Article 1
Persons Covered

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

Article 2
Taxes Covered

1. This Agreement shall cover taxes on income and taxes on capital imposed by each of the Contracting States or by their local authorities, irrespective of the manner in which they are levied.

2. Taxes on income and capital include all taxes on total income and on total capital or on elements of income or capital, including taxes on gains from the alienation of movable or immovable property, taxes on the total amount of wages or salaries paid by enterprises, and taxes on capital appreciation.

3. The existing taxes to which this Agreement shall apply are in particular:

   1. In the case of the Islamic Republic of Iran:

      • Income tax; and
      • Property tax;

      (hereinafter referred to as Iranian tax);

   2. In the case of the State of Kuwait:

      • Corporate income tax;
      • Contributions from the net income of Kuwaiti joint-stock companies payable to the Kuwait Foundation for the Advancement of Science (KFAS);
      • Zakat;
      • Taxes imposed under the Law on the Protection of State Employees;

      (hereinafter referred to as Kuwait tax).

4. This Agreement shall also apply to any taxes which are identical or substantially similar to the existing taxes and which are imposed by the laws of either Contracting State after the date of signature of this Agreement in addition to, or in place of, them. The competent authorities of the Contracting States shall notify each other of any significant changes which have been made in their respective taxation laws.

Article 3
General Definitions

1. For the purposes of this Agreement, except where the context otherwise requires:

   1. "territory" means, for the purposes of this Agreement only, the territories of the Islamic Republic of Iran and the Government of Kuwait over which each Contracting State exercises sovereign rights and jurisdiction in accordance with international law.

   2. "a Contracting State" and "the other Contracting State" mean, as the context requires, the Islamic Republic of Iran and the Government of Kuwait

   3. "person" means an individual, a company or any other body of individuals;

   4. "national" means any individual possessing the nationality of a Contracting State and any legal person, partnership, association or any other entity deriving its legal status from the laws in force in that Contracting State;

   5. "company" means any legal person or any entity treated as a legal person for tax purposes;

   6. "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;

   7. "International transport" means any transport by ship, boat, aircraft, road or railway vehicle operated by an enterprise of a Contracting State, except when the ship, boat, aircraft, road or railway vehicle is operated solely for transport between places in the other Contracting State;

   8. "Competent authority" means:

      • in the case of the Islamic Republic of Iran: the Minister of Economic Affairs and Finance or his authorized representative;
      • in the case of the Government of Kuwait: the Minister of Finance or his authorized representative.

2. As regards the application of this Agreement at any time by a Contracting State, any term not defined therein shall, unless the context otherwise requires, have the meaning which it has at that time under the laws of that Contracting State concerning the taxes to which this Agreement applies.

Article 4
Resident

1. For the purposes of this Agreement, the term "resident of a Contracting State" means any person who, under the laws of that State, is liable to tax in that State by reason of his domicile, residence, place of registration or any other criterion of a similar nature, and also includes that State or a local authority or any public body created under the general laws of that State, or any entity established in that State the capital of which is wholly owned by that State or a local authority or any public body as defined above. However, this term shall not include any person who is liable to tax in that State in respect only of capital or income from sources situated in that State.

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

   1. 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 in which his personal and economic interests are more important (centre of vital interests)

   2. 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 Contracting State in which he has an habitual abode.

   3. If he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident of the State of which he is a national.

   4. If he is not a national of either State or if by reason of the foregoing paragraphs he cannot be deemed to be a resident of either State, the question shall be settled by agreement between the competent authorities of the two States.

3. Where a person other than an individual is a resident of both States, he shall be deemed to be a resident only of the State in which his place of effective management is situated.

Article 5
Permanent Establishment

1. For the purposes of this Agreement, 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" includes in particular:

   1. a place of management,

   2. a branch,

   3. an office,

   4. a factory,

   5. a workshop, and

   6. a mine, an oil or gas well, a quarry or any other place of exploration for, extraction of or exploitation of natural resources.

3. A building site, a construction, erection, erection or installation project or any supervisory or supervisory activities connected therewith, carried on in a Contracting State shall be deemed to be a "permanent establishment" but only if such site, project or activities continue for a period of more than nine months.

