CONVENTION
between the Grand Duchy of Luxembourg and the Republic of Azerbaijan for the avoidance of double taxation and the prevention of fiscal fraud with regard to taxes on income and on capital

The Government of the Grand Duchy of Luxembourg and the Government of the Republic of Azerbaijan desirous of concluding a Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital have agreed to this following:

Chapter I st – Scope of the Convention
Article 1 st Personal scope

This Convention applies to persons who are residents of a Contracting State or of both Contracting States.

 

Article 2 Taxes covered

1.This Convention shall apply to taxes on income and on capital imposed on behalf of a Contracting State, of its administrative-territorial subdivisions or of its local communities, whatever the system of collection.
2.Taxes on total income, on total capital, or on elements of income or of capital, including taxes on gains from the alienation of movable property, are regarded as taxes on income and on capital. or real estate, taxes on the total amount of wages paid by companies, as well as taxes on capital gains.

3.The current taxes to which the Convention applies are in particular:

a) with regard to the Grand Duchy of Luxembourg:

(i) personal income tax;
(ii) corporate income tax;
(iii) wealth tax; and
(iv) municipal business tax;
(hereinafter referred to as “Luxembourg tax”);

b) with regard to the Republic of Azerbaijan:

(i) corporate profit tax;
(ii) personal income tax;
(iii) property tax; and
(iv) property tax;
(hereinafter referred to as “Azeri tax”).

4.The Convention also applies to taxes of an identical or similar nature which are established after the date of signature of the Convention and which are added to or replace existing taxes. The competent authorities of the Contracting States shall notify each other of any significant changes made to their respective tax laws.

Chapter II – Definitions
Article 3 General definitions

1.For the purposes of this Convention, unless the context requires a different interpretation:

a) the term “Luxembourg” designates the Grand Duchy of Luxembourg; when used in a geographical sense, it designates the territory of the Grand Duchy of Luxembourg;
b) the term “Azerbaijan” means the territory of the Republic of Azerbaijan, including internal waters, the sector of the Caspian Sea belonging to the Republic of Azerbaijan, the airspace above the Republic of Azerbaijan, at within which the sovereign rights and jurisdiction of the Republic of Azerbaijan are exercised with respect to the subsoil, seabed and natural resources as well as any other region which is or may be determined in accordance with international law and to the legislation of the Republic of Azerbaijan;
c) the expressions “a Contracting State” and “the other Contracting State” mean, as the context requires, Luxembourg or Azerbaijan;
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 which is treated as a body corporate for tax purposes;
f) 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;
g) the expression “international traffic” means any transport effected by a ship or an aircraft operated by an enterprise of a Contracting State, except when the ship or aircraft is operated only between points situated in the other State. contractor;
h) the term “national” means:

(i) any natural person who has the nationality of a Contracting State;
(ii) any legal person, partnership or association constituted in accordance with the legislation in force in a Contracting State;

i) the expression “competent authority” means:

(i) in Luxembourg, the Minister of Finance or his authorized representative;
(ii) in Azerbaijan, the Ministry of Finance and the Ministry of Taxes.

2.For the application of the Convention at a given time by a Contracting State, any term or expression which is not defined therein has, unless the context requires a different interpretation, the meaning assigned to it at that time by law. of that State concerning the taxes to which the Convention applies, the meaning attributed to this term or expression by the fiscal law of that State prevailing over the meaning attributed to it by other branches of the law of that State.

Article 4 Resident

1.For the purposes of this Convention, the expression “resident of a Contracting State” means any person who, under the laws of that State, is liable to tax in that State by reason of his domicile, his residence, place of registration, place of management or any other criterion of a similar nature and also applies to this State as well as to all its administrative-territorial subdivisions or to its local communities. However, this expression does not include persons who are subject to tax in that State only on income from sources situated in that State or on capital situated there.

