International shipping profits taxed in state of effective management; exception allows other state to tax with tax relief.

Profits from operating ships in international traffic are taxable only in the Contracting State where the enterprise's place of effective management is situated; if that place is aboard a ship it is deemed to be in the State of the ship's home harbour or, absent a home harbour, the State of the operator's residence. The rule covers participation in pools, joint businesses and international operating agencies. An exception allows the other Contracting State to tax income from voyages between its ports and third-country ports, subject to a reduction in tax imposed there.

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