4. Notwithstanding the preceding provisions of this Article, the term "permanent establishment" shall not include:

   1. the use of facilities solely for the purpose of storage or display of goods or merchandise belonging to the enterprise;

   2. the maintenance of goods or merchandise belonging to the enterprise solely for the purpose of storage or display;

   3. the maintenance of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;

   4. The maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise, or of collecting information, for that enterprise

   5. The maintenance of a fixed place of business solely for the purpose of carrying on any other activity which is of a preparatory or auxiliary character for that enterprise;

   6. The maintenance of a fixed place of business solely for any combination of activities mentioned in subparagraphs (a) to (e), provided that the overall activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary character.

5. Notwithstanding the provisions of paragraphs (1) and (2), where a person (other than an agent of an independent status to whom paragraph (6) applies) is acting in a Contracting State on behalf of an enterprise and has, and habitually exercises, an authority to conclude contracts in the name of the enterprise, that enterprise shall be deemed to have a permanent establishment in that State in respect of any activities which that person undertakes for it, unless the activities of that person are limited to those mentioned in paragraph (4), in which case such activities, if exercised through a fixed place of business, would not make this fixed place of business a permanent establishment under the provisions of that paragraph.

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 the other Contracting State through an agent, broker or any other agent of an independent status, provided that the activities of such persons are carried on in the ordinary course of their business. However, where the activities of such an agent are wholly or almost wholly devoted to the enterprise and the conditions made or imposed between that enterprise and the said agent in their commercial and financial relations differ from those which would be made between independent enterprises, he shall not be deemed to be an agent of an independent status within the meaning of this paragraph.

7. The mere fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of or carries on business in the other Contracting State (whether through a permanent establishment or otherwise) shall not of itself constitute one of them 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 situated in the other Contracting State, including income from agriculture or forestry, shall be taxable only in that other State.

2. The term "immovable property" shall have the same meaning as under the laws of the Contracting State in which the property is situated. The term "immovable property" shall in any case include property accessory to immovable property, livestock and equipment used in agriculture or forestry, rights to which the provisions of general law respecting landed property apply, usufruct of immovable property and rights to fixed or variable payments in consideration of work or the right to work, mineral deposits, springs and other natural resources, including oil, gas and quarrying. Ships, boats, aircraft, road or railway vehicles 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 income from immovable property of an enterprise and to income from immovable property used for the performance of independent personal services.

Article 7
Business Income

1. The income of an enterprise of a Contracting State shall be taxable only in that Contracting State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business through such permanent establishment, then the income of that enterprise shall be taxable only in that other Contracting State so far as is attributable to that 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, that permanent establishment shall be deemed in each Contracting State to have profits which it might be expected to make if it were a distinct and separate enterprise wholly independent of the enterprise of which it is a permanent establishment engaged in the same or similar activities under the same or similar conditions.

3. In determining the income of a permanent establishment, there shall be allowed as deductions expenses, including executive and general administrative expenses, so far as they are directly attributable to the purposes of that permanent establishment, whether incurred in the Contracting State in which the permanent establishment is situated or elsewhere.

   However, no allowance shall be made for amounts (other than reimbursement of actual expenses) paid by the permanent establishment to the head office or other offices of the enterprise as royalties, fees or other similar payments in consideration for the use of an exclusive right, patent or other right, or as fees for specific services rendered or for management, or as finance charges on loans made to the permanent establishment (other than to banking institutions).

   In determining the profits of a permanent establishment, there shall also be no allowance for the payment of royalties, fees or other similar payments (other than reimbursement of actual expenses) paid by the permanent establishment to the head office or other offices of the enterprise as consideration for the use of patents or other rights, as remuneration for specific services rendered or for management, or as finance charges on loans granted to the head office or other offices of the enterprise, except in the case of banking institutions.

4. The mere fact that a permanent establishment purchases goods or merchandise for the enterprise shall not constitute income for that permanent establishment.

5. Where it has been customary in a Contracting State to determine the income to be attributed to a permanent establishment on the basis of an apportionment of the total income of the enterprise to its various parts, the provisions of paragraph (2) shall not prevent that Contracting State from applying the customary method of apportionment in determining the income to be taxed. In any case, the result of the apportionment method adopted shall be in accordance with the principles of this Article.

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

7. Where the profits include items of income or gains which are dealt with separately in other Articles of this Agreement, the provisions of this Article shall not prejudice the provisions of those Articles.

Article 8
International Transport

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

2. For the purposes of this Article, income from the operation of ships, boats or aircraft in international traffic also includes:

   1. income from the rental of the full fleet of ships, boats or aircraft;

   2. income from the use, maintenance or rental of containers, including trailers and related equipment for the transport of containers, used in the transport of goods or merchandise, provided that such rental or use, maintenance or rental, as the case may be, is incidental to the operation of the ships or aircraft in international traffic.

