Netherlands - Bahrain Tax Treaty

CONVENTION BETWEEN THE GOVERNMENT OF THE KINGDOM OF BAHRAIN AND THE GOVERNMENT OF THE KINGDOM OF THE NETHERLANDS FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME

The Government of the Kingdom of Bahrain and The Government of the Kingdom of the Netherlands

Desiring that a Convention for mi Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes NN ‘be concluded Y both States,

Have agreed as follows:

CHAPTER 1 SCOPE OF THE CONVENTION

Article 1 PERSONS COVERED

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 be apply to taxes on income imposed on behalf of a Contracting State or of its political subdivisions or local authorities, party: of the manner in which they are levied.

2. There shall be regarded as taxes on income all taxes imposed on total income, or on elements of income, including taxes on gains from the-alienation of movable or immovable property, taxes on the total amounts of wages or salaries paid by enterprises, as well as taxes on capital appreciation. The existing taxes: to which the Convention shall apply are particular:

a) in the Kingdom of Bahrain income tax payable under Amiri Decree No, 22 of 1979) (hereinafter referred to as "Bahrain tax”;

b) in the Netherlands:

(i) de inkomstenbelasting (income tax);

(ii) de loonbelasting (wages tax);

(iii) de vennootschapsbelasting (company tax) including the Government share in the net profits of the exploitation of natural resources levied pursuant to the Mijnbouwwet (the Mining Act;

(iv) de dividendbelasting (dividend tax);

(hereinafter referred to as "Netherlands' tax’"):

The Convention shall apply also to any identical or substantially similar taxes that are imposed after the date of signature of the Convention 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.

CHAPTER II

DEFINITIONS

Article 3 GENERAL DEFINITIONS

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

a) the terms "a Contracting State” and “the other Contracting State’ mean the Kingdom of Bahrain (Bahrain) or Kingdom of the Netherlands (the Netherlands), as the context requires:

b) the term "Bahrain" means the Kingdom of Bahrain and, when used in a geographical sense, includes the national territory, the territorial sea, as well as any area beyond the territorial sea, including the exclusive economic zone and the continental shelf, over which the Kingdom of Bahrain exercises sovereign rights and jurisdiction in accordance with the provisions of international law and Bahrain's national laws and regulations;

Cc) the term “the Netherlands” means the part of the Kingdom of the Netherlands that is situated in Europe, including its territorial sea, and any area beyond the territorial sea within which the Netherlands, in accordance with international Jaw, exercises jurisdiction or sovereign rights;

d) the term "person" includes an individual, a company and any other body of persons; e) the term "company" means any body corporate or any entity that is treated as a

body corporate for tax purposes or any other taxable entity constituted or recognised under the laws of one or other of the Contracting States as a body

corporate; f) the term “enterprise” applies to the carrying on of any business; g) 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;

h) the term "international traffic’ means any transport by a ship or aircraft operated by an enterprise of a Contracting State, except when the ship or aircraft is operated solely between places in the other Contracting State;

i) the term "competent authority" means: (i) in Bahrain the Minister of Finance or his authorised representative; | (ii) in the Netherlands the Minister of Finance or his authorised representative; | j) the term "national" means: (i) in the case of Bahrain;

any individual possessing the nationality or citizenship of Bahrain and any legal person, partnership or association deriving its status as such from the laws in force in Bahrain; and

(ii) in the case of the Netherlands: any individual possessing the nationality of the Netherlands and any legal

person, partnership or association deriving its status as such from the laws in force in the Netherlands;

k) the term “business” includes the performance of professional services and of other activities of an independent character.

As regards the application of the Convention at any time by a Contracting State, any term not defined therein shall, unless the context otherwise requires, have the meaning that it has at that time under the law of that State for the purposes of the taxes to which the Convention applies, any meaning under the applicable tax laws of that State prevailing over a meaning given to the term under other laws of that State.

Article 4 RESIDENT

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. 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.

The term "resident of a Contracting State” also includes that State, any political subdivision, or local authority thereof, and a pension fund that is recognised and controlled according to the statutory provisions of a Contracting State and the income of which is generally exempt from tax in that State.

Where by reason of the provisions of paragraph 1 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 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 persona! 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 an 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.

Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both States, the competent authorities of the States shall endeavour to settle the question by mutual agreement having regard to its place of effective management, the place where it is incorporated or otherwise constituted and any other relevant factors. If the competent authorities are unable to determine the matter by mutual agreement, they shall endeavour to determine by mutual agreement the mode of application of the Convention to that person.

