Convention between the
Government of the Republic of India and the Government of the Republic of
Namibia
Notification No. 10814 [F.
No. 503/4/92-FTD], dated 8-3-1999
Whereas the Convention
stated in the Schedule below, between the Government of the Republic of India
and the Government of the Republic of Namibia for the avoidance of double
taxation and the prevention of fiscal evasion with respect to taxes on income
and capital gains has entered into force on 22nd January, 1999 on the
notification by both the Contracting States to each other of the completion of
the procedures as required by Article 29 of the said Convention:
Now, therefore, in
exercise of the powers conferred by section 90 of the Income-tax Act, 1961 (43
of 1961), the Central Government hereby directs that all the provisions of the
Convention stated in the Schedule shall be given effect to in the Union of
India.
Convention between the
Government of the Republic of India and the Government of the Republic of
Namibia for the avoidance of double taxation and the prevention of fiscal
evasion with respect to taxes on income and capital gains.
The Government of the
Republic of India and the Government of the Republic of Namibia desiring to
conclude a Convention for the avoidance of double taxation and the prevention
of fiscal evasion with respect to taxes on income and capital gains,
HAVE AGREED as follows:
Article 1
Personal scope
This Convention shall
apply to persons who are residents of one or both of the Contracting States.
Article 2
Taxes covered
1. The taxes to which this
Convention shall apply are:
(a) in Namibia:
(i) the income-tax;
(ii) the
non-resident shareholder's tax; and
(iii) the
petroleum income-tax;
(hereinafter referred to
as "Namibian tax");
(b) in India:
the
income-tax (including any surcharge thereon)
(hereinafter referred to as "Indian
tax").
2. The Convention shall
apply also to any identical or substantially similar taxes which are imposed
after the date of signature of the Convention in addition to, or in place of,
the existing taxes referred to in paragraph 1. The competent authorities of the
Contracting States shall notify each other of any substantial changes which
have been made in their respective taxation laws, and if it seems desirable to amend
any Article of this Convention without affecting the general principles
thereof, the necessary amendments may be made by mutual consent.
Article 3
General definitions
1. For the purposes of
this Convention, unless the context otherwise requires:
(a) the term "Namibia" means the Republic of Namibia
and when used in a geographical sense, includes the territorial sea as well as
the exclusive economic zone and the continental shelf, over which Namibia
exercises sovereign rights in accordance with its internal law and subject to
international law, concerning the exploration and exploitation of the natural
resources of the sea-bed and its subsoil and the superjacent waters;
(b) the term "India" means the territory of India and
includes the territorial sea and airspace above it, as well as any other
maritime zone in which India has sovereign rights, other rights and
jurisdiction, according to the Indian law and in accordance with international
law, including the UN Convention on the Law of the Sea, 1982;
(c) the terms "a Contracting State" and "the other
Contracting State" mean Namibia or India, as the context requires;
(d) the term "person" includes an individual, a
company, a body of persons and any other entity which is treated as a taxable
unit under the taxation laws in force in the respective Contracting States;
(e) the term "company" means any body corporate or any
entity which is treated as a body corporate for tax purposes;
(f) 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;
(g) the term "international traffic" means any
transport by 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 States;
(h) the term "national" means:
(i) any individual possessing the citizenship of a Contracting
State;
(ii) any legal person, partnership and
association deriving its status as such from the law in force in a Contracting
State;
(i) the term "competent authority" means:
(i) in the case of Namibia, the Permanent
Secretary in the Ministry of Finance who is the Chief Executive Officer and
Administrator of Namibian tax laws or his or her authorised representative;
(ii) in the case of India, the Central
Government in the Ministry of Finance (Department of Revenue) or its authorised
representative;
(j) the term "tax" means Indian
tax or Namibian tax, as the context requires, but shall not include any
interest or any amount which is payable in respect of any default or omission
in relation to the taxes to which this Convention applies or which represents a
penalty imposed relating to those taxes.
2. As regards the
application of the Convention by a Contracting State, any term not defined
therein shall unless the context otherwise requires, have the meaning which it
has under the law of that State concerning the taxes to which this Convention
applies.
Article 4
Resident
1. For the purposes of
this Convention, the term "resident of a Contracting State" means any
individual who is ordinarily resident, or has his or her domicile in that State
and any company or other body of persons which has its place of effective
management or incorporation in that State.
