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May 07, 1987

The Government of the Republic of the Philippines and the Government of the Kingdom of Sweden

Desiring to conclude a Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income

Have agreed as follows:

ARTICLE 1
  PERSONAL SCOPE

This Convention shall apply to persons who are residents of one or both of the Contracting States.

ARTICLE 2
  TAXES COVERED

1. This Convention shall apply to taxes on income imposed on behalf of each Contracting State, irrespective of the manner in which they are levied.

2. There shall be regarded as taxes on income all taxes imposed on total income or on elements of income including taxes on gains from the alienation of movable or immovable properly.

3. The existing taxes to which the Convention shall apply are:

(a) in the case of Sweden:
  the general Swedish income taxes, including sailors' tax, coupon tax and the tax on public entertainers, the profit sharing tax, the tax on undistributed profits of companies and the tax on distribution in connection with reduction of share capital or the winding-up of a company (hereinafter referred to as "Swedish tax").

(b) in the case of the Philippines:
  the income taxes imposed by the Government of the Philippines, (hereinafter referred to as "Philippine tax").

4. The Convention shall apply also to any identical or substantially similar taxes on income which are imposed after the date of signature of this Convention in addition to, or in place of, the existing taxes. The Contracting States shall notify each other of the substantial changes which have been made to their respective taxation laws.

ARTICLE 3
  GENERAL DEFINITIONS

1. In this Convention, unless the context otherwise requires:

(a) (i) the term "Sweden" means the Kingdom of Sweden and includes any area outside the territorial sea of Sweden within which under the laws of Sweden and in accordance with international law the rights of Sweden with respect to the exploration and exploitation of the natural resources on the sea-bed or in its subsoil may be exercised;

(ii) the term "Philippines" means the Republic of the Philippines and when used in a geographical sense means the national territory comprising the Republic of the Philippines;

(b) the terms "a Contracting State" and "the other Contracting State" mean, as the context, requires, Sweden or the Philippines;

(c) the term "person" comprises an individual, an estate, a trust, a company, and any other body of persons;

(d) the term ''company" means anybody corporate or any other entity which is treated as a body corporate for tax purposes;

(e) the terms "enterprise of a Contracting State" and "enterprise of the other Contracting State" mean respectively an enterprise carried on by a resident of a Contracting State and an enterprise carried on by a resident of the other Contracting State;

(f) the term "competent authority" means:

(i) in the case of Sweden, the Minister of Finance or his authorized representative;

(ii) in the case of the Philippines, the Secretary of Finance or his authorized representative;

(g) the term "tax" means Swedish tax or Philippine tax as the context requires;

(h) the term ''national" means:

(i) any individual possessing the citizenship of a Contracting State;

(ii) any legal person, partnership and association created, organized or incorporated under the 1aws of a Contracting State;

(i) the term "international traffic" means any transport by ship or aircraft operated by an enterprise of a Contracting State, except when the ship or aircraft is operated solely between places in the other Contracting State.

2. As regards the application of the Convention by a Contracting State any term not otherwise defined shall, unless the context otherwise requires, have the meaning which it has under the laws of that Contracting State relating to the taxes which are the subject of the Convention.

Notwithstanding the preceding sentence, if the meaning of such term under the Laws of a Contracting State is different from the meaning of the term under the laws of the other Contracting State , or if the meaning of such term is not readily determinable under the laws of a Contracting State, the competent authorities of the Contracting States may, in order to prevent double taxation or to further any purpose of this Convention, establish a common meaning of the term for the purpose of this Convention.

ARTICLE 4
  FISCAL DOMICILE

1. For the purpose of this Convention, the term ''resident of a Contracting State" means any person who, under the law of that State, is Liable to taxation therein by reason of his domicile, residence, place of management or any other criterion of a similar nature. But this term does not include any person who is liable to tax in that Contracting State in respect only of income from sources therein.

2. Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, then his status shall be determined, as follows:

(a) he shall be deemed to be a resident of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident of the State with which his personal and economic relations are closer (hereinafter referred to as his "centre of vital interests");

(b) if the State 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 State, he shall be deemed to be a resident of the State in which he has an habitual abode;

(c) if he has an habitual abode in both States or in neither of them, he shall he deemed to be a resident of the State of which lie is a national;

(d) if he is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.

3. Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting States, then this case shall be determined in accordance with the following rules:

(a) it shall be deemed to be a resident of the State of which it is a national;

(b) if it is a national of neither of the States, then it shall be deemed to be a resident of the State in which its place of effective management is situated;

(c) if the place of effective management cannot be determined, then the competent authorities of the Contracting States shall by a mutual agreement endeavour to settle the question, and to determine the mode of application of the Convention to such person.

ARTICLE 5
  PERMANENT ESTABLISHMENT

1. 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.

2. The term ''permanent establishment” shall include especially:

(a) a place of management;

(b) a branch;

(c) an office;

(d) a factory;

(e) a workshop;

(f) a mine, an oil or gas well, a quarry or other place of extraction of natural resources;

(g) a building site or construction or installation project or supervisory activities in connection therewith, where such site, project or activities continue for a period of more than six months;

(h) premises used as a sales outlet;

(i) a warehouse, in relation to a person providing storage facilities for others;

(j) the furnishing of services, including consultancy services, by a resident of a Contracting State through employees or other personnel, provided the activities of that nature continue (for the same or a connected project) within the other Contracting State for a period or periods aggregating more than 183 days during any taxable year.

3. The term "permanent establishment" shall not be deemed to include:

(a) the use of facilities solely for the purposes of storage, display or delivery of goods or merchandise belonging to the enterprise;

(b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery;

(c) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;

(d) the maintenance of a fixed place of business, solely for the purpose of purchasing goods or merchandise, or for collecting information for the enterprise;

(e) the maintenance of a fixed place of business solely for the purpose of advertising, for the supply of information, for scientific research, or for similar activities which have a preparatory or auxiliary character, for the enterprise.

4. A person acting in a Contracting State on behalf of an enterprise of the other Contracting State (other than an agent, of an independent status to whom paragraph 6 applies) shall be deemed to be a permanent establishment in the first-mentioned State if:

(a) he has and habitually exercises in that State an authority to conclude contracts on behalf of the enterprise, unless his activities are limited to the purchase of goods or merchandise for that enterprise; or

(b) he has no such authority, but habitually maintains in the first-mentioned State a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the enterprise.

5. An insurance enterprise of a Contracting State shall, except in regard to reinsurance, be deemed to have a permanent establishment in the other Contracting State if it collects premiums in the territory of that State or insures risks situated therein through an employee or through a representative who is not an agent of an independent status within the meaning of paragraph 6.

6. An enterprise of a Contracting State shall, not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that other State through a broker, general commission agent or any other agent of an independent status, where such persons are acting in the ordinary course of their business.

However, when the activities of such an agent are performed wholly or almost wholly on behalf of the enterprise, he shall not be considered as agent of an independent status within the meaning of this paragraph if it is shown that the transaction between the agent and the enterprise were not made under arms-length conditions. In such a case the provisions of paragraph 4 shall apply.

7. The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State, or which carries on business in that other State (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment of the other.

ARTICLE 6
  INCOME FROM IMMOVABLE PROPERTY

1. Income derived by a resident of a Contracting State from immovable property (including income from agriculture or forestry) situated in the other Contracting State may be taxed in that other State.

2. The term "immovable property" shall be defined in accordance with the law of the Contracting State in which the property in question is situated. The term shall in any case include property accessory to immovable property, livestock and equipment used in agriculture and forestry, rights to which the provisions of general law respecting landed property apply, usufruct of immovable property and rights to variable or fixed payments as consideration for the working of, or the right to work, mineral deposits, sources and other natural resources; ships, boats and aircraft shall not be regarded as immovable property.

3. The provisions of paragraph 1 shall apply to income derived from the direct use, letting or use in any other form of immovable property.

4. The provisions of paragraphs 1 and 3 shall also apply to the income from immovable property of an enterprise and to income from immovable property used for the performance of independent personal services.

ARTICLE 7
  BUSINESS PROFITS

1. The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on or has carried on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to:

(a) that permanent establishment; or

(b) sales within that other Contracting State of goods or merchandise of the same or similar kind as those sold, or from other business activities of the same or similar kind as those effected, through that permanent establishment unless the enterprise proves that such sales or business activities are not attributable to the activity of the permanent establishment.

2. Subject to the provisions of paragraph 3, where an enterprise of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein, there shall be attributed to that permanent establishment profits which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a permanent establishment.

However, in so far as it has been customary in a Contracting State to determine the profits to be attributed to a permanent establishment on the basis of an apportionment of the total profits of the enterprise to its various parts, nothing in this paragraph shall preclude that Contracting States from determining the profits to be taxed by such an apportionment as may be customary; the method of apportionment adopted shall, however, be such that the result shall be in accordance with the principles embodied in this Article.

3. In the determination of the profits of a permanent establishment, there shall be allowed as deductions expenses which are incurred for the purposes of the permanent establishment including executive and general administrative expenses so incurred, whether in the State in which the permanent establishment is situated or elsewhere.

4. Notwithstanding the provisions of paragraph 3, no deduction shall be allowed in respect of amounts paid or charged (other than reimbursement of actual expenses) by the permanent establishment to the head office of the enterprise or any of its other offices, by way of:

(a) royalties, fees or other similar payments in return for the use of patents or other rights;

(b) commission for specific services performed or for management; and

(c) interest on money lent to the permanent establishment, except in the case of a banking institution.

5. No profits shall be attributed to a permanent establishment by reason of the mere purchase by that permanent establishment of goods or merchandise for the enterprise.

6. For the purposes of the preceding paragraphs, the profits to be attributed to the permanent establishment shall be determined by the same method year by year unless there is good and sufficient reason to the contrary,

7. Where profits include items of income which are dealt with separately in other Articles of this Convention, then the provisions of those Articles shall not be affected by the provisions of this Article.

ARTICLE 8
  SHIPPING AND AIR TRANSPORT

1. Profits derived by an enterprise of a Contracting State from the operation in international traffic of ships or aircraft shall be taxable only in that State.

2. Notwithstanding the provisions of paragraph 1, profits from sources within a Contracting State derived by an enterprise of the other Contracting State from the operation of ships or aircraft an international traffic may be taxed in the first-mentioned State but the tax so charged shall not exceed the lesser of

(a) one and one-half per cent of the gross revenues derived from sources in that State; and

(b) the lowest rate of Philippine tax that may be imposed on profits of the same kind derived under similar circumstances by a resident of a third State.

3. The provisions of paragraphs 1 and 2 shall also apply to profits derived from the participation in a pool, a joint business or in an international operating agency.

ARTICLE 9
  ASSOCIATED ENTERPRISES

1. Where

(a) an enterprise of a Contracting State participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting State; or

(b) the same persons participate directly or indirectly in the management, control or capital of an enterprise of a Contracting State and an enterprise of the other Contracting State,

and in either case conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly.

2. Where profits on which an enterprise of a Contracting State has been charged to tax in that State are also included in the profits of an enterprise of the other Contracting State and taxed accordingly, and the profits so included are profits which would have accrued to that enterprise of the other State if the conditions made between the enterprises had been those which would have been made between independent enterprises, then the first-mentioned State shall, within the time limits provided in its national laws, make an appropriate adjustment to the amount of tax charged on those profits in the first-mentioned State. In determining such an adjustment due regard shall be had to the other provisions of this Convention in relation to the nature of the income, and for this purpose the competent authorities of the Contracting States shall, if necessary, consult each other.

ARTICLE 10
  DIVIDENDS

1. Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State.

2. However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident, and according to the law of that State, but if the recipient, is the beneficial owner of the dividends the tax so charged shall not exceed:

(a) 15 per cent of the gross amount of the dividends if the recipient is a company (excluding partnership) and during the part of the paying company's taxable year which precedes the date of the payment of the dividend and during the whole of its prior taxable year (if any), at least 10 per cent of the voting stock of the paying company was owned by the recipient company;

(b) in all other cases, 25 per cent of the gross amount of the dividends.

The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of this limitation.

3. The provisions of paragraphs 1 and 2 shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.

4. The term "dividends" as used in this Article means income from shares, "jouissance" shares or "jouissance" rights, mining shares, founders' shares or other rights, not being debt-claims, participating in profits, as well as income assimilated to income from shares by the taxation law of the State of which the company making the distribution is a resident.

5. The provisions of paragraphs 1 and 2 shall not apply if the recipient of the dividends, being a resident of a Contracting State, carries on in the other Contracting State of which the company paying the dividends is a resident, a business through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the holding by virtue of which the dividends are paid is effectively connected with such permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply.

6. Where a company which is a resident of a Contracting' State derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a resident of that other State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other State, nor subject the company's undistributed profits to a tax on the company's undistributed profits, even if the dividends paid or undistributed profits consist wholly or partly of profits or income arising in such other State.

7. Nothing in this Convention shall be construed as preventing a Contracting State from imposing in accordance with its internal law, a tax apart from the corporate income tax, on remittances of profits by a branch to its head office provided that the tax so imposed shall not exceed 15 per cent of the amount remitted.