2.Where, in accordance with the provisions of paragraph 1, a natural person is a resident of both Contracting States, his situation shall be settled as follows:
a) this person is considered to be a resident only of the State in which he has a permanent home; if he has a permanent home in both states, he is considered a resident only of the state with which his personal and economic ties are closest (center of vital interests);
b) if the State in which that person has the center of his vital interests cannot be determined, or if he does not have a permanent home in any of the States, he shall be regarded as a resident only of the State where she stays in the usual way;
c) if this person is habitually resident in the two States or if he does not habitually reside in either of them, he shall be considered as a resident only of the State of which he is a national;
d) if this person possesses the nationality of both States or if he does not possess the nationality of either of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.

 

3. Where, in accordance with the provisions of paragraph 1, a person other than an individual is a resident of both Contracting States, it shall be deemed to be a resident only of the State in which its place of effective management is situated.
Article 5 Permanent establishment

1.For the purposes of this Convention, the expression “permanent establishment” means a fixed place of business through which an enterprise carries out all or part of its activity.

2.The term “permanent establishment” includes especially:

a) an executive seat,
b) branch,
c) a desk,
d) factory,
e) a workshop,
f) a facility, structure or boat or any other place used for prospecting for natural resources, and
g) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources.

3.The term “permanent establishment” also includes:
a) a construction or assembly site or supervisory or consultancy activities carried out therein, but only when this site or these activities last more than twelve months;
b) the provision of services, including consultancy services, by a company acting through its employees or other personnel engaged by the company for this purpose, but only when activities of this nature are continued (for the same or related project) for a period or periods exceeding six months in any twelve month period.

4.Notwithstanding the preceding provisions of this article, it is considered that there is no “permanent establishment” if:

a) facilities are used for the sole purpose of storing, displaying or delivering goods belonging to the company;
b) goods belonging to the company are stored for the sole purpose of storage, display or delivery;
c) goods belonging to the company are stored for the sole purpose of processing by another company;
d) a fixed place of business is used for the sole purpose of purchasing goods or gathering information, for the business;
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) a fixed place of business is used solely for the purposes of the cumulative exercise of the activities mentioned in subparagraphs a) to e), provided that the overall activity of the fixed place of business resulting from this combination keeps a preparatory or auxiliary character.

5. Notwithstanding the provisions of paragraphs 1 and 2, where a person – other than an agent enjoying an independent status to which paragraph 6 applies – acts on behalf of an enterprise and has powers in a Contracting State which ” it habitually exercises there allowing it to conclude contracts on behalf of the enterprise, this enterprise is considered as having a permanent establishment in that State for all the activities that this person carries out for the enterprise, unless the activities of that person are limited to those mentioned in paragraph 4 and which, if they were carried on through a fixed place of business, would not allow that place to be considered as a permanent establishment under the provisions of that paragraph.

6. A company is not considered to have a permanent establishment in a Contracting State by the sole fact that it carries out its activity there through a broker, a commissionaire general or any other agent enjoying a status. independent, provided that these persons act within the ordinary framework of their activity. However, when the activities of such agent are carried out exclusively or almost exclusively for the enterprise, he is not considered to be an agent enjoying an independent status for the purposes of this paragraph, unless it is demonstrated that the Transactions between the agent and the company are made under conditions that would be agreed between independent parties.

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 there (whether through an establishment stable or not) is not in itself sufficient to make any one of these companies a permanent establishment of the other.

Chapter III – Income taxation

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. The expression “immovable property” has the meaning assigned to it by the law of the Contracting State in which the property in question is situated. The expression includes in all cases the accessories, the dead or alive livestock of agricultural and forestry operations, the rights to which the provisions of private law concerning land ownership, the usufruct of immovable property and the rights to variable payments apply. or fixed for the exploitation or concession of the exploitation of mineral deposits, sources and other natural resources; ships and aircraft are not considered real property.
3. The provisions of paragraph 1 apply to income derived from the direct exploitation, rental or leasing, as well as from any other form of exploitation of immovable property.

4. The provisions of paragraphs 1 and 3 also apply to income from immovable property of a business as well as to income from immovable property used for the exercise of an independent profession.

Article 7 Business profits

1. The profits of an enterprise of a Contracting State may be taxed only in that State, unless the enterprise carries on its activity in the other Contracting State through a permanent establishment situated there. If the enterprise carries on its activity in such a manner, the profits of the enterprise may be taxed in the other State but only to the extent that they are attributable to that permanent establishment.

