The Government of the Republic of San Marino and the Government of the Italian Republic, hereinafter referred to as the Contracting States, desiring to conclude a Convention for the avoidance of double taxation with respect to taxes on income and for the prevention of fiscal fraud and for strengthening the orderly development of economic relations between the two countries in the context of increased cooperation, as well as to ensure that the advantages of the Convention for the avoidance of double taxation accrue exclusively to taxpayers who fulfil their tax obligations;

have agreed as follows:

Chapter I

SCOPE OF THE CONVENTION

Article 1

SUBJECTS

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 of the Contracting States, its political or administrative subdivisions or local authorities, 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 property, taxes on the total amounts of wages and salaries paid by enterprises, as well as taxes on capital appreciation.
3. The existing taxes to which the Convention shall apply are in particular:
4. with regard to the Republic of San Marino:

• the tax on the income of natural persons;
• the tax on the income of legal persons and individual enterprises; even if collected by withholding tax

(hereinafter referred to as the “San Marino tax”); b) as regards the Italian Republic:

• the tax on the income of natural persons;
• the tax on the income of legal persons;
• the regional tax on productive activities; even if collected by withholding tax;

(hereinafter referred to as the “Italian tax”).

1. The Convention shall also apply to any future taxes of an identical or similar nature which are imposed after the date of signature of this Convention in addition to, or in place of, existing taxes. The competent authorities of the Contracting States shall notify each other of any material changes which have been made in their respective taxation laws.

Chapter II

DEFINITIONS

Article 3

GENERAL DEFINITIONS

1. For the purposes of this Convention, unless the context otherwise requires:
2. the term “Italy” means the Italian Republic
3. the term “San Marino” means the Republic of San Marino;
4. the terms “a Contracting State” and “the other Contracting State” mean, as the context requires, San Marino or Italy;
5. the term “person” includes an individual, a company and any other body of persons;
6. the term “company” means any body corporate or any entity which is treated as a body corporate for tax purposes;
7. 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;
8. the term “international traffic” means any transport by a ship or aircraft operated by an enterprise which has its place of effective management in a Contracting State, except when the ship or aircraft is operated solely between places in the other Contracting State;
9. the term “nationals” means:

• natural persons who are nationals of a Contracting State;
• persons legal entities, partnerships and associations constituted in accordance with the laws in force in a Contracting State;

1. the term “competent authority” means:

• in the case of Italy, the Ministry of Economy and Finance;
• in the case of San Marino, the Secretariat of State for Finance.

1. For the application of the Convention by a State withany term not defined therein shall, unless the context otherwise requires, have the meaning that it has at that time under the laws of that State concerning the taxes to which the Convention applies.

Article 4

RESIDENCE

1. For the purposes of this Convention, the term “resident of a Contracting State” means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature.

However, this term does not include any person who is liable to tax in that State in respect only of income from sources in that State.

1. Where, subject to the provisions of paragraph 1, an individual shall be deemed to be a resident of both Contracting States, his status shall be determined as follows:
2. he shall be deemed to be a resident only 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 (centre of vital interests);
3. 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;
4. if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident only of the State of which he is a national;
5. if he is a national of both States, or is not a national of either of them, the competent authorities of the States shall settle the question by mutual agreement.
6. Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting States, he shall be deemed to be a resident only of the State in which his place of management is situated effective.

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” includes especially:
3. a place of management;
4. a branch;
5. an office;
6. a factory;
7. a workshop;
8. a mine, an oil or gas field, a quarry or any other place of extraction of natural resources;
9. a building or installation project the duration of which exceeds twelve months;
10. The term “permanent establishment” shall not be deemed to include:
11. the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise;
12. the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery;
13. the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;
14. the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise or of collecting information, for the enterprise;
15. the maintenance of a fixed place of business solely for the purpose of advertising, the supply of information, scientific research or other activities of a preparatory or auxiliary character, for the enterprise;
16. 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 5 applies – shall be deemed to include: permanent establishment in the first-mentioned State if it has, and habitually exercises in that State, an authority to conclude contracts in the name of the enterprise, unless the activities of such person are limited to the purchase of goods or merchandise for the enterprise.
17. 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, provided that such persons are acting in the ordinary course of their business.
18. 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 carries on business in that other State (whether through anorganization or not) shall not of itself constitute either company a permanent establishment of the other.