ARTICLE 11
  INTEREST

1. Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

2. However, such interest may also be taxed in the Contracting State in which it arises, and according to the law of that State, but if the recipient is the beneficial owner of the interest the tax so charged shall not exceed 15 per cent of the gross amount of the interest. The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of this limitation.

3. The term "interest" as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage, and whether or not carrying a right to participate in the debtor's profits, and in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures, as well as income assimilated to income from money lent by the taxation law of the State in which the income arises, including interest on deferred payment sales. Penalty charges for late payment shall not be regarded as interest for purposes of this Article.

4. The provisions of paragraphs 1 and 2 shall not apply if the recipient of the interest, being a resident of a Contracting State, carries on in the other Contracting State in which the interest arises a business through a permanent establishment situated therein, or performs in that, other State independent personal services from a fixed base situated therein and the debt-claim in respect of which the interest is paid is effectively connected with such permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply.

5. Interest shall be deemed to arise in a Contracting State when the payer is that State itself, a political subdivision, a local, authority or a resident of that State. Where, however, the person paying the interest, whether he 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 indebtedness on which the interest is paid was incurred, and that interest, is borne by that permanent establishment or fixed base, then such interest shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated.

6. Where, by reason of a special relationship between the payer and the recipient or between both of them and some other person, the amount of interest paid, having regard to the debt-claim for which it is paid, exceeds the amount which would have been agreed upon by the payer and the recipient in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In that case, the excess part of the payment shall remain taxable according to the law of each Contracting State, due regard being had to the other provisions of this Convention.

7. Notwithstanding the provisions of paragraph 2,

(a) interest arising in a Contracting State and paid in respect of a bond, debenture or other similar obligation of the government of that Contracting State or of a political subdivision or local authority thereof shall, provided that the interest is beneficially owned by a resident of the other Contracting State be taxable only in that other State;

(b) interest arising in the Philippines and paid to a resident of Sweden shall be taxable only in Sweden if it is paid in respect of a loan made or guaranteed, or a credit extended or guaranteed by Exportkreditnamnden (Export Credit Board), AB Svensk Exportkredit (Swedish Export Credit Inc.) and Sveriges Iinvesteringsbank (Investment Bank of Sweden) and such other lending institution as is specified and agreed in letters exchanged between the competent authorities of the Contracting States;

(c) interest arising in Sweden and paid to a resident of the Philippines shall be taxable only in the Philippines if it is paid in respect of a loan made, guaranteed or insured, or a credit extended, guaranteed or insured by the Central Bank of the Philippines, the Philippine National Bank, the Development Bank of the Philippines and such other lending institution as is specified and agreed in letters exchanged between the competent authorities of the Contracting States; and

(d) the Philippine tax on interest arising in the Philippines in respect of public issues of bonds, debentures or similar obligations and paid by a company which is a resident of the Philippines to a resident of Sweden shall not exceed 10 per cent of the gross amount of the interest.

ARTICLE 12
  ROYALTIES

1. Royalties arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

2. However, such royalties may also be taxed in the Contracting State in which they arise, and according to the law of that State, but if the recipient is the beneficial owner of the royalties, the tax so charged shall not exceed

(a) 15 per cent of the gross amount of the royalties, where the royalties are paid by an enterprise registered with and engaged in preferred areas of activities and also royalties in respect of cinematographic films or tapes for television or broadcasting and royalties for the use of, or the right to use, any copyright of literary, artistic or scientific work;

(b) in all other cases, 25 per cent of the gross amount of the royalties.

3. The term "royalties" as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work, any patent, trademark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience, and includes payments of any kind in respect of motion picture films and works on films or videotapes for use in connection with television.

4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties arise, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the royalties are paid is effectively connected with such permanent establishment or fixed base. In such case, the provisions of Article 7 or Article 14, as the case may be, shall apply.

5. Royalties shall be deemed to arise in a Contracting State when the payer is that State itself, a political subdivision, a local authority or a resident of that State. Where, however, the person paying the royalties whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment, or fixed base in connect.ion with which the obligation to pay the royalties was incurred, and those royalties are borne by that permanent, establishment or fixed base, then such royalties shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated.

6. Where, by reason of a special relationship between the payer and the recipient or between both of them and some other person, the amount of the royalties paid, having regard to the use, right or information for which they are paid, exceeds the amount which would have been agreed upon by the payer and the recipient in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In that case, the excess part of the payments shall remain taxable according to the law of each Contracting State, due regard being had to the other provisions of this Convention.

