CLXXXVI CODIFICATION OF INTERNAL REVENUE LAWS "M. Andr6 Tardieu, Member of the House of Representatives, President of the Council of Ministers, Minister for Foreign Affairs, Officer of the Legion of Honour, "who, having communicated to one another their full powers found in good and due form, have agreed upon the following articles: " ATlICIz I "Enterprises of one of the contracting States are not subject to taxation by the other contracting State in respect of their industrial and commercial profits except in respect of such profits allocable to their permanent establishments in the latter State. "No account shall be taken, in determining the tax in one of the contracting States, of the purchase of merchandise effected therein by an enterprise of the other State for the purpose of supplying establishments maintained by such enterprise in the latter State. "ARTICLE II "American enterprises having permanent establishments in France are re- quired to submit to the French fiscal administration the same declarations and the same justifications, with respect to such establishments, as French enter- prises. "The French fiscal administration has the right, within the provisions of its national legislation and subject to the measures of appeal provided in such legislation, to make such corrections in the declaration of profits realized in France as may be necessary to show the exact amount of such profits. "The same principle applies mutatis mutandis to French enterprises having permanent establishments in the United States. "ANacL/ mI "Income which an enterprise of one of the contracting States derives from the operation of aircraft registered in such State and engaged in transportation between the two States is taxable only in the former State. "ARTICLE IV "When an American enterprise, by reason of its participation in the man- agement or capital of a French enterprise, makes or imposes on the latter, in their commercial or financial relations, conditions different from those which would be made with a third enterprise, any profits which should normally have appeared in the balance sheet of the French enterprise, but which have been, in this manner, diverted to the American enterprise, are, subject to the measures of appeal applicable in the case of the tax on industrial and com- mercial profits, incorporated in the taxable profits of the French enterprise. "The same principle applies mutatis mutandis, in the event that profits are diverted from an American enterprise to a French enterprise. " ARTICLE V "American corporations which maintain in France permanent establishments may, in derogation of article 3 of the decree of December 6, 1872, elect to pay the tax on income from securities on three-fourths of the profits actually derived from such establishments, the industrial and commercial profits being deter- mined in accordance with Article I. "An American corporation which wishes to place itself under the regime of the preceding paragraph must make a declaration to that effect at the Bureau of Registration within six months after the date upon which this agreement becomes effective or within six months after the creation of its establishment in France. The election made for one establishment applies to all the estab- lishments of such corporation. Any such election is irrevocable. "ARTICLE VI "An American corporation shall not be subject to the obligation prescribed by article 3 of the decree of December 6, 1872, by reason of any participa- tion in the management or in the capital of, or any other relations with, a French corporation, if such American corporation and French corporation con- form to the requirements of the present article. In such case, the tax on income from securities continues to be levied, in conformity with French legislation, on the dividends, interest and all other products distributed by the French enterprise; but it is moreover exigible, if the occasion arises, and subject to the measures of appeal applicable in the case of the tax on income from securities, on the profits which the American corporation derives from the French corporation under the conditions prescribed in Article IV.
�
