20 DE MARÇO DE 1997

440-(39)

the operation of ships used for the transport of hydro-cargons may be taxed in the other Contracting State.

5 — Whenever companies from different countries have agreed to carry on an air transportation business together in the form of a consortium, the provisions of paragraph 1 shall apply to such part of the profits of the consortium as corresponds to the participation held vn that consortium by a company that is a resident of a Contracting State.

Article 9 Associated enterprises

1 — Where:

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

b) The same persons participate directly or indirectly in the management, control or capital of an enterprise of a Contracting State and an enterprise of the other Contracting State,

and in either case conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and' taxed accordingly.

2 — Where a Contracting State includes in the profits of an enterprise of that State — and taxes accordingly — profits on which an enterprise of the other Contracting State has been charged to tax in that other State and the profits so included are profits which would have accrued to the enterprise of the first-mentioned State if the conditions made between the two enterprises had been those which would have been made between independent enterprises, then that other State shall make an appropriate adjustment to the amount of the tax charge therein on those profits. In determining such adjustement, 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.

3 — The provisions of paragraph 2 shall not be applied in cases of extreme negligence, fraud or wilful misconduct.

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 so charged shall not exceed 15% of the gross amount of the dividends until 31st December 1996 and 10% of such amount as from 1st January 1997.

The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of these limitations.

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

3 — The term «dividends» as used in this article means income from shares, «jouissance» shares or «jouissance» rights, mining snares, founders' shares or other rights, not being debt-claims, participating in profits, as well as income 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 term also includes profits attributed under an arrangement for participation in profits (associação em participação).

4 — The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment or fixed base. In such 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 impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a resident of that other State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other State, nor subject the company's undistributed profits to a tax on the company's undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State.

Article 11 Interest

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

2 — However, such interest may also be taxed in the Contracting State in which it arises and according to the laws of that State, but if the beneficial owner of the interest is a resident of the other Contracting State, the tax so charged shall not exceed 10 per cent of the gross amount of the interest. The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of this limitation.

3 — Notwithstanding the provisions of paragraph 2, interest arising in a Contracting State, shall be exempted from tax in that State:

a) If the debtor of such interest is the Government of that State, a political or administrative subdivision or a local authority thereof; or

b) If interest is paid to the Government of the other Contracting State, a political or administrative subdivision or a local authority thereof or an institution (including a financial institution) in connection with any financing granted by them under an agreement between the Governments of the Contracting States; or

c) In respect of loans or credit made by:

i) In the case of Portugal, the Caixa Geral de Depósitos (CGD), the Banco Nacional