Chapter III

TAXATION OF INCOME

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 have the meaning which it has under the law of the Contracting State in which the property is situated. The term shall in any case include accessories, livestock and equipment of agricultural and forestry enterprises, rights to which the provisions of private law concerning landed property apply. The usufruct of immovable property and rights relating to variable or fixed payments for the exploitation or the concession of the exploitation of mineral deposits, sources and other natural resources shall also be considered as “immovable property”. Ships, boats and aircraft shall not be deemed to be immovable property.
3. The provisions of paragraph 1 shall apply to income from the direct use, letting or any other form of exploitation of immovable property.
4. The provisions of paragraphs 1 and 3 shall also apply to income from immovable property of an enterprise as well as 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 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 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, there shall in each Contracting State be attributed to that permanent establishment the 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.
3. In determining 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, whether in the State in which the permanent establishment is situated or elsewhere.
4. Where it is customary in a Contracting State to determine the profits of a permanent establishment in the other Contracting State, there shall be allowed as deductions expenses which are incurred for the purposes of the permanent establishment in the other Contracting State, including executive and general administrative expenses … 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 paragraph 2 shall prevent that Contracting State from determining the profits to be taxed by such apportionment as may be customary. However, the method of apportionment adopted shall be such that the result obtained is in accordance with the principles contained in this Article.
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 the profits include items of income which are dealt with separately in other Articles of this Convention, the provisions of those Articles shall not be affected by the provisions of this Article.

Article 8

SHIPPING AND AIR TRANSPORT

1. Profits from the operation of ships or aircraft in international traffic shall be taxable only in the State Contracting State in which the place of effective management of the enterprise is situated.
2. If the place of effective management of a shipping enterprise is aboard a ship, then it shall be deemed to be situated in the Contracting State in which the home port of the ship is situated, or, if there is no home port, in the Contracting State of which the operator of the ship is a resident.
3. The provisionsions of paragraph 1 shall also apply to profits from the participation in a pool, a joint business or an international operating agency.

Article 9

ASSOCIATED ENTERPRISES

1. Where
2. 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
3. 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, any profits which, in the absence of such conditions, conditions, would have been realized by one of the enterprises, but, by reason of those conditions, have not so arisen, may be included in the profits of that enterprise and taxed accordingly.
4. Where a Contracting State includes in the profits of an enterprise of that State

• and taxes accordingly – profits on which an enterprise of the other Contracting State has been subjected to tax in that other State, and the profits so included are profits which would have accrued to the enterprise of the first-mentioned State if the conditions made between the two enterprises had been those which would have been made between independent enterprises, then that other State shall make an appropriate adjustment to the amount of the tax charged therein on those profits.

Such adjustments shall be made only in accordance with the mutual agreement procedure referred to in Article 25 of this Convention.

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 beneficial owner of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed:
3. 0 per cent of the gross amount of the dividends if the beneficial owner is a company other than a partnership which has held at least 10 per cent of the capital of the company distributing the dividends for a period of at least 12 months preceding the date of the resolution to distribute the dividends;
4. 15 per cent of the gross amount of the dividends, in all other Contracting States. cases.

The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of such limitations. This paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.

1. As used in this Article, the term “dividends” means income from shares, jouissance shares or rights, mining shares, founders’ shares or other rights, not being debt-claims, participating in profits, as well as income from other corporate rights subjected to the same taxation treatment as income from shares by the tax laws of the State of which the company making the distribution is a resident.
2. The provisions of paragraphs 1 and 2 shall not apply if 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 holding in respect of which the dividends are paid is effectively connected with such permanent establishment or a fixed base. In such case, the dividends may be taxed in that other Contracting State according to its own laws.
3. Where a company that 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 the undistributed profits consist wholly or partly of profits or income arising in such other State.

Articolo 11

INTERESTS

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 laws of that State, but if the beneficial owner of the interest is a resident of the other Contracting State, the tax so charged shall not exceed:
3. 0 per cent of the gross amount of the interest if the beneficial owner is a company other than a partnership which has held at least 25 per cent of the capital of the company paying the interest for a period of at least 12 months preceding the date of payment of the interest;
4. 13 per cent of the gross amount of the interest, in all other States. cases.