2. Where by reason of the
provisions of paragraph 1 an individual is a resident of both Contracting
States, then his or her status shall be determined as follows:
(a) he or she shall be deemed to be a resident of the State in
which he or she has a permanent home available to him or her, if he or she has
a permanent home available to him or her in both States, he or she shall be
deemed to be a resident of the State with which his or her personal and
economic relations are closer (centre of vital interests);
(b) if the State in which he or she has his or her centre of
vital interests cannot be determined, or if he or she has not a permanent home
available to him or her in either State, he or she shall be deemed to be a
resident of the State in which he or she has a habitual abode;
(c) if he or she has a habitual abode in both States or in
neither of them, he or she shall be deemed to be a resident of the State of
which he or she is a national;
(d) if he or she is a national of both States or of neither of
them, the competent authorities of the Contracting States shall settle the
question by mutual agreement.
3. Where by reason of the
provisions of paragraph 1 a person other than an individual is a resident of
both Contracting States, then it shall be deemed to be a resident of the State
in which its place of effective management is situated. In case of doubt the
competent authorities of the Contracting States shall settle the question by
mutual agreement.
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:
(a) a place of management;
(b) a branch;
(c) an
office;
(d) a
factory;
(e) a
workshop;
(f) a mine,
an oil or gas well, a quarry or any other place of extraction of natural
resources;
(g) an installation or structure used for
the exploration of natural resources, provided that the installation or
structure continue for a period of not less than six months;
(h) a
warehouse, in relation to a person providing storage facilities for others; and
(i) in the case of Namibia, a guest farm or other operation of a
similar nature.
3. The term
"permanent establishment" likewise encompasses:
(a) a building site, a construction,
assembly or installation project or supervisory activities in connection
therewith, but only where such site, project or activity continues for a period
of more than six months; or
(b) the furnishing of services, excluding
those referred to in Article 14, by an enterprise of a Contracting State
through employees or other personnel engaged in the other Contracting State,
provided that such activities continue for the same project or a connected
project for a period or periods aggregating more than six months within any
twelve month period.
4. Notwithstanding the
preceding provisions of this Article the term "permanent
establishment" shall be deemed not to include:
(a) the use of facilities solely for the
purpose of storage or display or the occasional delivery of goods or
merchandise belonging to the enterprise;
(b) the maintenance of a stock of goods or
merchandise belonging to the enterprise solely for the purpose of storage,
display or occasional delivery;
(c) the maintenance of a stock of goods or
merchandise belonging to the enterprise solely for the purpose of processing by
another enterprise;
(d) the maintenance of a fixed place of
business solely for the purpose of purchasing goods or merchandise or of
collecting information, for the enterprise;
(e) the maintenance of a fixed place of
business solely for the purpose of carrying on, for the enterprise, any other
activity of a preparatory or auxiliary character;
(f) the maintenance of a fixed place of
business solely for any combination of activities mentioned in sub-paragraphs
(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, 2 and 3, 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 of the other Contracting State, that
enterprise shall be deemed to have a permanent establishment in the
first-mentioned Contracting State in respect of any activities which that
person undertakes for the enterprise, if such person:
(a) 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 those mentioned in paragraph 4 which, 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; or
(b) has no such authority but nevertheless maintains habitually
in the first-mentioned Contracting State a stock of goods or merchandise from
which he or she regularly delivers goods or merchandise on behalf of the
enterprise.
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 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. However, when the activities of such an agent are
devoted wholly or almost wholly on behalf of that enterprise, he or she will
not be considered an agent of an independent status within the meaning of this
paragraph.
7. 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 which carries on
business in that other State (whether through a permanent establishment or
otherwise) shall not of itself constitute either company 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 (including income from
agriculture or forestry) situated in the other Contracting State may also 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 in question is situated. The
term shall in any case include property accessory to immovable property,
livestock and equipment used in agriculture and forestry, rights to which the
provisions of general law respecting landed property apply, usufruet of
immovable property and rights to variable or fixed payments as consideration
for the working of, or the right to work, mineral deposits, sources and other
natural resources. Ships, boats and aircraft 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 the income from immovable property of an
enterprise and to income from immovable property used for the performance of
independent personal services.
5. Where the ownership of
shares or other rights in a company or legal person entitles the owner to the
enjoyment of immovable property situated in a Contracting State and held by
that company or legal person, income derived by the owner from the direct use,
letting or use in any other form of his or her right of enjoyment may be taxed
in that State. The provisions of this paragraph shall apply notwithstanding the
provisions of Article 7 or 15.
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 the determination of
the profits of a permanent establishment, there shall be allowed as deductions
expenses which are incurred for the purposes of the business of the permanent
establishment, including executive and general administrative expenses so
incurred, whether in the State in which the permanent establishment is situated
or elsewhere, in accordance with the provisions of and subject to the
limitations of the laws of that State. However, no such deduction shall be
allowed in respect of amounts, if any, paid (otherwise than towards
reimbursement of actual expenses) by the permanent establishment to the head
office of the enterprise or any of its other offices, by way of royalties, fees
or other similar payments in return for the use of patents or other rights, or
by way of commission, for specific services performed or for management, or,
except in the case of a banking enterprise, by way of interest on moneys lent
to the permanent establishment. Likewise, no account shall be taken, in the
determination of the profits of a permanent establishment, for amounts charged
(otherwise than towards reimbursement of actual expenses), by the permanent
establishment to the head office of the enterprise or any of its other offices,
by way of royalties, fees or other similar payments in return for the use of
patents or other rights, or by way of commission for specific services
performed or for management, or, except in the case of a banking enterprise by
way of interest on moneys lent to the head office of the enterprise or any of
its other offices.
4. Insofar as it has been
customary in a Contracting State to determine the 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 preclude
that Contracting State from determining the profits to be taxed by such an
apportionment as may be customary. The method of apportionment adopted shall,
however, be such that the result shall be 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 reason to the contrary.
7. Where profits include
items of income which are dealt with separately in other Articles of this
Convention, then 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 or charter of ships or aircraft in international traffic and the
rental of containers and related equipment which is incidental to the operation
of ships or aircraft in international traffic shall be taxable only in the
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 or boat, then it
shall be deemed to be situated in the Contracting State in which the home
harbour of the ship or boat is situated, or, if there is no such home harbour,
in the Contacting State of which the operator of the ship or boat is a
resident.
3. For the purposes of this Article, interest on funds connected with the operation of ships or aircraft in international traffic shall be regarded as profits derived from the operation of such ships or aircraft and the provisions of Article 11 shall not apply in relation to such interest.
4. The provisions 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:
(a) 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
(b) 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, then any profits which would, but for those
conditions, have accrued to one of the enterprises, but, by reasons 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 the profits of an enterprise of that State -- and taxes accordingly -- profits on which an enterprise of the other Contracting State has been charged 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. In determining such adjustment, due regard shall be had to the other provisions of this Convention and the competent authorities of the 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 the beneficial owner of the dividends the tax so charged shall not
exceed 10 per cent of the gross amount of the dividends.
This paragraph shall not
affect the taxation of the company in respect of the profits out of which the
dividends are paid.
3. The term
"dividends" as used in this Article means income from shares of all
kinds or other rights, not being debt-claims, participating in profits, as well
as income from other corporate rights which is subjected to the same taxation
treatment as income from shares by the laws of the State of which the company
making the distribution is a resident.
4. 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 fixed base. In such case, the provisions
of Article 7 or 15, as the case may be, shall apply.
Interest
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 recipient is the beneficial owner of the
interest the tax so charged shall not exceed 10 per cent of the gross amount of
the interest.
3. Interest arising in a
Contracting State shall be exempt from tax in that State provided it is derived
and beneficially owned by:
(a) the Government, a political sub-division
or a local authority of the other Contracting State; or
(b) such agency or instrumentality of the
Government of the other Contracting State as may be agreed in writing between
the competent authorities of both Contracting States.
4. The term
"interest" as used in this Article means income from debt-claims of
every kind, whether or not secured by mortgage and whether or not 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. Penalty charges
for late payment shall not be regarded as interest for the purpose of this
Article.
5. The provisions of
paragraphs 1 and 2 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 such
permanent establishment or fixed base. In such case the provisions of Article 7
or 15, as the case may be, shall apply.
6. Interest shall be
deemed to arise in a Contracting State when the payer is that State itself, a
political sub-division, a local authority or a resident of that State. Where,
however, the person paying the interest, whether he or she 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
State in which the permanent establishment or fixed base is situated.
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 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
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 State, but if the recipient is the beneficial owner of the
royalties the tax so charged shall not exceed 10 per cent of the gross amount
of the royalties.
3. The term
"royalties" as used in this Article means payment 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 and
films or tapes used for radio or television broadcasting, any patent, trade
mark, design or model, computer programme, plan, secret formula or process, or
for the use of or the right to use industrial, commercial or scientific
equipment involving a transfer of know-how or for information concerning
industrial, commercial or scientific experience.
