Explanatory note

The Convention with Bolivia is set out in Part I of the Schedule to this Order.

The Convention provides for business profits not arising through a permanent establishment to be taxed only in the country of the taxpayer’s residence. Profits attributable to a permanent establishment may be taxed in the country in which the permanent establishment is situated (Articles 5 and 7).

Income from immovable property, including income from agriculture or forestry, may be taxed by the country in which the property is situated (Article 6).

Shipping and air transport profits are generally to be taxed only by the country in which the place of effective management of the operator is situated (Article 8).

The Convention includes rules for determining taxable profits when a company in one country is related to a company in the other (Article 9).

Dividends paid by a resident of one state to a resident of the other may be taxed by the source state, but the rate imposed will not exceed 15 per cent (Article 10).

Interest paid by a resident of one country to a resident of the other may be taxed by the source state, but at a rate which will not exceed 15 per cent. Certain categories of interest (e.g. interest paid to the Government of the other country) will be exempt from tax in the source state (Article 11).

The rate of tax imposed in the source country on royalties is limited to 15 per cent where the beneficial owner is a resident of the other country (Article 12).

Each country may generally tax capital gains in accordance with its domestic law, although gains from the alienation of ships or aircraft operated in international traffic shall be taxable only in the country of residence of the operator (Article 13).

The earnings of temporary business visitors and some other individuals are, subject to certain conditions, to be taxed only in the country of the taxpayer’s residence (Articles 14 and 15). Fees received by a resident of one country in his capacity as a director of a company resident in the other country may be taxed in that other country (Article 16). Income derived from the activities of artistes and sportsmen may be taxed in the country in which those activities are performed (Article 17).

Occupational pensions, other than those paid in respect of government service, and annuities are to be taxed only in the recipient’s country of residence (Article 18) while government service remuneration and pensions are normally to be taxed only by the paying Government (Article 19).

Certain payments made to visiting students and business apprentices are generally exempt from tax in the country visited (Article 20). Other income (excluding income from trusts or estates) will generally be taxed only by the country of which the beneficial owner is a resident (Article 21).

Elements of capital may generally only be taxed by the country in which the owner is resident, but capital in the form of immovable property may also be taxed by the country in which it is situated (Article 22).

Where income continues to be taxable in both countries, relief from double taxation will be given, in effect, in accordance with the laws of each country. In the case of dividends, the United Kingdom will give credit for the underlying tax paid in Bolivia where the shareholder is a United Kingdom company which controls at least 10 per cent of the voting power in the company paying the dividends (Article 23).

There are also measures safeguarding nationals and enterprises of one country against discriminatory taxation in the other country (Article 24), for consultation to resolve difficulties in the application or interpretation of the Convention (Article 25), for exchanges of information between the taxation authorities of the two countries (Article 26) and for the treatment of diplomatic or consular officials (Article 27).

The Exchange of Notes comprising Part II of the Schedule clarifies the intended interpretation of certain parts of the Convention and includes an agreement that if Bolivia subsequently agrees in a convention with any other member of the Organisation for Economic Co-operation and Development to apply lower rates of taxes to dividends, interest or royalties, those lower rates will apply to this Convention.

The Convention will enter into force on the date of the later of the notifications by each country of the completion of its legislative procedures. It will take effect in the United Kingdom from April 1st (in respect of corporation tax) and from April 6th (for income tax and capital gains tax) in the following calendar year (Article 28). The date of entry into force will in due course be published in the London, Edinburgh and Belfast Gazettes.