Article 9
Associated Enterprises

1. Where:

   1. 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

   2. 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. Conditions made or imposed between the two enterprises in their commercial or financial relations 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 a Contracting State includes in its own profits profits on which an enterprise of that other Contracting State has been charged to tax in the other Contracting State and such profits are profits which, if the conditions of independence had been established between the two enterprises, would have accrued to the enterprise of the first-mentioned Contracting State, then that other Contracting State shall make an appropriate adjustment to the amount of tax charged on those profits. In determining such adjustment, due regard shall be had to the other provisions of this Agreement and the competent authorities of the two 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 laws of that State, but if the recipient is a resident of the other Contracting State and is the beneficial owner of the dividends, the tax so charged shall not exceed five per cent (5%) of the gross amount of the dividends. This paragraph shall not affect the tax on the company in which the dividends are paid.

3. The term "dividends" as used in this Article means income from shares, profit-sharing rights or rights in profit-sharing, mining shares, founders' shares or other rights, not being debt-claims, participating in profits, as well as income from other partnership rights, which is subjected to the same taxation treatment as income from shares by the taxation laws of the Contracting State of which the company paying the dividends is a resident.

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

5. Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other Contracting State shall not impose any tax on the dividends paid by the company, except in so far as such dividends are paid to the beneficial owner of the dividends who is a resident of the other Contracting State or in so far 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 Contracting State, and shall not subject the company's undistributed profits to a tax on the company's undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in that other Contracting State

Article 11
Financial Charges

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

2. However, such financial expenses may also be taxed in the Contracting State in which they arise and according to the laws of that State, but if the recipient is a resident of the other Contracting State and is the beneficial owner of the financial expenses, the tax so charged shall not exceed five per cent (5%) of the gross amount of the financial expenses.

3. The term "financial expenses" as used in this Article means income from debt-claims of every kind, whether or not secured by security or 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 from loans granted under the tax laws of the Contracting State in which the income arises. Penalties for late payment shall not be considered financial expenses for the purposes of this Article.

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

5. Financial expenses shall be deemed to arise in a Contracting State if the payer is a resident of that State. However, if the person paying the financial expenses, 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 the debt in respect of which the financial expenses are paid, and such financial expenses are borne by such permanent establishment or fixed base, then such financial expenses shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated.

6. Notwithstanding the provisions of paragraph (2), financial expenses incurred in a Contracting State by the other Contracting State, ministries, other governmental agencies, municipalities, the Central Bank and other banks wholly owned by the other Contracting State shall be exempt from tax in the first-mentioned State.

7. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the financial charges paid for the debt-claim exceeds the amount which would have been agreed upon between the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the payments shall be taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement.

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 laws of that other State, but if the beneficial owner of the royalties is a resident of the other Contracting State, the tax so charged shall not exceed five per cent (5%) of the gross amount of such 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, including cinematograph films, filmstrips, tapes or other media for use in connection with radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or information concerning industrial, commercial or scientific experience, or the use of, or the right to use, industrial, commercial or scientific equipment.

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 if the payer is a resident of that other 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 a fixed base in connection with which the obligation to pay the royalties was incurred and the royalties were borne by such permanent establishment or fixed base, then the 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 beneficial owner or between both of them and some other person, the amount of the royalties paid, having regard to the use, right to exploit or information in respect of which the royalties are paid, exceeds the amount which would have been agreed upon between the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the latter amount. In such cases, the excess part of the payment shall remain taxable according to the laws of each Contracting State, subject to the other provisions of this Agreement.

Article 13
Capital Gains

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 Contracting State.

2. Gains derived by a resident of a Contracting State from the alienation of movable property forming part of the business equipment of a permanent establishment of an enterprise of a Contracting State which is situated 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 gains derived from the alienation of a permanent establishment (alone or with the whole enterprise) or such fixed base, may be taxed in that other Contracting State.

3. Gains derived by an enterprise of a Contracting State from the operation of ships, aircraft, road or railway vehicles operated in international traffic or movable property pertaining to the operation of such ships, aircraft, road or railway vehicles shall be taxable only in that Contracting State.

4. Gains from the operation of any property other than that referred to in paragraphs (1), (2) and (3) shall be taxable only in the Contracting State of which the transferor is a resident.