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 15, as the case may be, shall apply.
5. Royalties shall be
deemed to arise in a Contracting State when the payer is that State itself, a
political sub-division, a local authority or a resident of that State. Where
however, the person paying the royalties, whether he or she 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 liability to pay the royalties was
incurred, 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.
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, 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 and situated in the other Contracting State, or from
the alienation of shares in a company the assets of which consist principally
of such property, may also be taxed in that other State.
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 with the
whole enterprise) or of such fixed base, may also be taxed in that other State.
3. Gains from the
alienation of ships or aircraft operated in international traffic or 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 shares or similar rights being shares in a company, the assets of
which consist principally of immovable property situated in a Contracting
State, may also be taxed in that State. Gains from the alienation of an
interest in a partnership, trust or estate, the property of which consists
principally of immovable property situated in a Contracting State, may also be
taxed in that State.
5. Gains derived by a resident of a Contracting State from the sale, exchange or other disposition, directly or indirectly, of shares other than those mentioned in paragraph 4, or similar rights in a company which is a resident of the other Contracting State may also be taxed in that other State.
6. Gains from the
alienation of any property other than that referred to hereinabove, shall be
taxable only in the Contracting State of which the alienator is a resident.
Article 14
Fees for technical
services
1. Fees for technical
services arising in a Contracting State which are derived by a resident of the
other Contracting State may be taxed in that other State.
2. However, such fees for
technical services 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 the
beneficial owner of the fees for the technical services, the tax so charged
shall not exceed 10 per cent of the gross amount of such fees.
3. The term "fees for
technical services" as used in this Article means payments of any kind to
any person, other than to an employee of the person making the payments, in
consideration for any services of a technical, managerial or consultancy
nature.
4. The provisions of
paragraphs 1 and 2 shall not apply if the beneficial owner of the fees for
technical services, being a resident of a Contracting State carries on business
in the other Contracting State in which the fees for technical services arise
through a permanent establishment situated therein, or performs in that other
State independent personal services, and the fees for the technical services
are effectively connected with such permanent establishment or such services.
In such case, the provisions of Article 7 or 15, as the case may be, shall
apply.
5. Fees for technical
services shall be deemed to arise in a Contracting State when the payer is that
State itself, a political sub-division, a local authority or a statutory body
thereof, or a resident of that State. Where, however, the person paying the
fees for technical services, whether he is a resident of a Contracting State or
not, has in a Contracting State a permanent establishment in connection with
which the obligation to pay the fees for technical services was incurred, and
such fees for technical services are borne by that permanent establishment,
then such fees for technical services shall be deemed to arise in the
Contracting State in which the permanent establishment is situated.
6. Where, by reason of a
special relationship between the payer and the recipient or between both of
them and some other person, the amount of the fees paid for technical services,
exceeds for whatever reason, 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 law of each Contracting State due regard being had to the other provisions
of this Convention.
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 character shall be taxable only
in that State. Such income may also be taxed in the other Contracting State if:
(a) the individual has a fixed base
regularly available to him or her in that other State for the purpose of
performing his or her activities, but only so much thereof as is attributable
to that fixed base, or
(b) the individual is present in that other State for a period or periods exceeding in the aggregate 183 days within any period of twelve months, but only so much thereof as is attributable to services performed in that State.
2. The term
"professional services" includes especially independent scientific,
literary, artistic, educational or teaching activities as well as the
independent activities of medical practitioners, lawyers, engineers,
architects, dentists and accountants.
Article 16
Dependent personal
services
1. Subject to the
provisions of Articles 17, 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 there from 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:
(a) the recipient is present in the other
State for a period or periods not exceeding in the aggregate 183 days within
any period of twelve-months; and
(b) the remuneration is paid by, or on
behalf of, an employer who is not a resident of the other State; and
(c) the remuneration is not borne by a
permanent establishment or a fixed base which the employer has in the other
State.
3. Notwithstanding the preceding provisions of this Article, remuneration derived by a resident of a Contracting State in respect of an employment exercised aboard a ship or aircraft operated in international traffic may be taxed in the Contracting State in which the place of effective management of the enterprise is situated.
Article 17
Director's fees
Directors' fees and other
similar payments derived by a resident of a Contracting State in his or her
capacity as a member of the board of directors of a company which is a resident
of the other Contracting State may be taxed in that other State.