Article 5 PERMANENT ESTABLISHMENT

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.

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

g) a sales outlet; and

h) a warehouse in relation to a person providing storage facilities for others.

A building site or construction or installation project constitutes a permanent establishment only if it lasts more than twelve months.

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:

fy 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.

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 behaif 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.

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.

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.

CHAPTER III TAXATION OF INCOME Article 6 INCOME FROM IMMOVABLE PROPERTY

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.

The term "immovable property" shall have the meaning which it has under the law of the Contracting State in which the property in question is situated. The term shall in any case include property accessory to immovable property, livestock and equipment used in agriculture 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; ships and aircraft shall not be regarded as immovable property.

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

The provisions of paragraphs 1 and 3 shall also apply to the income from immovable property of an enterprise.

Article 7 BUSINESS PROFITS

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.

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.

In determining 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, whether in the State in which the permanent establishment is situated or elsewhere.

Insofar as it has been customary in a Contracting State to determine the profits to be attributed to a permanent establishment on the basis of an apportionment of the total profits of the enterprise to its various parts, nothing in paragraph 2 shall preclude that Contracting State from determining the profits to be taxed by such an apportionment as may be customary; the method of apportionment adopted shall, however, be such that the result shall be in accordance with the principles contained in this Article.

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.

For the purposes of the preceding paragraphs, the profits to be 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.

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

Profits of an enterprise of a Contracting State from. the participation of ships or aircraft in international traffic shall be-taxable only in that State

The provisions of: mance 4-shall also apply to piatisKom the participation in a pool, a joint business or an international Operating agency.

The Agreement bétween Government of the Kingdom of ‘Balweln and ihe Government of the Kingdom of the’Netherlands for the Reciprocal Exemption with:respect to Taxes on Income and Profits derived from International Air Transport, signed on the 5” of February 2007 at Manama, will remain in force, However, if this Convention provides for a more beneficial treatment of the items of j income, ‘concerned, this Convention shall also be applicable to the: extent that it is more tevgurable:

Article 9

Where

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

b) the same persons participate Girettly” OF indi rectly in the management, control or capital of an enterprise ‘6f-a“Coritractirig 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. It is understood, however, that the fact that associated enterprises have concluded arrangements, such as cost sharing arrangements or general services agreements, for or based on the allocation of executive, general administrative, technical and cormmercial expenses, research and development expenses and other similar expenses, is not in itself a condition as meant in the preceding sentence.

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 an appropriate adjustment to the amount of the tax charged therein on those profits. In determining such adjustment, due regard shall be had to the other provisions of this Convention and the competent authorities of the Contracting States shall if necessary consult each other.

Article 10 DIVIDENDS

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.

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 owner of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed:

a) 0% (zero per cent) of the gross amount of the dividends if the beneficial owner is a company the capital of which is wholly or partly divided into shares and which holds directly at least 10% (ten per cent) of the capital of the company paying the dividends;

b) 10% (ten per cent) of the gross amount of the dividends in all other cases.

The competent authorities of the Contracting States shail by mutual agreement settle the mode of application of paragraph 2.

The provisions of paragraph 2 shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.

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.

The provisions of paragraphs 1, 2 and 8 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 in respect of which the dividends are paid is effectively connected with such permanent establishment. In such case the provisions of Article 7 shall apply.

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 of profits or income arising in such other State.

The provisions of paragraphs 1, 2 and 7 shall not prevent the Netherlands from applying its national legislation, the so-called “preserving tax assessment” ("conserverende aanslag”), which has been issued to an individual insofar it concerns a substantial interest, according to Netherlands tax legislation, in a company which is resident in the Netherlands. The aforementioned shall only apply insofar the assessment or a part of the assessment is still outstanding.

With respect to dividends as meant in subparagraph (a) of paragraph 2 which are paid by a company which is a resident of the Netherlands, if, according to the law in force in Bahrain, taxation of such dividends in Bahrain will result in a tax burden of less than 10% (ten per cent) of the gross amount of the dividends, the Netherlands may levy a tax not exceeding 10% (ten per cent) of the gross amount of the dividends.

