code général des impôts) or from substantially similar provisions changing or replacing the provisions of that Article.

In witness thereof, the undersigned, duly authorised thereto, have signed this Protocol: Done at..., on ...., in two originals, in Croatian and French languages; both texts being equally authentic.

For the Government of the Republic of Croatia

For the Government of the French Republic