The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of such limitations.

1. Notwithstanding the provisions of paragraph 2, interest arising in a Contracting State shall be exempt from tax in that State if:
2. the payer of the interest is the Government of that Contracting State or a local authority thereof; or
3. the interest is paid to the Government of the other Contracting State or to a local authority thereof or to an agency or instrumentality (including a financial institution) wholly owned by that other Contracting State or a local authority thereof; or
4. the interest is paid on behalf of the Government to other agencies or bodies (including financial institutions) in connection with financing granted by them under agreements concluded between the Governments of the Contracting States.
5. For the purposes of this Article, the term “interest” means income from government securities, bonds or debentures, whether or not secured by mortgage and whether or not carrying a right to participate in the debtors’ profits, and from debt-claims of every kind, as well as any other income assimilated to income from money lent under the tax laws of the State in which the income arises.
6. The provisions of paragraphs 1 to 3 shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises, 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 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 a permanent establishment situated therein. esse.

In such case, the interest may be taxed in that other Contracting State according to its own laws.

1. Interest shall be deemed to arise in a Contracting State when the payer is that State itself, a political or administrative subdivision, a local authority thereof 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 such interest is borne by such 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.
2. 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 interest, 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 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 remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Convention.

Article 12

ROYALTY

1. Royalty payments arising in a Contracting State and the beneficial owner of which is 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 State, but if the beneficial owner of the royalties is a resident of the other Contracting State, the tax so charged shall not exceed:
3. 0 percent of the gross amount of the royalties if the beneficial owner is a company other than a partnership which has held at least 25 percent of the capital of the company paying the fees for a period of at least 12 months preceding the date of payment of the fees;
4. 10 per cent of the gross amount of the royalties, in all other cases.

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

1. As used in this Article, the term “royalties” 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 computer software, cinematograph films and tapes for radio or television broadcasting, 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.
2. 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 State Contracting State in which the royalties arise, a commercial or industrial activity through a permanent establishment situated therein, or 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 royalties may be taxed in that other Contracting State according to its own law.
3. Royalties shall be deemed to arise in a Contracting State when the payer is that State itself, a political or administrative 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 a fixed base in which the rights or property in respect of which the royalties are paid are effectively connected, and such royalties are borne by such permanent establishment or fixed base, then such royalties shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.
4. 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, 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 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 remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Convention.

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 may be taxed in the Contracting State in which such property is situated.
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 a permanent establishment (alone or in combination with the whole enterprise) or of such fixed base, may be taxed in that other State.
3. Gains from the alienation of ships or aircraft operated in international traffic or of movable property pertaining to the operation of such ships or aircraft shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.
4. Gains from the alienation of any property other than that mentioned in paragraphs 1, 2 and 3, shall be taxable only in the Contracting State of which the alienator is a resident.

Article 14

INDEPENDENT PROFESSIONS

1. Income derived by an individual who is a resident of a Contracting State in respect of professional services or other similar activities of an independent character may be taxed in that State. Such income may also be taxed in the other Contracting State according to its domestic law.
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

EMPLOYMENT

1. Subject to the provisions of Article 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. If 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:
3. the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in any twelve-month period commencing or ending in the fiscal year concerned, and
4. the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State, and
5. the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State.
6. Notwithstanding the preceding provisions of this Article, remuneration derived … of an employment exercised aboard a ship or aircraft operated in international traffic shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.

Article 16

DISPOSITIONS AND ATTENDANCE FEES

• DISPOSITIONS, ATTENDANCE FEES and other similar remuneration derived by a resident of a Contracting State in his capacity as a member of the board of directors or of the supervisory board of a company which is a resident of the other Contracting State may be taxed in that other State.

Article 17

ARTISTS AND SPORTSMEN

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

is paid not to the entertainer or athlete directly but to another person, such remuneration shall, notwithstanding the provisions of Articles 7, 14 and 15, be taxable in the Contracting State in which the activities of the entertainer or athlete are exercised.