ARTICLE 13
  GAINS FROM THE ALIENATION OF PROPERTY

1. Gains derived by a resident of a Contracting State from the alienation of immovable property referred to in Article 6 and situated in the other Contracting State may be taxed in that other State.

2. Gains from the alienation of movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or of movable property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, including such gains from the alienation of such permanent establishment (alone or together with the whole enterprise) or of such a fixed base may be taxed in that other State. However, gains derived by an enterprise of a Contracting State from the alienation of ships and aircraft operated in international traffic and movable property pertaining to the operation of such ships or aircraft, shall be taxable only in that State.

3. Gains from the alienation of shares of a company, the property of which consists principally of immovable property situated in a Contracting State, may be taxed in that State. Gains from the alienation of an interest in a partnership or a trust, the property of which consists principally of immovable property situated in a Contracting State, may be taxed in that State.

4. Gains from the alienation of any property, other than those mentioned in paragraphs 1, 2, and 3 shall be taxable only in the Contracting State of which the alienator is a resident.

5. The provisions of paragraph 4 shall not affect the right of either Contracting State to levy, according to its domestic law, a tax on gains from the alienation of any property derived by an individual who is a resident of the other Contracting State and has been a resident of the first-mentioned State at, any time during the six years immediately preceding the alienation of the property.

ARTICLE 14
  INDEPENDENT PERSONAL SERVICES

1. Income derived by a resident of a Contracting State in respect of professional services or other activities of an independent character shall be taxable only in that State. However, such income may be taxed in the other Contracting State:

(a) if he has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities; in that case, only so much of the income as is attributable to that fixed base may be taxed in that other Contracting State; or

(b) if his stay in the other Contracting State is for a period or periods aggregating 90 days or more in the calendar year; or

(c) if the gross remuneration derived from his services in the other Contracting State in the calendar year from residents of that Contracting State exceeds Fifty Thousand Swedish kronor or its equivalent in Philippine pesos. The competent authorities of the Contracting States may agree on such changes of the amount, mentioned above as may be reasonable with regard to changes in the value of money, amendment of legislation in a Contracting State or other similar circumstances.

2. The term '"professional services" includes especially independent scientific, literary, artistic, educational or teaching activities as well, as the independent activities of physicians, lawyers, engineers, architects, dentists and accountants.

ARTICLE 15
  DEPENDENT PERSONAL SERVICES

1. Subject to the provisions oft Articles 16 and 18, salaries, wages and other similar remuneration, other than a pension, derived by a resident of a contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State unless the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.

2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in the calendar year concerned, and either

(a) the remuneration earned in the other State in the calendar year concerned does not exceed Seventy-five Thousand Swedish kronor or its equivalent in Philippine pesos; or

(b) the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State, and such remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State.

The competent authorities of the Contracting States may agree on such changes in the amount mentioned in sub-paragraph (a) above as may be reasonable with regard to changes in the value of money, amendment of legislation in a Contracting State or other similar circumstances.

3. Notwithstanding the preceding provisions of this Article, remuneration in respect of employment as a member of the regular crew or complement of a ship or aircraft operated in international traffic by an enterprise of a Contracting State, shall be taxable only in that State, provided the recipient is subject to tax in that State in respect of such remuneration.

ARTICLE 16
  DIRECTORS' FEES

1. Directors' fees and similar payments derived by a resident of a Contracting State in his capacity as a member of the board of directors of a company which is a resident of the other Contracting State, may be taxed in that other State.

2. The provisions of Article 15 shall apply to the remuneration which a person to whom paragraph 1 applies derives from the company in respect of the discharge of day-to-day functions of a managerial or technical nature.

ARTICLE 17
  ARTISTES AND ATHLETES

1. Notwithstanding the provisions of Articles 14 and 15, income derived by a resident of a Contracting State as an entertainer, such as a theatre, motion picture, radio or television artiste, or a musician, or as an athlete, from his personal activities as such exercised in the other Contracting State, may be taxed in that other State,

2. Where income in respect of personal activities exercised by an entertainer or an athlete in his capacity as such accrues not to the entertainer or athlete himself but to another person, that income may, notwithstanding the provisions of Articles 7, 14 and 15, be taxed in the Contracting State in which the activities of the entertainer or athlete are exercised.

