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- (1) In the present Convention, unless the context otherwise requires –
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- (a) The term ‘United Kingdom’ means Great Britain and Northern Ireland;
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- (b) The term ‘Israel’ means the territory in which the Government of Israel levy taxation;
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- (c) The terms ‘one of the territories’ and ‘the other territory’ mean the United Kingdom or Israel, as the context requires;
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- (d) The term ‘taxation authorities’ means, in the case of the United Kingdom, the Commissioners of Inland Revenue or their authorised representative; in the case of Israel, the Minister of Finance or his authorised representative; and, in the case of any territory to which this Convention is extended under Article XXII, the competent authority for the administration in such territory of the taxes to which this Convention applies;
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- (e) The term ‘tax’ means the United Kingdom tax or Israel tax, as the context requires;
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- (f) The term ‘person’ includes any body of persons, corporate or not corporate;
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- (g) The term ‘company’ means any body corporate;
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- (h)
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- (i) The terms ‘resident of the United Kingdom’ and ‘resident of Israel’ mean respectively any person who is resident in the United Kingdom for the purposes of United Kingdom tax and any person who is resident in Israel for the purposes of Israel tax, but
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- (ii) Where by reason of the provisions of subparagraph (i) above an individual is a resident of both territories, then this case shall be solved in accordance with the following rules:
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- (aa) He shall be deemed to be a resident of the territory in which he has a permanent home available to him. If he has a permanent home available to him in both territories, he shall be deemed to be a resident of the territory with which his personal and economic relations are closest (hereinafter referred to as his ‘centre of vital interests’);
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- (bb) If the territory in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either territory, he shall be deemed to be a resident of the territory in which he has an habitual abode;
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- (cc) If he has an habitual abode in both territories or in neither of them, he shall be deemed to be a resident of the territory of which he is a national;
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- (dd) If he is a national of both territories or of neither of them, the taxation authorities of the territories shall determine the question by mutual agreement;
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- (iii) Where by reason of the provisions of subparagraph (i) a person other than an individual is a resident of both territories, the taxation authorities of the both territories shall endeavour to determine by mutual agreement the territory of which such person shall be deemed to be a resident for the purposes of this Convention, having regard to its place of effective management, the place where it is incorporated or otherwise constituted and any other relevant factors. In the absence of such agreement, such person shall not be entitled to any relief or exemption from tax provided by this Convention except to the extent and in such manner as may be agreed upon by the taxation authorities of the Contracting Parties.
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- (i) The terms ‘resident of one of the territories’ and ‘resident of the other territory’ mean a person who is a resident of the United Kingdom or a person who is a resident of Israel, as the context requires;
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- (j) The terms ‘United Kingdom enterprise’ and ‘Israel enterprise’ mean respectively an industrial or commercial enterprise or undertaking carried on by a resident of the United Kingdom and an industrial or commercial enterprise or undertaking carried on by a resident of Israel, and the terms ‘enterprise of one of the territories’ and ‘enterprise of the other territory’ mean a United Kingdom enterprise or an Israel enterprise, as the context requires;
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- (k) (i) For the purposes of this Convention, the term ‘permanent establishment’ means a fixed place of business through which the business of an enterprise is wholly or partly carried on.
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- (ii) The term ‘permanent establishment’ includes especially:
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- (aa) a place of management;
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- (bb) a branch;
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- (cc) an office;
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- (dd) a factory;
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- (ee) a workshop; and
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- (ff) a mine, an oil or gas well, a quarry or any other place of extraction, exploration or exploitation of natural resources.
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- (iii) A building site or construction or installation project constitutes a permanent establishment only if it lasts more than twelve months.
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- (iv) Notwithstanding the preceding provisions of this Article, the term ‘permanent establishment’ shall be deemed not to include:
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- (aa) the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise;
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- (bb) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery;
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- (cc) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;
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- (dd) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise, or of collecting information, for the enterprise;
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- (ee) the maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, any other activity of a preparatory or auxiliary character;
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- (ff) the maintenance of a fixed place of business solely for any combination of activities mentioned in sub-paragraphs (aa) to (ee), provided that the overall activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary character.
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- (v) Sub-subparagraph (iv) shall not apply to a fixed place of business that is used or maintained by an enterprise if the same enterprise or a closely related enterprise carries on business activities at the same place or at another place in the same territory and
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- (aa) that place or other place constitutes a permanent establishment for the enterprise or the closely related enterprise under the provisions of this Article, or
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- (bb) the overall activity resulting from the combination of the activities carried on by the two enterprises at the same place, or by the same enterprise or closely related enterprises at the two places, is not of a preparatory or auxiliary character,
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- provided that the business activities carried on by the two enterprises at the same place, or by the same enterprise or closely related enterprises at the two places, constitute complementary functions that are part of a cohesive business operation.
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- (vi) Notwithstanding the provisions of sub-subparagraphs (i) and (ii),where a person — other than an agent of an independent status to whom sub-subparagraph (vii) applies — is acting on behalf of an enterprise and has, and habitually exercises, in one of the territories an authority to conclude contracts on behalf of the enterprise, that enterprise shall be deemed to have a permanent establishment in that territory in respect of any activities which that person undertakes for the enterprise, unless the activities of such person are limited to those mentioned in sub-subparagraph (iv) which, if exercised through a fixed place of business, would not make this fixed place of business a permanent establishment under the provisions of that sub-subparagraph.
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- (vii) An enterprise shall not be deemed to have a permanent establishment in one of the territories merely because it carries on business in that territory through a broker, general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business.
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- (viii) The fact that a company which is a resident of one of the territories controls or is controlled by a company which is a resident of the other territory, or which carries on business in that other territory (whether through a permanent establishment or — otherwise), shall not of itself constitute either company a permanent establishment of the other.
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- (ix) For the purposes of this Article, a person is closely related to an enterprise if, based on all the relevant facts and circumstances, one has control of the other or both are under the control of the same persons or enterprises. In any case, a person shall be considered to be closely related to an enterprise if one possesses directly or indirectly more than 50 per cent of the beneficial interest in the other (or, in the case of a company, more than 50 per cent of the aggregate vote and value of the company’s shares or of the beneficial equity interest in the company) or if another person possesses directly or indirectly more than 50 per cent of the beneficial interest (or, in the case of a company, more than 50 per cent of the aggregate vote and value of the company’s shares or of the beneficial equity interest in the company) in the person and the enterprise.
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- (l) The term ‘international traffic’ includes traffic between places in one country in the course of a voyage which extends over more than one country;
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- (m) the term ‘enterprise’ applies to the carrying on of any business;
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- (n) the term ‘business’ includes the performance of professional services and of other activities of an independent character;
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- (o) The term ‘pension scheme’ means any plan, scheme, fund, trust or other arrangement established in one of the territories which operates principally to administer or provide pension or retirement benefits or to earn income for the benefit of one or more such arrangements and which:
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- (i) In the case of Israel is a pension scheme that has been approved in accordance with the provisions of the Control of the Financial Services Act (Provident Funds) 2005, as a Pension Provident Fund;
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- (ii) in the case of the United Kingdom is a pension scheme (other than a social security scheme) registered under Part 4 of the Finance Act 2004, including a pension fund or a pension scheme arranged through an insurance company or a unit trust where the unit holders are exclusively pension schemes; or
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- (iii) is any other pension scheme that has been agreed by the taxation authorities of both Contracting Parties.
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- (2) In the application of the provisions of the present Convention by one of the Contracting Parties any term not otherwise defined shall, unless the context otherwise requires, have the meaning which it has under the laws in force in the territory of that Party relating to the taxes which are the subject of the present Convention.