Article 18
Artistes and sports
persons
1. Notwithstanding the
provisions of Articles 15 and 16, 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 a sportsperson, from his or her personal
activities as such exercised in the other Contracting State, may be taxed in
that other State.
2. Where income in respect
of personal activities exercised by an artiste or a sportsperson in his or her
capacity as such accrues not to the artiste or sportsperson but to another
person, that income may, notwithstanding the provisions of Articles 7, 15 and
16, be taxed in the Contracting State in which the activities of the artiste or
sportsperson are exercised.
3. Notwithstanding the provisions of paragraphs 1 and 2 income derived by an artistic or sportsperson from his or her personal activities as such shall be exempt from tax in the Contracting State in which these activities are exercised if the activities are exercised within the framework of a visit which is substantially supported by the other Contracting State, a political sub-division, a local authority or a public institution thereof.
Article 19
Pensions and annuities
1. Subject to the
provisions of paragraph 2 of Article 20, pensions and other similar
remuneration for past employment or any annuity arising in a Contracting State
and paid to a resident of the other Contracting State, shall be taxable only in
the first mentioned State.
2. The term "annuity" means a stated sum payable periodically at stated times during life or during a specified or ascertainable period of time under an obligation to make the payments in return for adequate and full consideration in money or money's worth.
Article 20
Government service
1. (a) Remuneration,
other than a pension, paid by a Contracting State or a political sub-division
or a local authority thereof to an individual in respect of services rendered
to that State or sub-division or authority shall be taxable only in that State.
(b) However, such remuneration shall be taxable only in the other Contracting State if the services are rendered in that other State and the individual is a resident of that State who:
(i) is a national of that State; or
(ii) did not
become a resident of that State solely for the purpose of rendering the
services.
2. Any pension paid by, or
out of funds created by, a Contracting State or a political sub-division or a
local authority thereof to an individual in respect of services rendered to
that State or sub-division or authority shall be taxable only in that State.
3. The provisions of
Articles 16, 17 and 19 shall apply to remuneration and pensions in respect of
services rendered in connection with a business carried on by a Contracting
State or a political sub-division or a local authority thereof.
Article 21
Professors, teachers and
students
1. Remuneration received
for education or scientific research by an individual 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 State for the purpose of scientific
research or for teaching at an educational institution shall be exempt from tax
in the first-mentioned State. This exemption shall be granted for a period that
shall not exceed two years from the date on which the teacher or researcher
first entered the first-mentioned State for the purposes of engaging in
scientific research or for teaching. This Article shall not apply to income
from research if such research is undertaken not in the public interest but
primarily for the private benefit of a specific person or persons.
2. (a) Payments
which a student or a business 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 State solely for the purpose of his education
or training receives for the purpose of his maintenance, education or training
shall not be taxed in that State, provided that such payments arise from
sources outside that State.
(b) Payments which a student or business apprentice receives as
remuneration from employment in the first-mentioned State shall be exempted
from tax in the first-mentioned State. This benefit shall extend only for such
period of time as may be reasonable or customarily required to complete the
education or training undertaken, but in no event shall any individual have the
benefit of this provision for more than three consecutive years from the date
of his or her first arrival in the first-mentioned Contracting State.
Article 22
Other income
Items of income not dealt
with in the foregoing Articles of this Convention and derived from sources
within a Contracting State shall be taxable only in that State.
Article 23
Elimination of double
taxation
1. In Namibia, double
taxation shall be eliminated as follows:
Where a resident of
Namibia derives income or capital gains from India the amount of tax on that
income or gains payable, whether directly or by deduction, in India in
accordance with the provisions of this Convention, may be credited against the
Namibian tax imposed on that resident. The amount of credit, however, shall not
exceed the amount of the Namibian tax on that income or gains computed in
accordance with the taxation laws and regulations of Namibia.
2. In India, double
taxation shall be eliminated as follows:
Where a resident of India
derives income or capital gains from Namibia, which, in accordance with the
provisions of this Convention may be taxed in Namibia, then India shall allow
as a deduction from the tax on the income of that resident an amount equal to
the tax on income or capital gains paid in Namibia, whether directly or by
deduction.
Article 24
Limitation of benefits
1. If, in accordance with
the provisions of this Convention, the right of India to tax income is limited
and according to the Namibian tax laws the income is regarded as income from
foreign sources and therefore exempted from Namibian tax, India may tax such
income as if this Convention did not exist.