Article 14
Independent Personal Services

1. Income derived by an individual who is a resident of a Contracting State in respect of professional services or other activities of an independent nature shall be taxable only in that State unless he has or has had a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities, in which case such income shall be taxable only in that other State so far as is attributable to that fixed base.

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
Non-Independent Personal Services

1. Subject to the provisions of Articles 16, 18, 19, 20 and 21, salaries, wages and other similar remuneration 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, in which case the remuneration shall be taxable only 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 provided that:

   1. the period or periods during which the recipient is present in that other State do not exceed in the aggregate one hundred and eighty-three (183) days in any twelve-month period commencing or ending in the fiscal year concerned, and

   2. the remuneration is paid by or on behalf of an employer who is not a resident of the other Contracting State, and

   3. the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other Contracting State.

3. Notwithstanding the provisions of this Article, remuneration derived by an enterprise of a Contracting State in respect of an employment aboard a ship, boat, aircraft or road or railway vehicle operated in international traffic shall be taxable only in that Contracting State.

Article 16
Directors' Fees

Directors' fees and other similar payments derived by a resident of a Contracting State in his capacity as a member of the board of directors or other similar body of a company which is a resident of the other Contracting State shall be taxable only in that other State.

Article 17
Artists and Athletes

1. Income derived by a resident of a Contracting State as an artiste, such as a theatre, motion picture, radio or television artiste, or a musician, or as an athlete, from his personal activities exercised in the other Contracting State shall, notwithstanding the provisions of Articles 14 and 15, be taxable only in that other State.

2. Where income in respect of personal activities exercised by an entertainer or a sportsman in his capacity as such does not accrue to him and accrues to another person, that income shall, notwithstanding the provisions of Articles 7, 14 and 15, be taxable only in the Contracting State in which the activities of the entertainer or sportsman are exercised.

3. Income derived by an entertainer or sportsman in respect of his activities in a Contracting State shall be exempt from the provisions of paragraphs 1 and 2 of this Article, provided that the expenses of his visit to that State are wholly or mainly borne by the general funds of that other State or by a local authority thereof or by an organisation recognised as a non-profit organisation, in which case such income shall be taxable only in the Contracting State of which the person is a resident.

Article 18
Pensions and Annuities

Subject to the provisions of paragraph (2) of Article 19, pensions and other similar payments and annuities paid to an individual who is a resident of a Contracting State in consideration of past services shall be taxable only in that Contracting State

Article 19
Government Services

1. 1. Salaries, wages and other similar remuneration, other than pensions, paid by a Contracting State or a local authority thereof to an individual in respect of services rendered to that Contracting State or local authority shall be taxable only in that Contracting State

   2. However, if the services are rendered in the other Contracting State and the individual is a resident of that Contracting State, such salaries, wages and other similar remuneration shall be taxable only in the other Contracting State, provided that the individual:

      • was a national of that other Contracting State, or
      • did not become a resident of that Contracting State solely for the purpose of rendering the services in question.

2. 1. Any pension paid by a Contracting State or out of funds created by that State or a local authority thereof to an individual in respect of services rendered to that State or local authority shall be taxable only in that State.

   2. However, such pension shall be taxable only in the other Contracting State if the recipient is an individual resident of, and a national of, that other State.

3. In the case of salaries, wages and other similar remuneration and pensions in respect of services rendered in connection with a business carried on by a Contracting State or a local authority thereof, the provisions of Articles 15, 16 and 18 shall apply.

Article 20
Teachers and Researchers

1. An individual who was immediately before visiting a Contracting State a resident of the other Contracting State and who, at the invitation of the first-mentioned Contracting State or of a university, college, school, museum or other cultural institution situated in that first-mentioned Contracting State or under an official cultural exchange programme, is present in that Contracting State for a period not exceeding two consecutive years solely for the purpose of teaching, lecturing or carrying out research in such an institution shall be exempt from tax in that Contracting State in respect of such remuneration.

2. The provisions of this paragraph shall not apply to remuneration and income from research carried on by persons and institutions having commercial purposes.

Article 21
Students and Trainees

1. Payments which a student or trainee who was or is a resident of the other Contracting State immediately before visiting a Contracting State and who is present in the first-mentioned Contracting State solely for the purpose of his education or training and receives for the purpose of his maintenance, education or training shall not be subject to tax in that Contracting State.

2. Notwithstanding the provisions of paragraph (1), a student or trainee who was or is a resident of the other Contracting State immediately before visiting a Contracting State and who is present in the first-mentioned Contracting State solely for the purpose of his education or training shall be exempt from tax in respect of payments which he receives in respect of temporary services rendered in that other Contracting State, provided that such services are in connection with his education or training.

