- 1. Subject to the provisions of the law of the United Kingdom regarding the allowance as a credit against United Kingdom tax of tax payable in a territory outside the United Kingdom (which shall not affect the general principle hereof):
- (a) French tax payable under the laws of France and in accordance with this Convention, whether directly or by deduction, on profits, income or chargeable gains from sources within France (excluding in the case of a dividend, tax payable in respect of the profits out of which the dividend is paid) shall be allowed as a credit against any United Kingdom tax computed by reference to the same profits, income or chargeable gains by reference to which French tax is computed;
- (b) in the case of a dividend paid by a company which is a resident of France to a company which is a resident of the United Kingdom and which controls directly or indirectly at least 10 per cent of the voting power in the company paying the dividend, the credit shall take into account (in addition to any French tax for which credit may be allowed under the provisions of sub-paragraph (a)) the French tax payable by the company in respect of the profits out of which such dividend is paid.
- 2. For the purposes of paragraph 1:
- (a) profits, income and capital gains owned by a resident of the United Kingdom which may be taxed in France in accordance with the other Articles of this Convention (except capital gains which may be taxed in accordance with paragraph 6 of Article 14) shall be deemed to arise from sources in France;
- (b) capital gains from sources neither in France nor the United Kingdom which may be taxed in the United Kingdom in accordance with paragraph 6 of Article 14 shall be deemed to arise from sources in France;
- (c) the taxes referred to in clauses (i) to (iv) of subparagraph (b) of paragraph 1 of Article 2 and, in respect of the taxes mentioned in those clauses, in paragraph 2 of Article 2, shall be considered French tax.
- 3. In the case of France, double taxation shall be avoided in the following manner:
- (a) notwithstanding any other provision of this Convention, income which may be taxed or shall be taxable only in the United Kingdom in accordance with the provisions of this Convention shall be taken into account for the computation of the French tax where such income is not exempted from Corporation Tax according to French domestic law. In that case, the United Kingdom tax shall not be deductible from such income, but the resident of France shall, subject to the conditions and limits provided for in sub-paragraphs (i), (ii) and paragraph 4, be entitled to a tax credit against French tax. Such tax credit shall be equal:
- (i) in the case of income other than that mentioned in subparagraph (ii), to the amount of French tax attributable to such income provided that the resident of France is subject to United Kingdom tax in respect of such income;
- (ii) in the case of income referred to in Article 7 and paragraph 3 of Article 14 when that income is subject to French Corporation Tax, and in the case of income referred to in Article 11, paragraphs 1, 2 and 6 of Article 14, paragraph 3 of Article 15, Article 16, paragraphs 1 and 2 of Article 17 and paragraph 3 of Article 23, to the amount of tax paid in the United Kingdom in accordance with the provisions of those Articles; however, such credit shall not exceed the amount of French tax attributable to such income;
- (b) for the purposes of sub-paragraph (a) of this paragraph the term ‘amount of French tax attributable to such income’ means:
- (i) where the tax on such income is computed by applying a proportional rate, the amount of the net income concerned multiplied by the rate which actually applies to that income;
- (ii) where the tax on such income is computed by applying a progressive scale, the amount of the net income concerned multiplied by the rate resulting from the ratio of the tax actually payable on the total net income taxable in accordance with French law to the amount of that total net income;
- (c) for the purposes of sub-paragraph (a) of this paragraph, the term ‘amount of tax paid in the United Kingdom’ means the amount of United Kingdom tax effectively and definitively borne in respect of the income concerned, in accordance with the provisions of this Convention.
- 4.
- (a) Where gains may be taxed by a Contracting State by reason only of paragraph 6 of Article 14, that Contracting State, and not the other Contracting State, shall eliminate double taxation in accordance with the methods set out in this Article as if the gains arose from sources in the other Contracting State.
- (b) Where gains may be taxed by a Contracting State by reason of paragraphs 1, 2, or 3 of Article 14, the other Contracting State, and not the first-mentioned Contracting State, shall eliminate double taxation in accordance with the methods set out in this Article.
- 5. In paragraph 3 the term ‘income’ means income or capital gains as the context requires.