2. Subject to the provisions of paragraph 3, where an enterprise of a Contracting State carries on its activity in the other Contracting State through a permanent establishment situated therein, it shall be charged, in each Contracting State, to this permanent establishment the profits that it could have made if it had set up a separate enterprise carrying out identical or similar activities under identical or similar conditions and dealing in complete independence with the enterprise of which it constitutes a permanent establishment.

3. To determine the profits of a permanent establishment, the expenses incurred for the purposes pursued by this permanent establishment are allowed as deduction, including management expenses and general administrative expenses thus incurred, either in the State in which the said establishment is located. permanent establishment, or elsewhere, within the framework provided for by the domestic legislation of that State.

4. While it is customary in a Contracting State to determine the profits attributable to a permanent establishment on the basis of an allocation of the total profits of the enterprise among its various parts, nothing in paragraph 2 prevents this. Contracting State to determine the taxable profits according to the distribution in use; the distribution method adopted must, however, be such that the result obtained complies with the principles contained in this article.

5. No profit is attributed to a permanent establishment simply because it has purchased goods for the business.

6.For the purposes of the preceding paragraphs, the profits to be attributed to the permanent establishment are determined each year using the same method, unless there are valid and sufficient reasons for proceeding otherwise.

7. Where profits include items of income treated separately in other articles of this Convention, the provisions of those articles shall not be affected by the provisions of this article.

Article 8
Maritime and air navigation

1. The profits of an enterprise of a Contracting State arising from the operation, in international traffic, of ships or aircraft are taxable only in that Contracting State.

2.For the purposes of this article, profits from the operation, in international traffic, of ships or aircraft include:
a) profits from the occasional bareboat rental of ships or aircraft in international traffic,
b) profits from the use, maintenance or rental of containers in international traffic (including trailers and equipment relating to the transport of containers),

when these activities are complementary or incidental to the operation, in international traffic, of ships or aircraft.

3.The provisions of paragraphs 1 and 2 also apply to profits from the participation in a pool, a joint business or an international operating agency.

Article 9 Associated enterprises

1.When
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 of an enterprise of the other Contracting State,

and that, in either case, the two companies are, in their commercial or financial relations, bound by conditions agreed or imposed, which differ from those which would be agreed between independent companies, the profits which, without these conditions, would have been fulfilled by one of the undertakings but could not in fact be fulfilled because of these conditions, can be included in the profits of that undertaking 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 taxed in that other State, and the profits so included are profits which would have been realized by the enterprise of the first State if the conditions agreed between the two enterprises had been those which would have been agreed between independent enterprises, the other State makes an appropriate adjustment of the amount of tax therein. been levied on these profits. In determining this adjustment, account shall be taken of the other provisions of this Convention and, if necessary, the competent authorities of the Contracting States shall consult each other.

Article 10 Dividends

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

2.However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident, and according to the laws of that State, but if the beneficial owner of the dividends is a resident of the other Contracting State, the tax thus established may not exceed:
a) 5 percent of the gross amount of the dividends if the beneficial owner is a company which directly or indirectly owns at least 30 percent of the capital of the company paying the dividends and which has invested at least an amount equivalent to US $ 300,000 in the company who pays dividends on the date of dividend payment;
b) 10 per cent of the gross amount of the dividends, in all other cases.

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

3.The term “dividends” used in this article designates income from shares, founder’s shares or other beneficiary shares with the exception of claims, as well as income from other shares subject to the same tax regime as income from shares. ‘actions by the law of the State of which the distributing company is a resident.

4.The provisions of paragraphs 1 and 2 do not apply when the beneficial owner of the dividends, resident in a Contracting State, exercises in the other Contracting State of which the company paying the dividends is a resident, either an industrial or commercial activity. through a permanent establishment located there, or an independent profession by means of a fixed base located there, and that the dividend-generating participation is effectively attached to it. In this case, the provisions of article 7 or article 14, as the case may be, shall apply.