Article 18

PENSIONS

1. Subject to the provisions of paragraph 2 of Article 19, pensions and other similar remuneration paid to a resident of a Contracting State in consideration of past employment shall be taxable only in that State.
2. The provisions of paragraph 1 shall not apply if the recipient of the income is not subject to tax in respect of such income in the State of which he is a resident and according to the laws of that State. In such case, such income may be taxed in the State in which it arises.
3. Notwithstanding the provisions of paragraph 1 of this Article, pensions and other similar payments received under the social security legislation of a Contracting State shall be taxable only in that State.
4. If a resident of a Contracting State becomes a resident of the other Contracting State, any amounts received by such resident upon cessation of employment in the first-mentioned State as severance pay or lump sum remuneration of a similar nature shall be taxable only in the first-mentioned State.

Article 19

PUBLIC SERVICES

1. a) Remuneration, other than a pension, paid by a Contracting State or a political or administrative subdivision or an instrumentality thereof local remuneration to an individual in respect of services rendered to that State or to that subdivision or body shall be taxable only in that State.
2. However, such remuneration shall be taxable only in the other Contracting State if the services are rendered in that State and the individual is a resident of that State who:

• is a national of that State; or
• did not become a resident of that State solely for the purpose of rendering the services.

1. a) Pensions paid by a Contracting State or a political or administrative subdivision or a local authority thereof, whether directly or by way of levyfrom funds created by them, to an individual in respect of services rendered to that State or to that subdivision or body, shall be taxable only in that State.
2. However, such pensions shall be taxable only in the other Contracting State if the individual is a resident of, and a national of, that State.
3. The provisions of Articles 15, 16, 17 and 18 shall apply to remuneration and pensions paid in respect of services rendered in connection with a business carried on by one of the Contracting States or a political or administrative subdivision or a local authority thereof.

Article 20

PROFESSORS TEACHERS RESEARCHERS

1. A professor, a teacher or a researcher who visits a Contracting State temporarily for a period not exceeding two years for the purpose of teaching or carrying out research at a university, college, school or other similar educational institution, and who is, or was immediately before such visit, a resident of the other Contracting State shall be exempt from tax in the first-mentioned Contracting State in respect of remuneration derived from teaching or research.
2. The provisions of paragraph 1 of this Article shall not apply to income derived from research if such research is undertaken not in the public interest but in the private interest of one or more specific persons.

Article 21

STUDENTS AND APPRENTICES

1. Amounts from abroad which a student or apprentice who is, or was, immediately before visiting a Contracting State, a resident of the other Contracting State, and who is present in the first-mentioned Contracting State solely for the purpose of his education or of pursuing his technical, professional or business training, receives for the purpose of defraying the expenses of his maintenance, education or training or as a grant for the purpose of pursuing his education, shall not be taxable in that State for such period of time as is reasonably or usually necessary for the completion of the education or apprenticeship undertaken, but in no case shall a person enjoy the benefits provided by this paragraph for more than 5 years from the commencement of such education or apprenticeship.
2. Remuneration paid to a student or apprentice, respectively, for services rendered in the other Contracting State shall be exempt from tax in that other State for a period of 2 years provided that such services are in connection with his maintenance, education or training.

Article 22

OTHER INCOME

1. Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Convention shall be taxable only in that State.
2. The provisions of paragraph 1 shall not apply to income, other than income from immovable property as defined in paragraph 2 of Article 6, if the recipient of such 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 items of income may be taxed in that other Contracting State according to its own law.
3. Where, by reason of a special relationship between the persons who have exercised the activities in respect of which the income referred to in paragraph 1 is paid, the payment for those activities exceeds the amount which would have been agreed upon between independent persons, the provisions of paragraph 1 shall apply only to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Convention.

Chapter IV

METHODS OF ELIMINATION OF DOUBLE TAXATION

Article 23

ELIMINATION OF DOUBLE TAXATION

1. It is agreed that double taxation shall be eliminated in accordance with the following paragraphs of this Article.
2. With regard to Italy:

If a resident of Italy owns items of income which arenot taxable in San Marino, Italy, in calculating its income taxes specified in Article

• of this Convention, may include in the taxable amount of such taxes such items of income, unless express provisions of this Convention provide otherwise.

