#### Article 14. Capital Gains
- 1 Gains derived by a resident of one of the States from the disposition of real property
situated in the other State may be taxed in the other State. For the purposes of this
paragraph the term “real property situated in the other State” shall include:
- a) real property referred to in [Article 6](#Verdrag_2_Verdragtekst_1_HoofdstukIII_Artikel6) (Income from Real Property); and
- b) shares or other comparable corporate rights in a company that is a resident of that
other State, the assets of which company consist, directly or indirectly, for the
greater part of real property situated in that other State, and an interest in a partnership,
trust, or estate, to the extent that it is attributable to real property situated
in that other State.
In the United States, the term includes a “United States real property interest” as
defined in the Internal Revenue Code on the date of signature of this Convention,
and as amended from time to time without changing the general principles described
in this paragraph.
- 2
- a) Where after the date this Convention enters into force a person who has been a resident
of one of the States continuously since June 18, 1980, alienates real property situated
in the other State, the alienation of which could not be taxed by the other State
under the provisions of the prior [Convention](/jci1.3:c:BWBV0005531) as defined in [paragraph 2 of Article 37](#Verdrag_2_Verdragtekst_1_HoofdstukVI_Artikel37) (Entry into Force), and either:
- i) the resident owned the alienated property continuously from June 18,1980 until the
date of alienation; or
- ii) each of the following conditions is satisfied:
- A) the resident acquired the alienated property in a transaction that qualified for non-recognition
(determined without regard to section 897 of the Internal Revenue Code) for purposes
of
taxation in the other State, and the resident has owned the property continuously
since such acquisition; and
- B) the resident's initial basis in the alienated property was equal to either the basis
of the property that the resident exchanged for the alienated property, or the basis
of the alienated property in the hands of the person transferring the property to
the resident immediately prior to the transfer; then
the gain liable to tax in the other State under this Article shall be reduced by the
portion of the gain attributable proportionately, on a monthly basis, to the period
ending on December 31, 1984, or such greater portion as is shown to the satisfaction
of the competent authority of that other State to be attributable to that period.
- b) The provisions of this paragraph shall not apply unless, during the period from January
1, 1992, through the date of alienation, the resident, and any other person who owned
the property during such period, was entitled to the benefits of this Article under
[Article 26](#Verdrag_2_Verdragtekst_1_HoofdstukV_Artikel26) (Limitation on Benefits), or would have been so entitled if the Convention had been
in effect throughout such period. In addition, during the period from June 18, 1980,
through December 31, 1991, each person who owned the property must have been a resident
of one of the States under the prior [Convention](/jci1.3:c:BWBV0005531) as defined in [paragraph 2 of Article 37](#Verdrag_2_Verdragtekst_1_HoofdstukVI_Artikel37) (Entry into Force).
- c) The provisions of this paragraph shall not apply to the alienation of property that:
- i) formed part of the property of a permanent establishment, or ned to a fixed base,
situated in the other State at any time on or after June 18,1980;
- ii) was acquired directly or indirectly by any person on or after June 18, 1980, in a
transaction that did not qualify for non-recognition (determined without regard to
section 897 of the Internal Revenue Code), or in a transaction in which it was acquired
in exchange for an asset that was acquired in a transaction that did not qualify for
non-recognition (determined without regard to section 897 of the Internal Revenue
Code); or
- iii) was acquired, directly or indirectly, by any person on or after June 18,1980, in exchange
for property described in clause (i) or (ii) of this subparagraph, or property the
alienation of which could have been taxed by the other State under the provisions
of the prior [Convention](/jci1.3:c:BWBV0005531) as defined in [paragraph 2 of Article 37](#Verdrag_2_Verdragtekst_1_HoofdstukVI_Artikel37)(Entry into Force).
- 3 Gains from the alienation of personal property forming part of the business property
of a permanent establishment which an enterprise of one of the States has in the other
State or of personal property pertaining to a fixed base available to a resident of
one of the States in the other State for the purpose of performing independent personal
services, including such gains from the alienation of such permanent establishment
(alone or with the whole enterprise) or of such fixed base, may be taxed in that other
State.
- 4 Notwithstanding the provisions of paragraph 3, gains from the deemed alienation of
tangible depreciable personal property forming part of the business property of a
permanent establishment which an enterprise of one of the States has in the other
State under [paragraph 3 of Article 27](#Verdrag_2_Verdragtekst_1_HoofdstukV_Artikel27) (Offshore Activities) or of tangible depreciable personal property pertaining to
a fixed base available to a resident of one of the States in the other State under
paragraph 5 of Article 27 (Offshore Activities) for the purpose of performing independent
personal services, shall be taxable only in the State of residence of the enterprise
if the period during which the tangible depreciable personal property forms part of
the business property of such permanent establishment or pertains to such fixed base
is less than 3 months and provided that the actual alienation of the tangible depreciable
personal property does not take place within 1 year after the date of its deemed alienation.
If the gain from the deemed alienation of the tangible depreciable personal property
is taxable only in the State of residence of the enterprise, in determining the profits
of the permanent establishment or the fixed base in the other State the depreciation
with respect to such tangible depreciable personal property will be based on the lower
of book value or market value, measured when such property became part of the business
property of the permanent establishment or such property first pertained to the fixed
base.
- 5 Notwithstanding the provisions of paragraph 3, gains derived by an enterprise of one
of the States from the alienation of ships and aircraft operated in international
traffic, and of personal property pertaining to the operation of such ships and aircraft
shall be taxable only in that State.
- 6 Gains described in [Article 13](#Verdrag_2_Verdragtekst_1_HoofdstukIII_Artikel13) (Royalties) shall be taxable in accordance with the provisions of Article 13.
- 7 Gains from the alienation of any property other than property referred to in paragraphs
1 through 5 shall be taxable only in the State of which the alienator is a resident.
- 8 Where a resident of one of the States alienates property in the course of a corporate
organization, reorganization, amalgamation, division or similar transaction and profit,
gain or income with respect to such alienation is not recognized or is deferred for
the purpose of taxation in that State, then any tax that would otherwise be imposed
by the other State with respect to such alienation will also be deferred to the extent
and time as such tax would have been deferred if the alienator had been a resident
of the other State, but no longer and in no greater amount than in the first-mentioned
State provided that such tax can be collected upon a later alienation and the collection
of the amount of tax in question upon the later alienation is secured to the satisfaction
of the competent authority of both of the States.
The competent authorities of the States shall develop procedures for implementing
this paragraph.
- 9 The provisions of paragraph 7 shall not affect the right of each of the States to
levy according to its own law a tax on gains from the alienation of shares or other
corporate rights participating in profits in a company, the capital of which is wholly
or partly divided into shares and which, under the laws of that State is a resident
thereof, derived by an individual who is a resident of the other State and who:
- a) has, at any time during the five-year period preceding the alienation, been a resident
of the first-mentioned State, and
- b) at the time of the alienation owns, either alone or together with related individuals,
at least 25 percent of any class of shares of such company.
For purposes of this paragraph the term “related individuals” means the alienator's
spouse and his relatives (by blood or marriage) in the direct line (ancestors and
lineal descendents) and his relatives (by whole or half blood or by marriage) in the
second degree in the collateral line (siblings or their spouses).