Article 22
Other Income

1. Items of income of a resident of a Contracting State not dealt with in the foregoing Articles of this Agreement shall, wherever arising, be taxable only in that Contracting State.

2. Except in the case of income from immovable property as defined in paragraph 2 of Article 6, the provisions of paragraph 1 shall not apply if the recipient of the income, being a resident of a Contracting State, carries on business in the other Contracting State 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 income is paid is effectively connected with such permanent establishment or fixed base. In such case, the provisions of Articles 7 and 14 shall apply, as the case may be.

Article 23
Capital

1. Capital represented by immovable property referred to in Article 6, owned by a resident of a Contracting State and situated in the other Contracting State, may be taxed in that other State.

2. Capital represented by movable property forming part of the business equipment of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State, or by 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, may be taxed in that other State.

3. Capital represented by ships, boats, aircraft, road and railway vehicles used in international traffic by an enterprise of a Contracting State, as well as movable property pertaining to the operation of such ships, boats, aircraft, road and railway vehicles, shall be taxable only in that Contracting State.

4. All other capital of a resident of a Contracting State shall be taxable only in that Contracting State.

Article 24
Elimination of Double Taxation

1. Where a resident of a Contracting State derives income or owns capital which, in accordance with the provisions of this Agreement, may be taxed in the other Contracting State, the first-mentioned State shall allow:

   1. as a deduction from the tax on the income of that resident, an amount equal to the income tax paid in that other Contracting State;

   2. as a deduction from the tax on the capital of that resident, an amount equal to the capital tax paid in that other Contracting State.

   However, in either case, such deduction shall not exceed the amount of tax which would have been charged on the income or capital, as the case may be, before the deduction is given.

2. Where in accordance with any provision of this Agreement income derived or capital owned by a resident of a Contracting State is exempt from tax in that State, that State may, notwithstanding the exemption, include in the calculation of the tax on the remaining income or capital of such resident the exempted income or capital.

Article 25
Non-discrimination

1. Individuals who are nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith which is more burdensome than the taxation and connected requirements to which nationals of that other State in the same circumstances are or may be subjected. Notwithstanding the provisions of Article 1, these provisions shall also apply to individuals who are not residents of one or both of the Contracting States.

2. The taxation on a permanent establishment of an enterprise of a Contracting State in the other Contracting State shall not be less favourable than the taxation levied on enterprises of a third State carrying on the same activities under the same conditions. This provision shall not be construed as obliging a Contracting State to grant to residents of the other Contracting State any personal allowances, reliefs and reductions for tax purposes on account of personal status or family responsibilities which it grants to its own residents.

3. 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 Contracting 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 the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of third States are or may be subjected.

4. Nothing in this Article shall be construed as obliging a Contracting State to grant to any third State or its residents the benefit of any fiscal treatment, preference or preparatory privilege by reason of the formation of a customs union, economic union, free trade area or any regional or subregional arrangement which is wholly or partly

5. Except where the provisions of paragraph 1 of Article 9, paragraph 7 of Article 11 or paragraph 6 of Article 12 apply financial expenses, royalties and other disbursements paid by an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable income of that enterprise, be deductible under the same conditions as if they had been paid to a resident of the first-mentioned State. Likewise, any debt of an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable capital of that enterprise, be deductible under the same conditions as if they had been paid to a resident of the first-mentioned State.

Article 26
Bilateral Agreement Procedure

1. Where a person considers that the actions of one or both of the Contracting States result or will result for him in taxation not in accordance with the provisions of this Agreement, he may, irrespective of the remedies provided by the domestic law of those States, present his objection to the competent authority of the Contracting State of which he is a resident or, if his case comes under paragraph 1 of Article 25, to the competent authority of the Contracting State of which he is a national. The objection must be presented within three years from the date on which he first became aware of the action resulting in taxation not in accordance with the provisions of this Agreement.

2. If the competent authority considers that the objection is justified but is not itself able to arrive at an adequate solution, it shall endeavour 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 provisions of this Agreement. Any agreement reached shall be enforceable without regard to time limits in the domestic laws of the Contracting States.

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 this Agreement and may also consult each other for the elimination of double taxation in cases not provided for in this Agreement.