In such case, Italy shall deduct from the taxes so calculated the income tax paid in San Marino but the amount of the deduction may not exceed the share of Italian tax attributable to the aforesaid items of income in the proportion in which they contribute to the formation of the total income. However, no deduction shall be granted where the item of income is subjected in Italy to tax by withholding tax at the request of the recipient of the income in accordance with Italian law.

1. With regard to San Marino:

If a resident of San Marino owns items of income which are taxable in Italy, San Marino, in calculating its income taxes specified in Article 2 of this Convention, may include in the taxable amount of such taxes such items of income, unless express provisions of this Convention provide otherwise. In such case, San Marino must deduct from the taxes so calculated the income tax paid in Italy but the amount of the deduction may not exceed the share of the Sammarinese tax attributable to the aforesaid items of income in the proportion in which they contribute to the formation of the overall income. However, no deduction will be granted where the item of income is subjected in San Marino to taxation by withholding tax at the request of the recipient of the income in accordance with the Sammarinese legislation.

Chapter V

PROVISIONS DETAILS

Article 24

NON-DISCRIMINATION

1. 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. This provision shall also, notwithstanding the provisions of Article 1, apply to persons who are not residents of one

or both of the Contracting States.

1. 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. This provision shall not be construed as obliging a Contracting State to grant to residents of the other Contracting State any personal allowances, exemptions and reductions for taxation purposes on account of civil status or family responsibilities which it grants to its own residents.
2. Subject to the application of the provisions of paragraph 1 of Article 9, paragraph 7 of Article 11 or paragraph 6 of Article 12, interest, 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 profits of such enterprise, be deductible under the same conditions as if they had been paid to a resident of the first-mentioned State.
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 to any taxation in the first-mentioned State. obligations connected therewith, which are other or more burdensome than those to which other similar enterprises of the first-mentioned State are or may be subjected.
4. The provisions of this Article shall, notwithstanding the provisions of Article 2, apply to taxes of every kind and description.

Article 25

AMONGST 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 Convention, he may, irrespective of the remedies provided by the domestic law of those States, present his case to the competent authority of the Contracting State of which he is a resident or, if his case comes under paragraph 1 of Article 24, to that of the Contracting State of which he holds the nationality.

The case must be sotto within two years from the first notification of the action resulting in taxation not in accordance with the provisions of the Convention.

1. The competent authority, if the appeal appears to it to be well founded and if it is not itself able to arrive at a satisfactory solution, 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 Convention. The agreement reached shall be applied regardless of the time limits provided by the domestic laws of the Contracting States.
2. 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. They may also consult each other with a view to the elimination of double taxation in cases not provided for in the Convention.
3. The competent authorities of the Contracting States may communicate directly with each other with a view to reaching an agreement as set out in the preceding paragraphs. If it is considered that oral exchanges of views may facilitate the achievement of such agreement, they may take place within a Commission composed of representatives of the competent authorities of the Contracting States.
4. In the cases provided for in the preceding paragraphs, if the competent authorities of the Contracting States do not reach an agreement eliminating the double taxation within two years from the date on which the case was first submitted to one of them, the competent authorities shall establish, for each specific case, an Arbitration Commission to give an opinion on the method of eliminating the double taxation, provided that the taxpayer(s) undertake(s) to comply with the decisions of the Commission. The Commission may only be established if the parties to the dispute renounce in advance – without reservations or conditions – the proceedings of the proceedings pending before the national court.

The Arbitration Commission shall be composed of three members designated as follows: each competent authority shall designate, within 3 months of the expiry of the above-mentioned period, a member and the two members shall designate, within the same period, by mutual agreement, the President, choosing him from among independent personalities belonging to the Contracting States or to a third State member of the OECD. The Commission, in giving its opinion, shall apply the provisions of this Convention and the general principles of international law, taking into account the internal legislation of the Contracting States. The Commission itself establishes the rules of the arbitration procedure. The taxpayer(s) may, if they so request, be heard or be represented before the Commission and, if the Commission so requests, said taxpayer(s) is/are required to appear before the Commission or be represented therein.

1. The Commission shall deliver its opinion within six months of the date on which the President was appointed. The Arbitration Commission shall decide by simple majority of its members.

