3 DE NOVEMBRO DE 1997

198-(31)

Ad. article 4

It is understood that if Venezuela changes its present territorial tax system to a world-wide system of taxation

the term «resident of a Contracting State» shall mean any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature and also includes that State and any political or admis-trative subdivisions or local authority thereof. 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.

Ad. article 7

1 — With respect to paragraphs 1 and 2 of article 7, where an enterprise of a Contracting State sells merchandise or exercises an activity in the other Contracting State through a permanent establishment situated therein, the profits of such permanent establishment shall not be determined on the basis of the total amount derived by the enterprise, but only on the basis of the remuneration attributable to the activity which is effectively carried out by the permanent establishment in connection wiht the sales or activities. Especially 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 of such permanent establishment shall not be determined on the basis of the total amount of the contract, but only on the basis of that part of the contract which is effectively carried out by that permanent establishment in the State in which it is situated. The provisions of this paragraph shall not preclude the application of article 12 whenever there are cases of mixed contracts involving sales or activities with transfer of know-how. In these cases, only the appropriate portion concerning such payments shall be considered in the application of that article.

2 — With respect to paragraph 3, the term «expenses which are incurred for the purposes of the permanent establishment shall be construed as expenses directly related to the activity of such permanent establishment.

3 — In the case of Venezuela the provision of paragraph 3 would only be applied if Venezuela changes its territorial tax system to a world-wide system of taxation. Meanwhile, for the purposes of the determination of the taxable profit of a permanent establishment, interest, royalties and other disbursements may be deducted in the same terms and conditions as if they had been incurred by a resident enterprise.

Ad. article 8

The amount of tax to be levied in accordance with paragraph 4 shall not in any case be higher than that provided under the tax legislation of the Contracting State in force at the time of signature of this Convention.

Ad. article 14

The Contracting States agree that in case Venezuela or Portugal agree to an amount different from that established in paragraph 1, b), they will undertake to revise the terms of article 14 to avoid any discriminatory treatment for residents of both Contracting States.

Ad. article 23

Notwithstanding paragraph 2 of article 23, in case Venezuela adopts a world-wide basis of taxation, double taxation shall be eliminated as follows:

a) Where a resident of Venezuela derives income which, in accordance with the provisions of this Convention, may be taxed in Portugal, Venezuela shall allow as a deduction from the tax on the income of that resident an amount equal to the income tax paid in Portugal; such deduction shall not, however, exceed that part of the income tax, as computed before the deduction in given, which is attributable to the income which may be taxed in Portugal; and

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

Ad. article 24

1 — Except where the provisions of paragraph 1 of article 9, paragraph 7 of article 11, or paragraph 6 of article 12, apply, interest, royalties and other disbursements paid by an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable profits of such enterprise, be deductible under the same conditions as if they had been paid to a resident of the first-mentioned State. In the case of Venezuela, this provision would only be applied if Venezuela changes its territorial tax system to a world-wide system of taxation.

2 — The provisions of article 24 do not preclude the application of any provision of the tax law of a Contracting State dealing with thin capitalization problems.

3—The provisions of article 24 shall be construed in the sense that insofar as the deductibility of the incurred disbursements is concerned, each Contracting State may apply its own procedures regarding the burden of proof.

In witness whereof, the undersigned duly authorised thereto, have signed this Protocol.

For the Government of the Portuguese Republic:

Jaime José Matos da Gama, Minister for Foreign Affairs.

For the Government of the Republic of Venezuela:

Miguel Angel Burelli Rivas, Minister for Foreign Affairs.

A Divisão de Redacção e Apoio Audiovisual.