5. 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 levy any tax on the dividends paid by the company, except to the extent that such dividends are paid to a resident of that other State or to the extent that the dividend-generating participation is effectively attached to a permanent establishment or to a fixed base situated in that other State, nor to levy any tax, in respect of the taxation of profits not distributed, out of the undistributed profits of the company, even if the dividends paid or the undistributed profits consist wholly or in part of profits or income deriving from that other State.

Article 11 Interest

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

2.However, such interest may also be taxed in the Contracting State from which it arises and according to the legislation of that State, but if the beneficial owner of the interest is a resident of the other Contracting State, the tax thus established may not exceed 10 percent of the gross amount of interest.
3.Notwithstanding the provisions of paragraph 2, the interest mentioned in paragraph 1 shall be taxable only in the Contracting State of which the person receiving the interest is a resident, if that person is the beneficial owner of such interest and if the interest is paid. :
a) to the Government of this Contracting State, to one of its administrative-territorial subdivisions or local authorities, or to the Central Bank of this State;
b) by virtue of a loan made, guaranteed or insured by the Government of one of the Contracting States, by the Central Bank of one of the States or by any other financial institution wholly owned by that Government (when agreed thus periodically by the competent authorities of the Contracting States); Where
c) in connection with the sale on credit of industrial, commercial or scientific equipment.

4.The term “interest” used in this article designates income from debts of any kind, whether or not accompanied by mortgage guarantees or a profit-sharing clause of the debtor, and in particular income from public funds and loan obligations. , including the bonuses and prizes attached to these securities. However, the term “interest” does not include the income referred to in article 10. Penalties for late payment are not considered as interest within the meaning of this article.
5.The provisions of paragraphs 1, 2 and 3 do not apply when the beneficial owner of the interest, resident in a Contracting State, exercises in the other Contracting State from which the interest arises, either an industrial or commercial activity by the ‘intermediary of a permanent establishment located there, that is to say an independent profession by means of a fixed base located there, and that the debt generating interest is actually attached to it. In this case, the provisions of article 7 or article 14, as the case may be, shall apply.

6.Interest is considered to have accrued in a Contracting State when the debtor is a resident of that State. However, when the debtor of the interest, whether or not he is a resident of a Contracting State, has in a Contracting State a permanent establishment, or a fixed base, for which the debt giving rise to the payment of interest has been contracted and which bears the cost of these interests, they are considered as coming from the State where the permanent establishment, or the fixed base, is located.

7.When, by reason of special relations existing between the debtor and the beneficial owner or that both have with third parties, the amount of interest, taking into account the claim for which they are paid, exceeds that of which agreed between the debtor and the beneficial owner in the absence of such a relationship, the provisions of this article only apply to the latter amount. In this case, the excess part of the payments remains taxable according to the legislation of each Contracting State and taking into account the other provisions of this Convention.

Article 12 Royalties

1. Royalties arising in a Contracting State and the beneficial owner of which is a resident of the other Contracting State may be taxed in that other State.

2.However, these royalties may also be taxed in the Contracting State from which they originate and according to the legislation of that State, but if the beneficial owner of the royalties is a resident of the other Contracting State, the tax thus established may not exceed :
a) 5 per cent of the gross amount of the royalties paid for any software, patent, design or model, plan, formula or secret process or for any information relating to experience acquired in the industrial, commercial or scientific field if this software, patent, design or secret model, plan, formula or process or such information is less than three years old;
b) 10 per cent of the gross amount of the royalties, in all other cases.

3. The term “royalties” used in this article means remuneration of any kind paid for the use or the concession of the use of a copyright in a literary, artistic or scientific work, including cinematographic films and software, a patent, a trade mark, a design or a model, a plan, a secret formula or a process and for information relating to experience acquired in the industrial, commercial or scientific field.

4.The provisions of paragraphs 1 and 2 do not apply when the beneficial owner of the royalties, resident in a Contracting State, exercises in the other Contracting State from which the royalties originate, either an industrial or commercial activity through the intermediary of a permanent establishment located there, or an independent profession by means of a fixed base located there, and that the right or property generating the royalties is actually attached to it. In this case, the provisions of article 7 or article 14, as the case may be, shall apply.

