Protocol

An individual living aboard a ship without any real domicile in either of the Contracting States shall be deemed to be a resident of the Contracting State in which the ship has its home harbour.

It is understood that a person who is authorised to negotiate all elements and details of a contract in a way binding on the enterprise can be said to exercise this authority in a Contracting State, even if the contract is signed by another person in the other Contracting State in which the enterprise is situated.

It is understood that exploration and exploitation rights of natural resources shall be regarded as immovable property situated in the Contracting State the sea bed and sub-soil of which they are related to, and that these rights shall be deemed to pertain to the property of a permanent establishment in that State. Furthermore, it is understood that the aforementioned rights include rights to interests in, or to the benefits of, assets to be produced by such exploration or exploitation.

In respect of paragraphs 1 and 2 of Article 7, where an enterprise of a Contracting State sells goods or merchandise or carries on business in the other Contracting State through a permanent establishment situated therein, the profits of that permanent establishment shall not be determined on the basis of the total amount received by the enterprise, but shall be determined only on the basis of that portion of the income of the enterprise that is attributable to the actual activity of the permanent establishment in respect of such sales or business. Specifically, in the case of contracts for the survey, supply, installation or construction of industrial, commercial or scientific equipment or premises, or of public works, when the enterprise has a permanent establishment, the profits attributable to such permanent establishment shall not be determined on the basis of the total amount of the contract, but shall be determined only on the basis of that part of the contract that is effectively carried out by the permanent establishment in the Contracting State where the permanent establishment is situated. The profits related to that part of the contract which is carried out by the head office of the enterprise shall be taxable only in the Contracting State of which the enterprise is a resident.

In respect of paragraph 1 of Article 7, profits derived from the sale 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 a permanent establishment, may be considered attributable to that permanent establishment, provided that it is proved that the transaction concerned has been resorted to in order to avoid taxation in the Contracting State where the permanent establishment is situated.

Payments received as a consideration for technical services, including studies or surveys of a scientific, geological or technical nature, or for consultancy or supervisory services shall be deemed to be payments to which the provisions of Article 7 or Article 14 apply.

In respect of paragraph 1 of Article 9, it is understood that the fact that associated enterprises have concluded arrangements, such as cost sharing arrangements or general services agreements, for or based on the allocation of executive, general administrative, technical and commercial expenses, research and development expenses and other similar expenses, is not in itself a condition as meant in that paragraph. However, this does not prevent one of the Contracting States from checking these arrangements for conditions as meant in paragraph 1 of Article 9.

Where tax has been levied at source in excess of the amount of tax chargeable under the provisions of Articles 10, 11 or 12, applications for the refund of the excess amount of tax have to be lodged with the competent authority of the State having levied the tax, within a period of five years after the expiration of the calendar year in which the tax has been levied.

It is understood that in the case of the Netherlands income received in connection with the (partial) liquidation of a company or a purchase of own shares by a company is treated as income from shares and not as capital gains.

A financial institution as mentioned in Article 11, paragraph 3 (III), includes especially: the Netherlands Development Finance Company (Nederlandse Financieringsmaatschappij voor Ontwikkelingslanden N.V.), and the Netherlands Investment Bank for Developing Countries (Nederlandse Investeringsbank voor Ontwikkelingslanden N.V.). With respect to Azerbaijan an agency or instrumentality mentioned in Article 11, paragraph 3 (iii), includes especially the State Oil Fund of Azerbaijan.

It is also understood that the list of the agencies and instrumentalities to which Article 11, paragraph 3 (iii) applies, could be agreed from time to time between the competent authorities of the Contracting States.

It is understood that the term ‘member of the board of directors’ means in the case of the Netherlands, a ‘bestuurder’ or a ‘commissaris’. It is further understood that ‘bestuurder’ or ‘commissaris’ of a Netherlands company means persons, who are nominated as such by the general meeting of shareholders or by any other competent body of such company and are charged with the general management of the company and the supervision thereof, respectively.

It is understood that pensions and other similar remuneration paid to a resident of a Contracting State in consideration of past employment will include:

It is further understood that Article 18 will not be applicable where pensions and other similar remuneration is not of a periodical nature, or if the Contracting State of which the beneficial owner of the pensions and other similar remuneration is a resident, exempts such remuneration. In that case such remuneration may be taxed in the Contracting State in which it arises.

The term ‘annuity’ means a stated sum payable periodically at stated times during a specified or ascertainable period of time under an obligation to make the payments in return for adequate and full consideration in money or money's worth.

It is understood that Article 21 will not be applicable to other income if the Contracting State of which the beneficial owner of that income is a resident exempts such income. In that case such income may be taxed in the Contracting State in which it arises.

With respect to the Netherlands it is understood that for the computation of the reduction mentioned in paragraph 2 of Article 23, the items of capital referred to in paragraph 1 of Article 22 shall be taken into account for the value thereof reduced by the value of the debts secured by mortgage on that capital and the items of capital referred to in paragraph 2 of Article 22 shall be taken into account for the value thereof reduced by the value of the debts pertaining to the permanent establishment or fixed base.

It is understood that exchange of information is also an important instrument to prevent fiscal evasion including the prevention of fraud and the facilitation of administration of statutory provisions against legal avoidance.

With respect to the Netherlands Article 27 will, for political subdivisions or local authorities, not be applicable to other taxes than those covered by this Convention, until the national legislation of the Netherlands contains a juridical basis therefore in line with the 2003 OECD Model Tax Convention.

IN WITNESS WHEREOF the undersigned, duly authorised thereto, have signed this Protocol.

DONE at Baku this 22^nd day of September 2008, in duplicate, in the Netherlands, Azerbaijani and English languages, the three texts being equally authentic. In case there is any divergence of interpretation between the Netherlands and Azerbaijani texts, the English text shall prevail.