Within six months of the delivery of the opinion by the Arbitration Commission, the competent authorities of the Parties may still adopt, by mutual agreement, measures aimed at eliminating the cause that determined the dispute. The measures thus adopted may not be in accordance with the opinion of the Arbitration Commission. If within six months of the issuance of the opinion by the Arbitration Commission the competent authorities of the Parties have not reached an agreement to eliminate the cause of the dispute, they shall comply with and give effect to that opinion.

1. The costs of the proceedings of the Commission shall be shared equally by the Contracting States.

Article 26

EXCHANGE OF INFORMATION

1. The competent authorities of the Contracting States shall exchange such information as is reasonably relevant for carrying out the provisions of this Convention or for the administration or enforcement of the domestic laws concerning taxes of every kind and description imposed on behalf of the Contracting States, of their political or administrative subdivisions or local authorities insofar as the taxation thereunder is not contrary to the Convention, and for the prevention of fiscal evasion and avoidance. The exchange of information is not restricted by Articles 1 and 2.
2. Information received under paragraph 1 by a Contracting State shall be treated as secret, in the same way as information obtained under the domestic law of that State, and shall be disclosed only to persons or authorities (including judicial authorities and law enforcement bodies) authorised to exercise their powers.(i) administrative bodies responsible for the assessment or collection of the taxes referred to in paragraph 1, for the procedures or proceedings in respect of such taxes, for the determination of appeals lodged in respect of such taxes, or for the supervision of the preceding activities. The persons or authorities mentioned above shall use such information only for these purposes. They may use this information in public hearings or in judicial proceedings.
3. In no case shall the provisions of paragraphs 1 and 2 be construed so as to impose on a Contracting State the obligation:
4. to carry out administrative measures at variance with the laws or administrative practice of that or of the other Contracting State;
5. 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;
6. 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).
7. If information is requested by a Contracting State in accordance with this Article, the other Contracting State shall use its powers to collect the information requested, even if such information is not relevant for the domestic tax purposes of that other State. The obligation in the preceding sentence is subject to the limitations provided in paragraph 3, but in no case shall such limitations be construed to permit a Contracting State to refuse to supply information solely because it has no interest in the information for its own tax purposes.
8. In no case shall the provisions of paragraph 3 be construed to permit a Contracting State to refuse to supply information solely because the information is held by a bank, other financial institution, nominee or person acting in an agency or fiduciary capacity or because the information relates to interests in a person.

Article 27

DIPLOMATIC AGENTS AND CONSULAR OFFICERS

The provisions of this Convention shall not affect the fiscal privileges of diplomatic agents or officials consular offices under the general rules of international law or the provisions of special agreements.

Article 28

REFUNDS

1. Taxes collected in a Contracting State by withholding at source shall be refunded upon request by the interested party if the right to collect such taxes is limited by the provisions of this Convention.
2. Requests for refunds, to be submitted in compliance with the time limits established by the legislation of the Contracting State required to make the refund, must be accompanied by an official certificate from the Contracting State of which the taxpayer is a resident certifying that the conditions required to be entitled to the application of the benefits provided for by this Convention exist.
3. The competent authorities of the Contracting States shall establish by mutual agreement, in accordance with the provisions of Article 25 of this Convention, the methods of application of this Convention. Article.

Article 29

LIMITATION OF BENEFITS

1. Notwithstanding the other provisions of this Convention, a person who is a resident of a Contracting State shall not receive the benefit of any reduction or exemption from taxation provided by this Convention from the other Contracting State if the principal purpose or one of the principal purposes of the incorporation or existence of such resident or any person connected with such resident was to obtain benefits under this Convention to which such person would not otherwise be entitled.
2. The provisions of this Convention shall not affect the application of domestic law concerning the limitation of expenses and other deductions arising in transactions between enterprises of a Contracting State and enterprises situated in the other Contracting State.

Chapter VI

FINAL PROVISIONS

Article 30

ENTRY INTO FORCE

This Convention shall enter into force on the date of receipt of the second of the two notifications by which the Contracting Parties shall have communicated to each otherand officially the completion of the respective internal ratification procedures provided for this purpose and its provisions will apply:

1. with reference to taxes withheld at source, to amounts realized from 1 January of the calendar year following that in which this Convention entered into force; and
2. with reference to other taxes on income, to taxes relating to taxable periods starting from 1 January of the calendar year following that in which this Convention entered into force.