5.Royalties are considered to arise from a Contracting State when the debtor is a resident of that State. However, when the debtor of the royalties, whether or not he is a resident of a Contracting State, has in a Contracting State a permanent establishment, or a fixed base, for which the commitment giving rise to the payment of the royalties has been contracted and who bears the burden of these fees, they are considered to come from the State where the permanent establishment, or the fixed base, is located.

6.When, by reason of special relations existing between the debtor and the beneficial owner or that both have with third parties, the amount of the royalties, taking into account the service for which they are paid, exceeds that of which agreed between the debtor and the beneficial owner in the absence of such a relationship, the provisions of this article only apply to the latter amount. In this case, the excess part of the payments remains taxable according to the legislation of each Contracting State and taking into account the other provisions of this Convention.

Article 13 Capital gains

1.Gains which a resident of a Contracting State derives 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 which form part of the assets of a permanent establishment which an enterprise of one Contracting State has in the other Contracting State, or from movable property which belongs to a fixed base of which a resident of a Contracting State has in the other Contracting State for the exercise of an independent profession, including such gains arising from the alienation of this permanent establishment (alone or with the whole enterprise) or of this fixed base, are taxable in that other State.

3.Gains which an enterprise of a Contracting State derives from the alienation of ships or aircraft operated in international traffic, or movable property used in the operation of such ships or aircraft, shall be taxable only in that Contracting State.

4.Gains from the alienation of any property other than that referred to in paragraphs 1, 2 and 3 may be taxed only in the Contracting State of which the transferor is a resident.

Article 14 Independent professions

1.Income which a natural person who is a resident of a Contracting State derives from a liberal profession or other activities of an independent character may be taxed only in that State; however, such income may also be taxed in the other Contracting State in the following cases:
a) if that resident usually has, in the other Contracting State, a fixed base for the exercise of his activities, in this case, only the fraction of the income which is attributable to the said fixed base may be taxed in that other State ; Where
b) if his stay in the other Contracting State is for a period or periods exceeding in the aggregate 183 days during any twelve month period beginning or ending during the calendar year; in this case only the portion of the income derived from such activities carried on in that other State may be taxed in that other State.

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

Article 15 Dependent professions

1.Subject to the provisions of Articles 16, 18 and 19, wages, salaries and other similar remuneration which a resident of a Contracting State receives in respect of paid 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 which a resident of a Contracting State receives in respect of paid employment exercised in the other Contracting State may be taxed only in the former State if:
a) the beneficiary stays in the other State for a period or periods not exceeding in the aggregate 183 days during any twelve month period beginning or ending in the calendar 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 cost of remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State.

3.Notwithstanding the foregoing provisions of this article, remuneration received in respect of salaried employment exercised on board a ship or an aircraft operated in international traffic by an enterprise of a Contracting State, may be taxed in that Contracting State.

Article 16 Directors’ fees

Directors ‘fees, directors’ fees and other similar remuneration that a resident of a Contracting State receives in his capacity as a member of the board of directors or supervisory board or of a similar body of a company which is a resident of the other Contracting State are taxable in that other State.

Article 17 Artists and sportsmen

1.Notwithstanding the provisions of Articles 7, 14 and 15, the income which a resident of a Contracting State derives from his personal activities carried on in the other Contracting State as a performing artist, such as a theater artist, cinema, variety, radio or television, or as a musician, or as an athlete, are taxable in that other State.
2.When the income from activities that an entertainer or an athlete exercises personally and in this capacity are attributed not to the artist or to the athlete himself but to another person, this income is taxable, notwithstanding the provisions of the Articles 7, 14 and 15, in the Contracting State where the activities of the artist or sportsman are carried out.

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 respect of previous employment shall be taxable only in that State.

Article 19 Public functions

1.
a) Salaries, wages and other similar remuneration, other than pensions, paid by a Contracting State or one of its administrative-territorial subdivisions or local authorities to a natural person, in respect of services rendered to that State or to that subdivision or collectivity, are 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 if the individual is a resident of that State who:

(i) has the nationality of that State, or
(ii) did not become a resident of that State for the sole purpose of rendering the services.