3. The provisions of paragraphs 1 and 2 shall not apply to income derived from activities performed in a Contracting State by entertainers and athletes if the visit to that Contracting State is substantially supported by public funds of the other Contracting State, including any political subdivision, local authority or statutory body thereof.

4. Notwithstanding the provisions of Article 7, where the activities mentioned in paragraph 1 of this Article are provided in a Contracting State by an enterprise of the other Contracting State the profits derived from providing these activities by such an enterprise may be taxed in the first-mentioned Contracting State, unless the enterprise is substantially supported from the public funds of the other Contracting State, including any political subdivision, local authority or statutory body thereof, in connection with the provisions of such activities, or unless the enterprise is certified by the competent authority of that other State as a non-profit organization, engaged in the exchange of cultural activities.

ARTICLE 18
  GOVERNMENT SERVICE

1. (a) Remuneration, other than a pension paid by a Contracting State or a political subdivision or a local authority thereof to any individual in respect of services rendered to that State or subdivision or local authority thereof shall be taxable only in that State.

(b) However, such remuneration shall be taxable only in the other Contracting State if the services are rendered in that State and the recipient is a resident of that State who:

(i) is a national of that State; or

(ii) did not become a resident, of that State solely for the purpose of performing the services.

2. (a) Any pension paid by, or out of funds created by, a Contracting State or a political subdivision or a Local authority thereof to any individual in respect of services rendered to that state or subdivision or local authority thereof shall be taxable only in that State.

(b) However, such pension shall be taxable only in the other Contracting State if the recipient is a national of and a resident of that State.

3. The provisions of Articles 15, 16 and 20 shall apply to remuneration and pensions in respect of services rendered in connection with any business carried on by a Contracting State or a political subdivision or a local authority thereof.

4. The term "pension" as used in this Article means periodic payments made in consideration for past services rendered.

ARTICLE 19
  STUDENTS AND TRAINEES

An individual who was a resident of a Contracting State immediately before a visit to the other Contracting State and who is temporarily present in that other State solely:

(a) as a student at a university, college or school in that other State;

(b) as a business apprentice or trainee, or

(c) as the recipient of a grant, allowance or reward from a scientific, educational, religious or charitable organization or under a technical assistance programme entered into by the Contracting States,

shall be exempt from tax in that other State in respect of:

(i) remittances from abroad for the purposes of his maintenance, education, training or practice; and

(ii) remuneration for personal services performed in that other State, provided the remuneration does not exceed Twelve Thousand Swedish kronor or its equivalent in Philippine pesos for any taxable year.

The benefits under sub-paragraph (ii) above shall extend only for such period of time as may be reasonably or customarily required to complete the education, training or practice undertaken but shall in no event exceed a period of five consecutive years.

ARTICLE 20
  INCOME NOT EXPRESSLY MENTIONED

1. Items of income of a resident of a Contracting State which are not expressly mentioned in the foregoing Articles of this Convention shall be taxable only in that Contracting State except that, if such income is derived from sources within the other Contracting State, it may also be taxed in accordance with the law of that other State.

2. Compensation paid to any individual by a Contracting State, a political subdivision or a local authority thereof for an injury or damage sustained as a result of hostilities or political persecution shall be taxable only in that State.

ARTICLE 21
  RELIEF FROM DOUBLE TAXATION

1. (a) Where a resident of Sweden derives income which, in accordance with the provisions of this Convention, may be taxed in the Philippines, Sweden shall allow - subject to the provisions of the law of Sweden concerning credit for foreign tax (as it may be amended from time to time without changing the general principle hereof) - as a deduction from Swedish tax on the income of that resident an amount equal to the income tax paid in the Philippines.

(b) Notwithstanding the provisions of sub-paragraph (a) of this paragraph, where a resident of Sweden derives income which, in accordance with the provisions of Article 7 or paragraph 1 (a) of Article 14, may be taxed in the Philippines, Sweden shall exempt such income from tax provided that the principal part of the income of the permanent establishment or fixed base arises from business activities, other than the management of securities and other similar property, and such activities are carried on within the Philippines through the permanent establishment or the fixed base.

(c) Where a resident of Sweden derives income which shall be taxable only in the Philippines in accordance with the provisions [of paragraph 3 of Article 15 and of Article 18 or shall be exempt from Swedish tax in accordance with sub-paragraph (b) of this paragraph, Sweden may, when determining the graduated rate of Swedish tax, take into account the income which shall be taxable only in the Philippines or shall be exempt from Swedish tax, respectively.