However, the provisions under paragraph 9 do not apply if the dividends are paid by a company which is a resident of the Netherlands and the beneficial owner of the dividends is the Government of Bahrain or any political subdivision or local authority thereof as defined in paragraph 2 of Article 4 and established in Bahrain, or a company resident in Bahrain and either:

a.) the capital of the company receiving the dividends is exclusively beneficially owned by the Government of Bahrain or any political subdivision or local authority thereof as defined in paragraph 2 of Article 4; or

b.) shares in such company are regularly traded on the Stock Exchange of Bahrain; or

c.) the company receiving the dividends is engaged in an active trade or business in Bahrain.

In the case a company does not fulfil one of the conditions laid down in paragraph 10, the provisions under paragraph 9 shall also not apply with respect to such company if it is established in mutual agreement by the competent authorities of the Contracting States, in conformity with Article 25 of the Convention, that such company is not established or maintained in Bahrain mainly for the purpose of ensuring the benefits of subparagraph (a) of paragraph 2 and provided that the company receiving the dividends is a resident of Bahrain and the beneficial owner of the dividends.

Notwithstanding the provisions of subparagraph (b) of paragraph 2, the Contracting State of which the company paying the dividends is a resident may tax the dividends at the rate under its domestic legislation in case the beneficial owner of the dividends is an individual and a resident of the other Contracting State as well as a resident of a third State. However, if the Contracting State of which the company paying the dividends is a resident, has concluded an Agreement for the avoidance of double taxation with the third state meant in the preceding sentence, the tax charged on these dividend payments shall not exceed the rate provided for dividends paid to individuals under that Agreement.

Article 14 INCOME FROM DEBT CLAIMS

Income from debt claims arising in a Contracting State and beneficially owned by a resident of the other Contracting State shall be taxable only in that other State.

The term "income from debt claims" as used in this Article 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 and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures. Penalty charges for late payment shall not be regarded as income from a debt claim for the purpose of this Article.

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

4, 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 income from a debt claim, 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 Convention.

Article 12 ROYALTIES

1. Royalties arising in a Contracting State and beneficially owned by a resident of the other Contracting State shall be taxable only in that other State.

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 cinematograph films, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience.

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 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 permanent establishment. In such case the provisions of Article 7 shall apply.

4. 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 Convention.

Article 13 CAPITAL GAINS

1. Gains derived by a resident of a Contracting State from the alienation of immovable property referred to in Article 6 and situated in the other Contracting State may be taxed in that other State.
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, including such gains from the alienation of such a permanent establishment (alone or with the whole enterprise) may be taxed in that other State.

Gains derived by an enterprise of a Contracting State from the alienation of ships or aircraft operated in international traffic or movable property pertaining to the operation of such ships or aircraft, shall be taxable only in that State.

Gains from the 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.

The provisions of paragraph 4 shall not prevent the Netherlands from applying its national legislation, the so-called “preserving tax assessment” (“conserverende aanslag”), which has been issued to an individual insofar it concerns a substantial interest, according to Netherlands tax legislation, in a company which is resident in the Netherlands. The aforementioned shail only apply insofar the assessment or a part of the assessment is still outstanding.

Article 14 INCOME FROM EMPLOYMENT

Subject to the provisions of Articles 15, 17, 18 and 19, salaries, wages 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.

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 any 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.

Notwithstanding the preceding provisions of this Article, remuneration derived in respect of an employment exercised aboard a ship or aircraft operated by a resident of a Contracting State in international traffic may be taxed in that State.

Article 15 DIRECTORS' FEES

Directors' fees and other remuneration derived by a resident of a Contracting State in his capacity as a member of the board of directors of a company which is a resident of the other Contracting State may be taxed in that other State.

Where a company is a resident of the Netherlands, the term “member of the board of directors” includes both a “bestuurder” and a “commissaris’”. The terms “bestuurder” and “commissaris” mean respectively persons who are charged with the general management of the company and persons who are charged with the supervision thereof.

Article 16

ENTERTAINERS AND SPORTSPERSONS

1. Notwithstanding the provisions of Articles 7 and 14, 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 sportsperson, from his personal activities as such exercised in the other Contracting State, may be taxed in that other State.

2. Where income in respect of personal activities exercised by an entertainer or a sportsperson in his capacity as such accrues not to the entertainer or sportsperson himself but to another person, that income may, notwithstanding the provisions of Articles 7 and 14, be taxed in the Contracting State in which the activities of the entertainer or sportsperson are exercised.

3. The provisions of paragraphs 1 and 2 shall not apply to income derived by a resident of a Contracting State from activities exercised in the other Contracting State, if the visit to that other State is wholly or mainly supported by public funds of one or both of the Contracting States or political subdivisions or local authorities thereof, or takes place under a cultural agreement between the Governments of the Contracting States. In such a case, the income shali be taxable only in the Contracting State of which the entertainer or sportsperson is a resident.

