New Article 12B – INCOME FROM AUTOMATED DIGITAL SERVICES
1. Income from automated digital services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.
2. However, income from automated digital services arising in a Contracting State 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 income is a resident of the other Contracting State, the tax so charged shall not exceed ____ percent (the percentage is to be established through bilateral negotiations) of the gross amount of the income.
3. Notwithstanding the provisions of paragraph 2, the beneficial owner of the income from automated digital services referred to in that paragraph may require the Contracting State where the income from automated digital services arises, to subject its qualified profits from automated digital services for the fiscal year concerned to taxation at the tax rate provided for in the domestic laws of that State. For the purpose of this paragraph, the qualified profits shall be 30 percent of the amount resulting from applying the beneficial owner’s profitability ratio or the profitability ratio of its automated digital business segment, if available, to the gross annual revenue from automated digital services derived from the Contracting State where such income arises. Where the beneficial owner belongs to a multinational group, the profitability ratio to be applied shall be that of the group or, if available, of the business segment of the group relating to income covered by this Article.
4. The term “income from automated digital services” as used in this Article means any payment in consideration for any service provided on the internet or an electronic network requiring minimal human involvement from the service provider. The term “income from automated digital services” does not, however, include payments qualifying as ‘fees for technical services’ under Article 12A.
5. The provisions of paragraphs 1, 2 and 3 shall not apply if the beneficial owner of the income from the rendering of automated digital services, being a resident of a Contracting State, carries on business in the other Contracting State in which the income from automated digital services arises through a permanent establishment situated in that other State, or performs in the other Contracting State independent personal services from a fixed base situated in that other State, and the income from automated digital services are effectively connected with: (a) such permanent establishment or fixed base, or (b) business activities referred to in © of paragraph 1 of Article 7. In such cases the provisions of Article 7 or Article 14, as the case may be, shall apply.
6. For the purposes of this Article, subject to paragraph 7, income from automated digital services shall be deemed to arise in a Contracting State if the payer is a resident of that State or if the person paying the income, whether that person is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the obligation to make the payment was incurred, and such payments are borne by the permanent establishment or fixed base.
7. For the purposes of this Article, income from automated digital services shall be deemed not to arise in a Contracting State if the payer is a resident of that State and carries on business in the other Contracting State through a permanent establishment situated in that other State or performs independent personal services through a fixed base situated in that other State and such expenses are borne by that permanent establishment or fixed base.
8. Where, by reason of a special relationship between the payer and the beneficial owner of the income from automated digital services or between both of them and some other person, the amount of the income, having regard to the services 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 income shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Convention.