(d) Notwithstanding the provisions of sub-paragraph (a) of this paragraph, dividends paid by a company being a resident of the Philippines to a company which is a resident of Sweden shall be exempt from Swedish tax to the extent that the dividends would have been exempt under Swedish law if both companies had been Swedish companies.

2. For the purpose of paragraph 1 (a) of this Article:

(a) tax payable under the laws of the Philippines on the gross amount of interest received by a resident of Sweden on bonds, debentures or similar obligations referred to in paragraph 7 (d) of Article 11 shall be deemed to have been paid at a rate of 15 per cent; and

(b) tax payable under the laws of the Philippines shall not, include any amount imposed in accordance with paragraph 2 of Article 26 that exceeds the amount that would be payable in accordance with this Convention in the absence of that paragraph.

The provisions of sub-paragraph (a) of this paragraph shall apply for a period of ten years from the date this Convention takes effect. The competent authorities shall consult each other in order to determine whether this period shall be extended.

3. In the application of paragraph 1 (a) of this Article, as respects dividends referred to in paragraph 2 (a) of Article 10, not being dividends which are exempt from Swedish tax under paragraph 1 (d) of this Article, payments referred to in paragraph 7 of Article 10, interest referred to in paragraph 2 of Article 11 and royal ties referred to in paragraph 2 (a) of Article 12 Philippine tax shall be deemed to have been paid at a rate of 20 per cent.

The provisions of this paragraph shall apply for a period of ten years from the date this Convention takes effect. The competent authorities shall consult each other in order to determine whether this period shall be extended.

4. Subject to the existing provisions of the laws of the Philippines regarding the deduction from tax payable in the Philippines of tax paid outside the Philippines and to subsequent modifications of those provisions which shall not affect the general principle hereof tax payable under the laws of Sweden on profits, income or gains arising in Sweden shall be deducted from any Philippine tax payable in respect of such profits, income or gains. The deduction shall not, however, exceed that part of the Philippine income tax, as computed before the deduction is given, which is appropriate to the income which may be taxed in Sweden.

ARTICLE 22
  NON-DISCRIMINATION

1. The nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith, which is other or more burdensome than the taxation and connected requirements to which nationals of that other State in the same circumstances are or may be subjected.

2. The taxation on a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favourably levied in that other State than the taxation levied on enterprises of that other State carrying on the same activities.

3. Nothing in this Article shall be construed as obliging a Contracting State to grant to residents of the other Contracting State any personal allowances, reliefs and reductions for taxation purposes on account of civil status which it grants to its own residents.

4. Except where the provisions of paragraph 1 of Article 9, paragraph 6 of Article 11, or paragraph 6 of Article 12, apply, interest, royalties and other disbursements paid by an enterprise of a Contracting State to a resident of the other Contacting State shall, for the purpose of determining the taxable profits of such enterprise, be deductible under the same conditions as if they had been paid to a resident of the first-mentioned State.

5. Enterprises of a Contracting State, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State, shall not be subjected in the first-mentioned State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which other similar enterprises of that first-mentioned State are or may be subjected.

6. Nothing in this Article shall be construed so as to prevent the Philippines from limiting to its nationals the enjoyment of tax incentives granted under:

(a) Presidential Decree No, 1789, as amended by Batas Pambansa Big. 391, otherwise known as the Investment Incentive Policy Act of 1983; and

(b) any other enactment of the Philippines adopted in pursuance of its programme of economic development which the competent authorities of the Contracting States agree should be excluded from the provisions of this Article, if it has not been modified thereafter or has been modified only in minor respects so as not to affect its general character.

7. In this Article, the term "taxation" means taxes, which are the subject of this Convention.

ARTICLE 23
  MUTUAL AGREEMENT PROCEDURE

1. Where a resident of a Contracting State considers that the actions of one or both of the Contracting States result or will result for him in taxation not in accordance with this Convention, he may, without, prejudice to the remedies provided by the national laws of those States, address to the competent authority of the Contracting State of which he is a resident or, if his case comes under paragraph 1 of Article 22 (Non-discrimination) to that Contracting State of which he is a national, an application in writing stating the grounds for claiming the revision of such taxation. To be admissible, the said application must be submitted within two years from the first notification of the action which gives rise to taxation not in accordance with the Convention.