Article 17 PENSIONS, ANNUITIES AND SOCIAL SECURITY PAYMENTS

1. Subject to the provisions of paragraph 2 of Article 18, pensions, annuities and other similar remuneration, arising in a Contracting State and paid to a resident of the other Contracting State, may be taxed in the first-mentioned State.

2. Pensions paid and other payments made under the provisions of the social security legislation of a Contracting State to a resident of the other Contracting State, may be taxed in the first-mentioned State.

3. A pension, an annuity or other similar remuneration shall be deemed to arise in a Contracting State insofar as the contributions or payments associated with that pension or annuity or other similar remuneration, or the entitlements received from them qualified for relief from tax in that State. The transfer of a pension or an annuity or other similar remuneration from a pension fund or an insurance company in a Contracting State to a pension fund or an insurance company in another State shall not restrict in any way the taxing rights of the first-mentioned State under this Article.

4, The term “annuity” means a stated sum payable periodically at stated times during life or during a specified or ascertainable period of time under an obligation to make payments in return for adequate and full consideration in money or money’s worth.

5. The provisions of this Article shall aiso apply in case a lump sum payment is made in lieu of a pension, an annuity or other similar remuneration before the date on which the pension, the annuity or other similar remuneration commences.

6. Whether and to what extent a pension or similar remuneration falls under this Article or under Article 18, is determined by the nature of the past employment, as private or governmental, during which the entitlement to that part of the pension or similar remuneration was built up.

Article 18 GOVERNMENT SERVICE

1. a) Salaries, wages and other similar remuneration 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 authority shall be taxable only in that State.

b) However, such salaries, wages and other similar remuneration shall be taxable only in the other Contracting State if the services are rendered in that State and the individual is a resident of that State who:

(i) is a national of that State; or (ii) did not become a resident of that State solely for the purpose of rendering the services. 2. a) Notwithstanding the provisions of paragraph 1, pensions and other similar

remuneration 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 authority shall be taxable only in that State.

b) However, such pensions and other similar remuneration shall be taxable only in the other Contracting State if the individual is a resident of, and a national of, that State.

3. The provisions of Articles 14, 15, 16 and 17 shall apply to salaries, wages, pensions, and other similar remuneration 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 19 PROFESSORS AND TEACHERS

1. Payments which a professor or teacher who is a resident of a Contracting State and who is present in the other Contracting State for the purpose of teaching or scientific research for a maximum period of two years in a university, college or other establishment for teaching or scientific research in that other State, receives for such teaching or research, shall be taxable only in the first-mentioned State. ,

2. This Article shall not apply to income from research if such research is undertaken not in the public interest but primarily for the private benefit of a specific person or persons.

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 taxed in that State, provided that such payments arise from sources outside that State.

Article 21 OTHER INCOME

Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Convention shall be taxable only in that State.

The provisions of paragraph 1 shall not apply to income, other than income from immovable property as defined in paragraph 2 of Article 6, if the recipient of such income, being a resident of a Contracting State, carries on business in the other Contracting State through a permanent establishment situated therein and the right or property in respect of which the income is paid is effectively connected with such permanent establishment. In such case the provisions of Article 7 shall apply.

CHAPTER IV

ELIMINATION OF DOUBLE TAXATION

Article 22 ELIMINATION OF DOUBLE TAXATION

The Netherlands, when imposing tax on its residents, may include in the basis upon which such taxes are imposed the items of income which, according to the provisions of this Convention, may be taxed or shall be taxable only in Bahrain.

However, where a resident of the Netherlands derives items of income which according to paragraphs 1, 3 and 4 of Article 6, paragraph 1 of Article 7, paragraph 7 of Article 10, paragraph 3 of Article 11, paragraph 3 of Article 12, paragraphs 1 and 2 of Article 13, paragraphs 1 (subparagraph a) and 2 (subparagraph a) of Article 18 and paragraph 2 of Article 21 of this Convention may be taxed in Bahrain and are included in the basis referred to in paragraph 1, the Netherlands shall exempt such items of income by allowing a reduction of its tax. This reduction shall be computed in conformity with the provisions of the Netherlands' law for the avoidance of double taxation. For that purpose the said items of income shall be deemed to be included in the amount of the items of income which are exempt from Netherlands’ tax under those provisions.

