ARTICLE 8

Shipping and Air Transport

Paragraph 1 provides that profits of an enterprise of a Contracting State from the operation of ships or aircraft in international traffic shall be taxable only by that Contracting State. International traffic is defined in paragraph 1(g) of Article 3 (General Definitions). As indicated in the discussion of paragraph 7 of Article 7 (Business Profits), this Article takes precedence over the rules of Article 7. Thus, the other Contracting State may not tax such profits even if they are attributable to a permanent establishment of the enterprise in that other State.

Paragraph 2 clarifies what income is to be considered profits from the operation of ships or aircraft. Paragraph 2 states that income from the operation of ships or aircraft in international traffic includes profits from the rental of ships or aircraft if operated in international traffic by the lessee, or if such rental profits are incidental to operating profits. Such "incidental" rental profits may include rents from bareboat charters.

Paragraph 3 states that profits of an enterprise of a Contracting State from the use,

maintenance or rental of containers, and related equipment for the transport of containers, used for the transport of goods or merchandise in international traffic are taxable only by the Contracting State in which the enterprise is resident.

Paragraph 4 provides that the provisions of paragraphs 1 and 3 apply to profits from the participation in a pool, a joint business, or an international operating agency.