4. The competent authorities of the Contracting States may communicate with each other directly for the purpose of reaching an agreement in the cases referred to in the preceding paragraphs. The competent authorities shall, by consultation with each other, devise appropriate procedures, conditions, methods and techniques for the implementation of the bilateral agreement procedure provided for in this Article.

Article 27
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 Agreement or for carrying out the domestic laws of the Contracting States not contrary to this Agreement concerning taxes covered by this Agreement. 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 authorities, concerned with the assessment, collection, enforcement or prosecution of, or the determination of appeals in relation to, the taxes covered by this Agreement. Such persons or authorities shall use the information only for such purposes. They may disclose such information in open court proceedings or in judicial decisions.

2. In no case shall the provisions of paragraph (1) be construed so as to require a Contracting State:

   1. to carry out administrative measures at variance with the laws and administrative procedures of that State or of the other Contracting State;

   2. to supply information which is not obtainable under the laws or in the normal course of its own or of the administrative procedures of another Contracting State.

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

Article 28
Members of Diplomatic Missions and Consular Posts

The provisions of this Agreement shall not affect the financial privileges of members of diplomatic missions and consular posts under the general rules of international law or under the provisions of special agreements.

Article 29
Entry into Force

1. Each Contracting State shall notify the other Party of the completion of its constitutional procedures for the entry into force of this Agreement. This Agreement shall enter into force on the date of the last notification and its provisions shall apply in both Contracting States as follows:

   1. in the Islamic Republic of Iran in respect of taxes on income derived or capital acquired for any fiscal year beginning on or after the first day of Farvardin (in the State of Kuwait, equivalent to 21 March) next following the calendar year in which this Agreement enters into force;

   2. in the State of Kuwait in respect of taxes on income derived or capital acquired for any fiscal year beginning on or after the first day of January (in the Islamic Republic of Iran, equivalent to 11 Diyan) next following the calendar year in which this Agreement enters into force.

Article 30
Duration and Termination of the Agreement

This Agreement shall remain in force until terminated by a Contracting State. Either Contracting State may terminate this Agreement through diplomatic channels by giving notice of termination at least six months before the end of any calendar year after the expiration of a period of five years from the date on which the Agreement enters into force. In such case, this Agreement shall not apply in either Contracting State in the following cases:

1. in the Islamic Republic of Iran, in respect of taxes on income derived or capital acquired for any fiscal year beginning on or after the first day of Farvardin (equivalent to 21 March in the State of Kuwait) next following the calendar year in which the notice of termination is given;

2. in the State of Kuwait, in respect of taxes on income derived or capital acquired for any fiscal year beginning on or after the first day of January (equivalent to 11 January in the Islamic Republic of Iran) next following the calendar year in which the notice of termination is given.

In witness whereof, the undersigned, being duly authorized thereto by their respective Governments, have signed this Agreement.

This Agreement is done in duplicate at Tehran on 26/10/1386 AH (7/1/1429 AH) corresponding to 16/1/2008, in the Persian, Arabic and English languages, all three texts being equally authentic. In case of any discrepancy, the English text shall prevail.

Protocol

Protocol between the Government of the Islamic Republic of Iran and the Government of Kuwait

at the time of signing the Agreement for the Avoidance of Double Taxation with respect to Taxes on Income and Capital between the two Governments in Tehran on 26/10/1386 AH (7/1/1429 AH), corresponding to 16/1/2008, agreed on the following provisions, which shall be an integral part of the said Agreement:

It is understood that:

1. In respect of paragraph (1) of Article 4, in the case of the Government of Kuwait, the term "resident" includes a natural person who has his domicile in the State of Kuwait and is a Kuwaiti national.

2. In relation to Article 18

   1. the terms "pension and other similar remuneration" mean periodical payments received after retirement in consideration of past employment or in compensation for injuries sustained in connection with past employment.

   2. the term "annuity" means a stated sum payable to an individual periodically for life or for a specified or determinable period under an obligation to pay to him or her an adequate and full consideration in cash or its equivalent in kind.

3. In relation to Article 19, remuneration derived by an employee of an airline of a Contracting State in respect of services rendered in the other Contracting State shall be taxable only in the Contracting State in which the airline is situated.

In witness whereof the undersigned, being duly authorized thereto by their respective Governments, have signed this Protocol.

This Protocol was drawn up in Tehran in duplicate on 26/10/1386 AH (7/1/1429 AH) corresponding to 16/1/2008 AD in Persian, Arabic and English languages, all three texts being equally authentic. In the event of any discrepancy, the English text shall prevail.