Further, the Netherlands shall allow a reduction from the Netherlands’ tax so computed for the items of income which according to paragraphs 2 and 8 of Article 10, paragraph 5 of Article 13, paragraphs 1 and 3 of Article 14, paragraph 1 of Article 15, paragraphs 1 and 2 of Article 16 and paragraphs 1, 2 and 5 of Article 17 of this Convention may be taxed in Bahrain to the extent that these items are included in the basis referred to in paragraph 1. The amount of this reduction shall be equal to the tax paid in Bahrain on these items of income, but shall, in case the provisions of the Netherlands’ law for the avoidance of double taxation provide so, not exceed the amount of the reduction which would be allowed if the items of income so included were the sole items of income which are exempt from Netherlands tax under the provisions of the Netherlands law for the avoidance of double taxation.

This paragraph shall not restrict allowance now or hereafter accorded by the provisions of the Netherlands’ law for the avoidance of double taxation, but only as far as the caiculation of the amount of the reduction of Netherlands’ tax is concerned with respect to the aggregation of income from more than one country and the carry forward of the tax paid in Bahrain on the said items of income to subsequent years.

4. Notwithstanding the provisions of paragraph 2, the Netherlands shall allow a reduction from the Netherlands’ tax for the tax paid in Bahrain on items of income which according to paragraph 1 of Article 7, paragraph 7 of Article 10, paragraph 3 of Article 11, paragraph 3 of Article 12 and paragraph 2 of Article 21 of this Convention may be taxed in Bahrain to the extent that these items are included in the basis referred to in paragraph 1, insofar as the Netherlands under the provisions of the Netherlands’ law for the avoidance of double taxation allows a reduction from the Netherlands' tax of the tax levied in another country on such items of income. For the computation of this reduction the provisions of paragraph 3 of this Article shall apply accordingly.

5. In Bahrain double taxation shall be eliminated as follows:

(a) where a resident of Bahrain derives income, which, in accordance with the provisions of this Convention, may be taxed in the Netherlands, Bahrain shall allow as a deduction from the tax on the income of that resident, an amount equal to the income tax paid in the Netherlands. 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 Netherlands; and

(b) where in accordance with any provision of this Convention income derived by a resident of Bahrain is exempt from tax in Bahrain, Bahrain may nevertheless, in calculating the amount of tax on the remaining income of such resident, take into account the exempted income.

CHAPTER V

SPECIAL PROVISIONS

Article 23

OFFSHORE ACTIVITIES

1. The provisions of this Article shall apply notwithstanding any other provisions of this Convention. However, this Article shall not apply where offshore activities of a person constitute for that person a permanent establishment under the provisions of Article 5.

2. In this Article the term “offshore activities” means activities which are carried on offshore in connection with the exploration or exploitation of the seabed and its subsoil and their natural resources, situated in a Contracting State.

3. An enterprise of a Contracting State which carries on offshore activities in the other Contracting State shall, subject to paragraph 4 of this Article, be deemed to carry on, in respect of those activities, business in that other State through a permanent establishment situated therein, unless the offshore activities in question are carried on in the other State for a period or periods of less than in the aggregate 30 days in any twelve month period.

For the purposes of this paragraph:

a) where an enterprise carrying on offshore activities in the other Contracting State is associated with another enterprise and that other enterprise continues, as part of the same project, the same offshore activities that are or were being carried on by the first-mentioned enterprise, and the aforementioned activities carried on by both enterprises - when added together - constitute a period of at ieast 30 days, then each enterprise shall be deemed to carry on its activities for a period of at least 30 days in any twelve month period;

b) an enterprise shall be regarded as associated with another enterprise if one enterprise holds directly or indirectly at least one third of the capital of the other enterprise or if a person holds directly or indirectly at least one third of the capital of both enterprises.

However, for the purposes of paragraph 3 of this Article the term "offshore activities" shall be deemed not to include:

a) one or any combination of the activities mentioned in paragraph 4 of Article 5;

b) towing or anchor handling by ships primarily designed for that purpose and any other activities performed by such ships;

c) the transport of supplies or personnel by ships or aircraft in international traffic.

Notwithstanding the second sentence of paragraph 1 of this Article, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment connected with offshore activities carried on through a permanent establishment in the other Contracting State may, to the extent that the employment is exercised offshore in that other State, be taxed in that other State.