2.
a) Pensions paid by a Contracting State or one of its administrative-territorial subdivisions or local authorities, either directly or by deduction from funds they have established, to a natural person, for services rendered to that State or to this subdivision or community, are taxable only in that State.
b) However, these pensions are taxable only in the other Contracting State if the individual is a resident of that State and holds its nationality.

3.The provisions of Articles 15, 16, 17 and 18 apply to wages, salaries and other similar remuneration as well as to pensions paid for services rendered in the course of an industrial or commercial activity exercised by a Contracting State or ‘one of its administrative-territorial subdivisions or local communities.

Article 20 Students

The sums that a student or trainee who is, or who was immediately before going to a Contracting State, a resident of the other Contracting State and who is staying in the first State solely for the purpose of continuing his studies there or his training, received to cover his costs of maintenance, studies or training are not taxable in that State, provided that they come from sources located outside that State.

Article 21 Other income

1.Items of income of a resident of a Contracting State, wherever they arise, which are not dealt with in the preceding articles of this Convention shall be taxable only in that State.

2.The provisions of paragraph 1 do not apply to income other than income from immovable property as defined in paragraph 2 of article 6, when the beneficiary of such income, resident of a Contracting State, exercises in the other Contracting State, either an industrial or commercial activity through the intermediary of a permanent establishment situated there, or an independent profession by means of a fixed base situated there, and that the law or the good income generator is actually attached to it. In this case, the provisions of article 7 or article 14, as the case may be, shall apply.

Chapter IV – Taxation of fortune
Article 22
Fortune

1.The fortune constituted by immovable property referred to in Article 6, owned by a resident of a Contracting State and which is situated in the other Contracting State, may be taxed in that other State.

2.The fortune constituted by movable property which forms part of the assets of a permanent establishment that an enterprise of a Contracting State has in the other Contracting State, or by movable property which belongs to a fixed base of which a resident a Contracting State has in the other Contracting State for the exercise of an independent profession, is taxable in that other State.

3.The fortune constituted by ships and aircraft operated in international traffic by an enterprise of a Contracting State, as well as by movable property used for the operation of these ships or aircraft, is taxable only in that Contracting State.

4.All other elements of the capital of a resident of a Contracting State are taxable only in that State.

Chapter V – Methods to eliminate double taxation
Article 23 Elimination of double taxation

1.Subject to the provisions of Luxembourg law concerning the elimination of double taxation which does not affect its general principle, double taxation is eliminated as follows:

a) Where a resident of Luxembourg receives income or owns capital which, in accordance with the provisions of this Convention, is taxable in Azerbaijan, Luxembourg shall exempt such income or capital from tax, subject to the provisions of sub-paragraphs b) and c), but may, in order to calculate the amount of tax on the remainder of the resident’s income or capital, apply the same tax rates as if the income or elements of capital had not been exempt.
b) When a resident of Luxembourg receives income which, in accordance with the provisions of Articles 10, 11, 12 and 17 is taxable in Azerbaijan, Luxembourg grants from the tax it collects on the income of that resident, a deduction of an amount equal to the tax paid in Azerbaijan. This deduction may not, however, exceed the fraction of the tax, calculated before deduction, corresponding to these items of income received from Azerbaijan.
c) The provisions of sub-paragraph a) shall not apply to income received or to assets owned by a resident of Luxembourg where Azerbaijan applies the provisions of this Convention to exempt such income or assets from tax or applies the the provisions of paragraph 2 of Article 10, 11 or 12 to such income.

2.For Azerbaijan, double taxation is avoided as follows:
When a resident of the Republic of Azerbaijan receives income or owns capital which, in accordance with the provisions of this Convention, is taxable in Luxembourg, the tax on such income or on that capital paid in Luxembourg shall be deducted from the tax. tax collected from that person in the Republic of Azerbaijan on such income or fortune. This deduction may not, however, exceed the amount of tax paid on such income or capital in accordance with the laws and taxation rules of Azerbaijan.

Chapter VI – Special provisions
Article 24
Non-discrimination

1.Nationals of a Contracting State shall not be subject in the other Contracting State to any taxation or obligation relating thereto which is different or heavier than those to which nationals of that other State who are in the same State are or may be subject. situation, in particular with regard to the residence. This provision also applies, notwithstanding the provisions of Article 1, to persons who are not residents of a Contracting State or of both Contracting States.