2. The competent authority shall endeavour, if the objection appears to it to be justified and if it is not itself able to arrive at a satisfactory solution, to resolve the case by mutual agreement with the competent authority of the other Contracting State, with a view to the avoidance of taxation not in accordance with the Convention. A Contracting State is not obliged to implement an agreement reached after the expiration of five years from the end of the taxable year in issue.

3. The competent authorities of the Contracting States shall endeavour to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the Convention. In particular, the competent authorities of the Contracting States may consult together to endeavour to agree:

(a) to the same attribution of profits to a resident of a Contracting State and its permanent establishment situated in the other Contracting State;

(b) to the same allocation of income between a resident of a Contracting State and any associated person provided for in Article 9.

4. The competent authorities of the Contracting States may consult together for the elimination of double taxation in cases not provided for in the Convention.

ARTICLE 24
  EXCHANGE OF INFORMATION

1. The competent authorities of the Contracting States shall exchange such information as is necessary for carrying out the provisions of this Convention or of the domestic laws of the Contracting States concerning taxes covered by the Convention insofar as the taxation thereunder is not contrary to the Convention. The exchange of information is not restricted by Article 1. Any information received by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) involved in the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes which are the subject of the Convention. Such persons or authorities shall use the information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions.

2. In no case shall the provisions of paragraph 1 be construed so as to impose on a Contracting State the obligation:

(a) to carry out administrative measures at variance with the laws and administrative practice of that or of the other Contracting State;

(b) to supply information which is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State;

(c) to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or information, the disclosure of which would be contrary to public policy (ordre public).

ARTICLE 25
  DIPLOMATIC AND CONSULAR OFFICIALS

1. Nothing in this Convention shall affect the fiscal privileges of members of diplomatic or consular missions under the general rules of international law or under the provisions of special agreements.

2. Notwithstanding the provisions of Article 4 of this Convention, an individual who is a member of a diplomatic, consular or permanent mission of a Contracting State which is situated in the other Contracting State or in a third State shall be deemed for the purposes of this Convention to be a resident of the sending State if he is liable in the sending State to the same obligations in relation to tax on his total world income as are residents of that sending State.

3. This Convention shall not apply to International Organizations, to organs or officials thereof and to persons who are members of a diplomatic, consular or permanent mission of a third State, being present in a Contracting State and who are not 1iable in either Contracting State to the same obligations in relation to tax on their total world income as are residents thereof.

ARTICLE 26
  MISCELLANEOUS RULES

1. The provisions of this Convention shall not be construed to restrict in any manner any exclusion, exemption, deduction, credit, or other allowance now or hereafter accorded,

(a) by the laws of a Contracting State in the determination of the tax imposed by that Contracting State; or

(b) by any other agreement entered into by a Contracting State.

2. Nothing in this Convention shall be construed as preventing the Philippines from taxing, in accordance with its law, its citizens who are residents of Sweden.

3. The competent authorities of the Contracting States may communicate with each other directly for the purpose of applying this Convention.

ARTICLE 27
  ENTRY INTO FORCE

1. This Convention shall be ratified and the instruments of ratification shall be exchanged at Stockholm as soon as possible.

2. The Convention shall enter into force upon the exchange of the instruments of ratification and its provisions shall have effect:

(a) in respect, of tax withheld at the source on amounts paid to non-residents on or after the first day of January in the calendar year next following that in which the exchange of instruments of ratification takes place;

(b) in respect of other taxes on income, for taxable years beginning on or after the first day of January in the calendar year next following that in which the exchange of instruments of ratification takes place.

3. The Convention of 12th April, 19G6, between the Government of the Kingdom of Sweden and the Government of the Republic of the Philippines, for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital is hereby terminated and its provisions shall cease to have effect with respect to taxes on income to which the present Convention applies in accordance with paragraph 2 and with respect to taxes on capital levied during any year commencing with the second calendar year following the exchange of instruments of ratification of the present Convention.

ARTICLE 28
  TERMINATION

This Convention shall continue in effect indefinitely but either Contracting State may, on or before June 30 in any calendar year after the fifth year following the exchange of the instruments of ratification, give notice of termination to the other Contracting State and in such event the Convention shall cease to have effect:

(a) in respect of tax withheld at the source on amounts paid to non-residents on or after the first day of January in the calendar year next following that in which the notice is given; and

(b) in respect of other taxes on income, for taxable years beginning on or after the first day of January in the calendar year next following that, in which the notice is given.

IN WITNESS WHEREOF, the undersigned, being duly authorized thereto by their respective Governments, have signed this Convention.