Article 31

DENUNCIATION

This Convention shall remain in force until denounced by one of the Contracting States. Either Contracting State may denounce the Convention through diplomatic channels not earlier than five years after its entry into force, by giving notice of termination at least six months before the end of the calendar year. In this case, the Convention shall cease to have effect:

1. with respect to taxes withheld at source, on amounts realized from 1 January of the calendar year following that in which the denunciation is notified;
2. with respect to other taxes on income, on taxes relating to taxable periods from 1 January of the calendar year following that in which the denunciation is notified.

IN WITNESS WHEREOF the undersigned, being duly authorized to do so, have signed this Convention with the additional Protocol annexed thereto.

For the Government of the Republic of San Marino | For the Government of the Italian Republic

DONE at Rome, this 21st day of March 2002, in duplicate in the Italian language.

The Government of the Republic of San Marino and the Government of the Italian Republic, desiring to conclude a Protocol amending the Convention between the Contracting States for the avoidance of double taxation with respect to taxes on income and the prevention of fiscal fraud, with Additional Protocol, signed at Rome on 21st March 2002.

ADDITIONAL PROTOCOL

to the Convention between the Government of the Republic of San Marino and the Government of the Italian Republic for the avoidance of double taxation with respect to taxes on income and the prevention of fiscal fraud. Upon the signature of the Convention concluded today between the Government of the Republic of San Marino and the Government of the Italian Republic for the avoidance of double taxation with respect to taxes on income and the prevention of fiscal fraud. tax, the following additional provisions have been agreed upon and form an integral part of the Convention. It is understood that:

1. The two Contracting States agree to examine the application cases of Article 4 of the aforementioned Convention in the matter of tax residence, also taking into account the particular socio-economic and geographical situation of the two Countries.
2. With regard to paragraph 3 of Article 7, “expenses incurred for the purposes of the permanent establishment” means expenses directly connected with the activity of the permanent establishment.
3. With regard to Article 8, profits from the operation of ships or aircraft in international traffic include:
4. profits from the bareboat chartering of ships and aircraft used in international traffic,
5. profits from the use or rental of containers if they constitute occasional profits and secondary to other profits from the operation of ships or aircraft in international traffic.
6. profits from the use or rental of containers if they constitute occasional profits and secondary to other profits from the operation of ships or aircraft in international traffic. aircraft.
7. With reference to paragraph 4 of Article 10, paragraph 5 of Article 11, paragraph 4 of Article 12, and paragraph 2 of Article 22, the last sentence therein may not be interpreted as contrary to the principles contained in Articles 7 and 14 of this Convention.
8. With reference to Article 11, the provisions of the Convention shall not preclude the application of the Agreement between the European Community and the Republic of San Marino establishing measures equivalent to those provided for in Council Directive 2003/48/EC on taxation of savings income in the form of interest payments, signed in Brussels on 7 December 2004. Therefore, having regard to Article 12, paragraph 2, of the aforementioned Agreement between the European Community and the Republic of San Marino, as well as paragraph 4 of the related Memorandum of Understanding, the provisions of Article 26 “Exchange of information”, as amended by Article IV of the Protocol to the Convention, also apply with reference to the income covered by the aforementioned Agreement between the European Community and the Republic of San Marino.
9. In relationIn accordance with the provisions of Article 15, as regards the taxation of employment of cross-border workers resident in Italy, the two Contracting States agree to apply the concurrent taxation system, with final taxation in the State of residence.

The Italian Republic will subject to taxation the gross income of cross-border workers resident in Italy earned in the Republic of San Marino in the manner that will be established by ordinary law. Ordinary law may determine a portion of the gross income of cross-border workers exempt from tax in Italy.

1. With reference to paragraphs 1 and 2 of Article 19, the remuneration paid to a natural person in exchange for services rendered to the Bank of Italy or the Central Bank of the Republic of San Marino and the National Institute for Foreign Trade (I.C.E.), as well as to the corresponding Sammarinese bodies, are included in the scope of application of the provisions relating to the functions public.