Article 21 · Elimination of Double Taxation

- 1. The Netherlands, when imposing tax on its residents, may include in the basis upon which such taxes are imposed the items of income which, according to the provisions of this Convention, may be taxed in the United Kingdom.

- 2. However, where a resident of the Netherlands derives items of income which according to Article 6, Article 7, paragraph 5 of Article 10, paragraph 3 of Article 11, paragraph 3 of Article 12, paragraphs 1 and 2 of Article 13, paragraph 1 of Article 14, paragraph 2 of Article 17, subparagraph a) of paragraph 1 of Article 18 and paragraph 2 of Article 20 of this Convention may be taxed in the United Kingdom and are included in the basis referred to in paragraph 1, the Netherlands shall exempt such items of income by allowing a reduction of its tax. This reduction shall be computed in conformity with the provisions of the Netherlands law for the avoidance of double taxation. For that purpose the said items of income shall be deemed to be included in the amount of the items of income which are exempt from Netherlands tax under those provisions.

The following paragraph 2 of Article 5 of the MLI applies to paragraph 2 of Article 21 of this Convention with respect to residents of the Netherlands:

Article 5 of the MLI — applications of methods for elimination of double taxation (Option A).

Paragraph 2 of Article 21 of the Convention shall not apply where the United Kingdom applies the provisions of the Convention to exempt income derived by a resident of a Netherlands from tax or to limit the rate at which such income may be taxed. In the latter case, Netherlands shall allow as a deduction from the tax on income or capital of that resident an amount equal to the tax paid in the United Kingdom. Such deduction shall not, however, exceed that part of the tax, as computed before the deduction is given, which is attributable to such items of income which may be taxed in the United Kingdom.

- 3. In respect of items of income which according to paragraphs 2 and 3 of Article 10, paragraph 5 of Article 11, paragraph 5 of Article 12, paragraphs 4 and 6 of Article 13, Article 15, paragraphs 1 and 2 of Article 16, the first sentence of paragraph 3 of Article 17 and paragraph 4 of Article 20 of this Convention may be taxed in the United Kingdom, the Netherlands shall allow a deduction from the Netherlands tax to the extent that these items are included in the basis referred to in paragraph 1. The amount of this deduction shall be equal to the tax paid in the United Kingdom on those items of income, but shall not exceed the amount of the deduction which would be allowed if the items of income so included were the sole items of income which are exempt from Netherlands tax under the provisions of the Netherlands law for the avoidance of double taxation.

- This paragraph shall not restrict any allowance accorded by the provisions of the Netherlands law for the avoidance of double taxation to the extent that the calculation of the amount of the deduction of Netherlands tax concerns the aggregation of income from more than one country and the carry forward of the tax paid in the United Kingdom on the said items of income to subsequent years.

- 4. Notwithstanding the provisions of paragraph 2, the Netherlands shall allow a deduction from the Netherlands tax for the tax paid in the United Kingdom on items of income which according to Article 7, paragraph 5 of Article 10, paragraph 3 of Article 11, paragraph 3 of Article 12 and paragraph 2 of Article 20 of this Convention may be taxed in the United Kingdom to the extent that these items are included in the basis referred to in paragraph 1, if and insofar as the Netherlands, under the provisions of the Netherlands law for the avoidance of double taxation, allows a deduction from the Netherlands tax of the tax levied in another country on such items of income. For the computation of this deduction the provisions of paragraph 3 of this Article shall apply accordingly.

- 5. 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) Netherlands tax payable under the laws of the Netherlands and in accordance with this Convention, whether directly or by deduction, on profits, income or chargeable gains from sources within the Netherlands (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 the Netherlands tax is computed;

- (b) in the case of a dividend paid by a company which is a resident of the Netherlands 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 Netherlands tax for which credit may be allowed under the provisions of subparagraph a) of this paragraph) the Netherlands tax payable by the company in respect of its profits out of which such dividend is paid.

- 6. For the purposes of the preceding provisions of this Article, profits, income and capital gains owned by a resident of a Contracting State which may be taxed in the other Contracting State in accordance with this convention shall be deemed to arise from sources in that other State.

- 7. Notwithstanding the preceding provisions of this Article:

- (a) where gains may be taxed by a Contracting State by reason only of paragraph 7 of Article 13, 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, 4 or 6 of Article 13, the other Contracting State and not the first-mentioned Contracting State, shall eliminate double taxation in accordance with the methods set out in paragraphs 1 to 5 of this Article.