Where documentary evidence is produced that tax has been paid in Bahrain on the items of income which may be taxed in Bahrain according to Article 7 in connection with paragraph 3 of this Article, according to Article 14 in connection with paragraph 3 of this Article or according to paragraph 5 of this Article, the Netherlands shail allow a reduction of its tax, which shall be computed in conformity with the rules laid down in paragraph 2 of Article 22.

Article 24 NON-DISCRIMINATION

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 connected requirements to which nationals of that other State in the same circumstances, in particular with respect to residence, are or may be subjected. This provision shail, notwithstanding the provisions of Article 1, also apply to persons who are not residents of one or both of the Contracting States.

Stateless persons who are residents of a Contracting State shall not be subjected in either Contracting State to any taxation or any requirement connected therewith, which is other or more burdensome than the taxation and connected requirements to which nationals of the State concerned in the same circumstances, in particular with respect to residence, are or may be subjected.

The taxation on a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be fess favourably 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, reliefs and reductions for taxation purposes on account of civil status or family responsibilities which it grants to its own residents.

Except where the provisions of paragraph 1 of Article 9, paragraph 4 of Article 11, or paragraph 4 of Article 12, apply, income from debt claims, 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.

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 are or may be subjected.

Contributions paid by, or on behalf of, an individual who renders services in a Contracting State to a pension pian that is recognised for tax purposes in the other Contracting State will be treated in the same way for tax purposes in the first-mentioned State as a contribution paid to a pension plan that is recognised for tax purposes in that first- mentioned State, provided that

a) such individual was contributing to such pension plan before he became a resident of the first-mentioned State; and

b) the competent authority of the first-mentioned State agrees that the pension plan corresponds to a pension plan recognised for tax purposes by that State.

For the purpose of this paragraph, "pension plan" includes a pension plan created under a public social security system.

The provisions of this Article shall, notwithstanding the provisions of Article 2, apply to taxes of every kind and description.

Article 25 MUTUAL AGREEMENT PROCEDURE

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 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 or, if his case comes under paragraph 1 of Article 24, to that of the Contracting State of which he is a national. The case must be presented within three years from the first notification of the action resulting in taxation not in accordance with the provisions of the Convention.

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 the avoidance of taxation which is not in accordance with the Convention. Any agreement reached shall be implemented notwithstanding any time limits in the domestic law of the Contracting States.

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

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. If any difficulty or doubt arising as to the interpretation or application of the Convention cannot be resolved by the competent authorities of the Contracting States in a mutual agreement procedure pursuant to the previous paragraphs of this Article within a period of two years after the question was raised, the case may, at the request of either Contracting State, be submitted for arbitration, but only after fully exhausting the procedures available under paragraphs 1 to 4 of this Article and provided the taxpayer or taxpayers involved agree in writing to be bound by the decision of the arbitration board. The decision of the arbitration board in a particular case shall be binding on both Contracting States and the taxpayer or taxpayers involved with respect to that case.

Article 26 EXCHANGE OF INFORMATION

The competent authorities of the Contracting States shall exchange such information as is foreseeably relevant for carrying out the provisions of this Convention or to the administration or enforcement of the domestic laws concerning taxes of every kind and description imposed on behalf of the Contracting States, or of their political subdivisions or local authorities, insofar as the taxation thereunder js not contrary to the Convention. The exchange of information is not restricted by Articles 1 and 2.

Any information received under paragraph 1 by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that 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, the determination of appeals in relation to the taxes referred to in paragraph 1, or the oversight of the above. 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.

The Contracting States may release to the arbitration board, established under the provisions of paragraph 5 of Article 25, such information as is necessary for carrying out the arbitration procedure. The members of the arbitration board shall be subject to the limitations on disclosure described in paragraph 2 of this Article with respect to any information so released.

In no case shall the provisions of the previous paragraphs 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 (ordre public).

d) to supply information, which is neither held by its authorities nor in the possession or control of persons who are within its territorial jurisdiction.

If information is requested by a Contracting State in accordance with this Article, the other Contracting State shail use its information gathering measures to obtain the requested information, even though that other State may not need such information for its own tax purposes. The obligation contained in the preceding sentence is subject to the limitations of paragraph 4 but in no case shall such limitations be construed to permit a Contracting State

to decline to supply information solely because it has no domestic interest in such information.

6. In no case shall the provisions of paragraph 4 be construed to permit a Contracting State to decline to supply information solely because the information is held by a bank, other financial institution, nominee or person acting in an agency or a fiduciary capacity or because it relates to ownership interests in a person.