2.The taxation of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State is not established in that other State in a less favorable manner than the taxation of enterprises of that other State which carry out the same activity. This provision may not be interpreted as obliging a Contracting State to grant to residents of the other Contracting State the personal deductions, allowances and tax reductions according to the situation or the family responsibilities which it grants to its own residents. .

3.Unless the provisions of paragraph 1 of article 9, paragraph 7 of article 11 or paragraph 6 of article 12 apply, interest, royalties and other expenses paid by an enterprise of a State contracting to a resident of the other Contracting State are deductible, for the determination of the taxable profits of this enterprise, under the same conditions as if they had been paid to a resident of the first State. Likewise, the debts of an enterprise of a Contracting State towards a resident of the other Contracting State are deductible, for the determination of the taxable fortune of this enterprise, under the same conditions as if they had been contracted towards a resident. of the first state.

4.Companies of a Contracting State, the capital of which is wholly or in part, directly or indirectly, owned or controlled by one or more residents of the other Contracting State, are not subject in the first State to any taxation or obligation therein. relative, which is different or heavier than those to which the other similar enterprises of the first State are or may be subject.

5.The provisions of this article apply to the taxes covered by this Convention.

Article 25
Mutual agreement procedure

1.Where a person considers that the measures taken by a Contracting State or by both Contracting States result or will result for him or her in taxation not in accordance with the provisions of this Convention, he may, independently of the remedies provided for by the internal law of those States, submit her case to the competent authority of the Contracting State of which she is a resident or, if her case falls under paragraph 1 of Article 24, to that of the Contracting State of which she 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.

2.The competent authority shall endeavor, if the complaint appears to it to be justified and if it is not itself able to find a satisfactory solution, to resolve the case by mutual agreement with the competent authority of the other Contracting State, for the avoidance of taxation which is not in accordance with the Convention. The agreement is applied regardless of the time limits provided for by the internal law of the Contracting States.

3.The competent authorities of the Contracting States shall endeavor, by mutual agreement, to resolve any difficulties or to dispel any doubts which may arise in 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.

4.The competent authorities of the Contracting States may communicate with each other directly, including within a joint commission composed of these authorities or their representatives, with a view to reaching an agreement as indicated in the preceding paragraphs.

Article 26 Exchange of information

1.The competent authorities of the Contracting States shall exchange the information necessary to apply the provisions of this Convention or those of the internal legislation of the Contracting States relating to the taxes covered by the Convention insofar as the taxation it provides is not contrary. to the Convention. The exchange of information is not restricted by Article 1. Information received by a Contracting State shall be kept secret in the same way as information obtained under the domestic law of that State and shall only be communicated to persons or authorities (including courts and administrative bodies) concerned by the establishment or collection of taxes covered by the Convention, by the proceedings or prosecutions relating to such taxes, or by decisions on appeals relating to these taxes. These persons or authorities only use this information for these purposes. They may reveal this information in public court hearings or in judgments.

2.The provisions of paragraph 1 may in no case be interpreted as imposing on a Contracting State the obligation:

a) to take administrative measures at variance with its laws and administrative practice or those 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 provide information which would reveal a trade secret, industrial, professional or a trade process or information the communication of which would be contrary to public order.

Article 27 Assistance in tax collection

1.The Contracting States assist each other in the recovery of their tax debts. This assistance is limited by Articles 1 and 2. The competent authorities of the States may by mutual agreement settle the modalities of application of this article.

2.The term “tax claim” as used in this article means an amount due in respect of taxes referred to in article 2, to the extent that the corresponding taxation is not contrary to this Convention or to any other instrument to which these Contracting States are parties, as well as the interest, administrative penalties and costs of collection or conservation relating to such taxes.

3.When a tax claim of a Contracting State which is collectable under the laws of that State and is owed by a person who, at that date, cannot under those laws prevent its recovery, such tax claim is, at the request of the competent authorities of that State, accepted with a view to its recovery by the competent authorities of the other Contracting State. This tax claim is collected by that other State in accordance with the provisions of its legislation applicable to the recovery of its own taxes as if the claim in question were a tax claim of that other State.

4.When a tax claim of a Contracting State is a claim in respect of which that State may, by virtue of its law, take protective measures to ensure its recovery, this claim must, at the request of the competent authorities of that State State, be accepted for the purpose of adopting provisional measures by the competent authorities of the other Contracting State. That other State must take precautionary measures with regard to this tax claim in accordance with the provisions of its law as if it were a tax claim of that other State even if, at the time when these measures are applied, the tax debt is not recoverable in the first State or is due by a person who has the right to prevent its recovery.

5.Notwithstanding the provisions of paragraphs 3 and 4, the limitation periods and priority applicable under the law of a Contracting State to a tax claim by reason of its nature as such do not apply to a claim tax accepted by that State for the purposes of paragraph 3 or 4. In addition, a tax claim accepted by a Contracting State for the purposes of paragraph 3 or 4 may not have any priority in that State under the law of the other Contracting State.

6.Proceedings concerning the existence, validity or amount of a tax claim of a Contracting State are only admitted to the courts or administrative bodies of that State. Nothing in this article may be interpreted as creating or giving a right to such proceedings before the courts or administrative bodies of the other Contracting State.

7.Where at any time after a request has been made by a Contracting State under paragraph 3 or 4 and before the other State has collected and transmitted the amount of the tax claim in question to the first State, that tax claim cease to be
a) in the case of a claim made under paragraph 3, a tax claim of the first State which is collectible under the laws of that State and is owed by a person who at that time is not entitled under the laws of that State, prevent its recovery, or
b) in the case of a claim made under paragraph 4, a fiscal claim of the first-mentioned State in respect of which that State may, under its laws, take precautionary measures to ensure its recovery,

the competent authorities of the first State shall promptly notify this fact to the competent authorities of the other State and the first State, at the option of the other State, suspends or withdraws its request.

8.The provisions of this article may in no case be interpreted as imposing on a Contracting State the obligation:
a) to take administrative measures at variance with its laws and administrative practice or those of the other Contracting State;
b) to take measures which would be contrary to public order;
c) to provide assistance if the other Contracting State has not taken all reasonable measures of recovery or conservation, as the case may be, which are available under its laws or administrative practice;
d) to provide assistance in cases where the resulting administrative burden for that State is clearly disproportionate to the advantages which may be derived therefrom by the other Contracting State.

Article 28 Members of diplomatic missions and consular posts

The provisions of this Convention are without prejudice to the fiscal privileges enjoyed by members of diplomatic missions or consular posts by virtue either of the general rules of international law or of the provisions of special agreements.

Article 29 Protocol

The attached Protocol is an integral part of this Convention.

Chapter VII – Final provisions
Article 30 Entry into force

1.The Contracting States shall notify each other in writing, through the diplomatic channel, that the procedures required by their law for the entry into force of this Convention have been completed. The Convention will enter into force on the date of receipt of the last notification.

2.This Convention will be applicable:
a) in respect of taxes withheld at source, to income derived on or after 1 st January in the calendar year immediately following the year in which the Convention enters into force;
b) in respect of other taxes on income, and taxes on capital, for taxes chargeable for any tax year beginning on or after 1 st January in the calendar year immediately following the year in which the Convention will enter into force.

Article 31 Denunciation

1.This Convention shall remain in force until it has been denounced by a Contracting State. Each Contracting State may denounce the Convention through diplomatic channels with a minimum notice of six months before the end of each calendar year following the period of five years from the date on which the Convention enters into force.

2.The Convention will cease to be applicable:
a) in respect of taxes withheld at source, to income derived on or after 1 st January in the calendar year immediately following the year in which the notice is given;
b) in respect of other taxes on income, and taxes on capital, for taxes chargeable for any year of assessment beginning on or after 1 st January in the calendar year immediately following the year in which the notice will be given.

IN WITNESS WHEREOF the Plenipotentiaries of the two Contracting States, being duly authorized for this purpose, have signed this Convention.
DONE in duplicate at Baku on June 16, 2006 in the French and Azeri languages, both texts being equally authentic.