Article 27 ASSISTANCE IN THE COLLECTION OF TAXES The Contracting States shall within the limitations of their tax structures lend aid and

assistance to each other in order to notify and recover the taxes referred to in Article 2 as well as surcharges, additions, compensation for late payments, costs and fines of a non-penal nature.

Article 28 MEMBERS OF DIPLOMATIC MISSIONS AND CONSULAR POSTS

1. Nothing in this Convention shall 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.

2. For the purposes of the Convention, an individual who is a member of a diplomatic mission or consular post of a Contracting State in the other Contracting State or in a third State and who is a national of the sending State shall be deemed to be a resident of the sending State if he is subjected therein to the same obligations in respect of taxes on income as are residents of that State.

3. The Convention shall not apply to international organisations, organs and officials thereof and members of a diplomatic mission or consular post of a third State, being present in a Contracting State, if they are not subjected therein to the same obligations in respect of taxes on income as are residents of that State.

Article 29 TERRITORIAL EXTENSION

1 1. This Convention may be extended, either in its entirety or with any necessary modifications, to countries of the Kingdom of the Netherlands which are not situated in Europe, if the country concerned has a tax system comparable to that of the part of the Kingdom of the Netherlands situated in Europe. Any such extension shall take effect from such date and subject to such modifications and conditions, including conditions as to | termination, as may be specified and agreed between the Contracting States in notes to be exchanged through diplomatic channels.

2. Unless otherwise agreed the termination of the Convention shall not also terminate any extension of the Convention to any country to which it has been extended under this Article.

I CHAPTER VI FINAL PROVISIONS Article 30 ENTRY INTO FORCE

This Convention shall enter into force on the thirtieth day after the latter of the dates on which the respective Governments have notified each other in writing that the formalities constitutionally required in their respective States have been complied with, and its provisions shall have effect for taxable years and periods beginning on or after the first day of January in the calendar year following that in which the Convention has entered into force.

Article 31 TERMINATION

This Convention shall remain in force until terminated by a Contracting State. Either Contracting State may terminate the Convention, through diplomatic channels, by giving notice of termination at least 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. In such event the Convention shall cease to have effect for taxable years and periods beginning after the end of the calendar year in which the notice of termination has been given.

IN WITNESS whereof the undersigned, duly authorised thereto, have signed this Convention. DONE at the Hague this 16" day of April 2008, in duplicate, in the Arabic, Dutch and English

languages, the three texts being equally authentic. In case there is any divergence of interpretation between the Arabic and Dutch texts, the English text shail prevail.

For the Government of - For the Government of The Kingdom of Bahrain : a The Kingdom of the Netherlands

Protocol

At the moment of signing the Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, this day concluded between the Kingdom of Bahrain and the Kingdom of the Netherlands, the undersigned have agreed that the following provisions shall form an integral part of the Convention.

A. General

1. It is understood that the provisions of the Convention which are the same or substantially the same as the corresponding provisions of the OECD Model Tax Convention on Income and on Capital, shall be interpreted according to the OECD Commentary on these provisions at the moment of signing the Convention and to subsequent clarifying modifications of the OECD Commentary on these provisions. The understanding in the preceding sentence shall not apply with respect to any contrary interpretation agreed to in this Protocol, to contrary interpretation agreed to by the competent authorities after the entry into force of the Convention or to reservations or observations to the OECD Model Tax Convention or OECD Commentary by either Contracting State.

2. In the case of an item of income derived by or through a person that is fiscally transparent under the laws of either State, such item shall be considered to be derived by a resident of a State to the extent that the item is treated for the purposes of the taxation law of such State as the income of a resident. Where, by virtue of the preceding sentence, an item of income is considered by a State to be derived by a person who is a resident of that State, and the same item is considered by the other State to be derived by another person who is a resident of that other State, that sentence shall not prevent either State from taxing the item as the income of the person considered by that State to have derived the item of income.

3. Where, in accordance with paragraph 2, an item of income is taxed in a Contracting State in the hands of a person that is fiscally transparent under the laws of the other State, and is also taxed in the hands of a resident of the other Contracting State as a participant in such a person, that other State shall provide relief in respect of taxes imposed in the first- mentioned State on that item of income in accordance with the provisions of Article 22.

B. Ad Article 3, paragraph 2 and Article 25

It is understood that, if the competent authorities of the Contracting States have, by mutual agreement, reached a solution within the context of the Convention for cases in which

a) application of paragraph 2 of Article 3 with respect to the interpretation of a term not defined in the Convention; or

b) differences in qualification (for example of an element of income or of a person) would result in double taxation or double exemption, this solution, after publication thereof by both competent authorities, shall also be binding for the application of the provisions of the Convention in other similar cases.

Cc. Ad Article 4

An individual living aboard a ship without any real domicile in either of the Contracting States shall be deemed to be a resident of the Contracting State in which the ship has its home harbour.

Ad Article 5, paragraph 2, subparagraphs g and h

It is understood that a sales outlet and a warehouse in relation to a person providing storage facilities for others can only be deemed to be a permanent establishment insofar as the other activities of the enterprise in the other Contracting State consist of business activities which constitute a permanent establishment in the meaning of Article 5.

Ad Articles 5, 6, 7, 13 and 23

It is understood that rights to the exploration and exploitation of natural resources shall be regarded as immovable property located in the Contracting State to whose seabed - and subsoil thereof - these rights apply, and that these rights are regarded as assets of a permanent establishment in that State. Furthermore, it is understood that the aforementioned rights include rights to interests in, or benefits from assets that arise from, that exploration or exploitation.

Ad Article 7

Payments received as a consideration for technical services, including studies or surveys of a scientific, geological or technical nature, or for consultancy or supervisory services shall be deemed to be payments to which the provisions of Article 7 apply.

In respect of paragraphs 1 and 2 of Article 7, where an enterprise of a Contracting State sells goods or merchandise or carries on business in the other Contracting State through a permanent establishment situated therein, the profits of that permanent establishment shall not be determined on the basis of the total amount received by the enterprise, but shall be determined only on the basis of that portion of the income of the enterprise that is attributable to the actual activity of the permanent establishment in respect of such sales or business. Specifically, in the case of contracts for the survey, supply, installation or construction of industrial, commercial or scientific equipment or premises, or of public works, when the enterprise has a permanent establishment, the profits attributable to such permanent establishment shall not be determined on the basis of the total amount of the contract, but shall be determined only on the basis of that part of the contract that is effectively carried out by the permanent establishment in the Contracting State in which the permanent establishment is situated. The profits related to that part of the contract which is carried out by the head office of the enterprise shall be taxable only in the Contracting State of which the enterprise is a resident.

Ad Article 8

It is understood that the provisions of Article 8 shall also apply to taxes levied on the basis of the gross receipts in respect of the carriage of passengers and cargo in international traffic.

Ad Article 10

Notwithstanding paragraph 2 of Article 10, the Contracting State of which the company is a resident shall not levy a tax on dividends paid by that company, if the beneficial owner of the dividends is a pension fund referred to in paragraph 2 of Article 4.

Ad Articles 10, 11 and 12

Where tax has been levied at source in excess of the amount of tax chargeable under the provisions of Articles 10, 11 or 12, applications for the refund of the excess amount of tax have to be lodged with the competent authority of the State having levied the tax, within a period of three years after the expiration of the calendar year in which the tax has been levied.

J. Ad Articles 10 and 13

It is understood that income received in connection with the (partial) liquidation of a company or a purchase of own shares by a company is treated as income from shares and not as capital gains.

K. Ad Article 25

The competent authorities of the States may also agree, with respect to any agreement reached as a result of a mutual agreement procedure as meant in Article 25, if necessary contrary to their respective national legislation, that the State in which there Is an additional tax charge as a result of the aforementioned agreement shall not impose any increases, surcharges, interest and costs with respect to this additional tax charge, if the other State in which there is a corresponding reduction of tax as a result of the agreement refrains from the payment of any additional compensation due with respect to such a reduction of tax,

L. Ad Article 26

1, The provisions of Article 26 shall apply accordingly to information that is relevant for carrying out the income-related regulations under the laws of the Netherlands by the authorities of the Netherlands concerned with the implementation, administration or enforcement of these income-related regulations.

2 Any information received under paragraph 7 of this Article in connection with Article 26 of this Convention, shall be used only for the purpose of the determination and levying of the contributions and the determination and granting of the benefits under the income related regulations as meant in paragraph 1,

IN WITNESS whereof the undersigned, duly authorised thereto, have signed this Protocol. DONE at the Hague this 16” day of April 2008, in duplicate, in the Arabic, Dutch and English

languages, the three texts being equally authentic. In case there is any divergence of interpretation between the Arabic and Dutch texts, the English text shall prevail,

For the Government of For the Government of The Kingdom of Bahrain The Kingdom of the Netherlands