2. If, in accordance with
the provisions of this Convention, the right of Namibia to tax income from
Namibian sources or deemed to be from Namibian sources is limited and if such
income is in accordance with the Indian tax laws not taxed in India, Namibia
may tax such income as if this Convention did not exist.
Article 25
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 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,
notwithstanding the provisions of Article 1, also apply to persons who are not
residents of one or both of the Contracting States.
2. 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 preventing a
Contracting State from charging the profits of a permanent establishment which
a company of the other Contracting State has in the first-mentioned State at a
rate of tax which is higher than that imposed on the profits of a similar
company of the first-mentioned Contracting State, nor as being in conflict with
the provisions of paragraph 3 of Article 7 of this Convention.
3. Except where the
provisions of paragraph 1 of Article 9, paragraph 7 of Article 11, paragraph 6
of Article 12, or paragraph 6 of Article 14 apply, interest, royalties, fees
for technical services 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.
4. 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 State to any taxation or any requirement connected therewith which is more burdensome than the taxation and connected requirements to which other similar enterprises of the first-mentioned State are or may be subjected.
5. Nothing in this Article
shall be construed as obliging a Contracting State to grant to residents of the
other Contracting State any personal allowances, reliefs and reductions for
taxation purposes on account of civil status or family responsibilities which
it grants to its own residents.
Article 26
Mutual agreement procedure
1. Where a person consider
that the actions of one or both of the Contracting States result or will result
for him or her in taxation not in accordance with the provisions of this Convention,
he or she may, irrespective of the remedies provided by the domestic laws of
those States, present his or her case to the competent authority of the
Contracting State of which he or she is a resident or, if his or her case comes
under paragraph 1 of Article 25, to that of the Contracting State of which he
or she is a national. The case must be presented within three years from the
first notification of the action resulting in taxation not in accordance with
the provisions of the Convention.
2. The competent authority
shall endeavour, if the objection appears to it to be justified and if it is
not itself able to arrive at a satisfactory solution, to resolve the case by
mutual agreement with the competent authority of the other Contracting State, with
a view to the avoidance of taxation which is not in accordance with the
Convention. Any agreement reached shall be implemented notwithstanding any 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 the Convention. They may also consult together for the
elimination of double taxation in cases not provided for in the Convention.
4. The competent
authorities of the Contracting States may communicate with each other directly
for the purpose of reaching an agreement, in the sense of the preceding
paragraphs.
Article 27
Exchange of information
1. The competent
authorities of the Contracting States shall exchange such information,
including documents, as are necessary for carrying out the provisions of this
Convention or of the domestic laws of the Contracting States concerning taxes
covered by the Convention, insofar as the taxation thereunder is not contrary
to the Convention, in particular for the prevention of fraud or evasion of such
taxes. The exchange of information is not restricted by Article 1. 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 bodies) involved in the assessment or collection of, the
enforcement or prosecution in respect of, or the determination of appeals in
relation to, the taxes covered by the Convention. Such persons or
authorities shall use the information
only for such purposes. They may disclose the information in public court
proceedings or in judicial decisions.
2. In no case shall the
provisions of paragraph 1 be construed so as to impose on a Contracting State
the obligation:
(a) to carry out administrative measures at
variance with the laws and administrative practice of that or of the other Contracting
State;
(b) 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;
(c) 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.
Article 28
Diplomatic agents and
consular officers
Nothing in this Convention
shall affect any fiscal privileges accorded to members of diplomatic or
permanent missions or consular posts under the general rules of international
law or under the provisions of special agreements.
Article 29
Entry into force
Each of the Contracting
States shall notify to the other through diplomatic channels the completion of
the procedures required by its law for the bringing into force of this
Convention. This Convention shall enter into force on the date of the later of
these notifications and shall thereupon have effect:
(a) in Namibia:
(i) in respect of taxes withheld at source,
for amounts paid or credited on or after the first day of March in the calendar
year next following that in which the Convention enters into force; and
(ii) in respect of other taxes, for any year
of assessment beginning on or after the first day of March in the calendar year
next following that in which the Convention enters into force;
(b) in India:
(i) in respect of taxes withheld at source,
for amounts paid or credited on or after the first day of April in the calendar
year next following that in which the Convention enters into force; and
(ii) in respect of other taxes, for any
fiscal year beginning on or after the first day of April in the calendar year
next following that in which the Convention enters into force.
Article 30
Termination
1. This Convention shall
remain in force until terminated by one of the Contracting States. Either
Contracting State may terminate the Convention, through diplomatic channels, by
giving notice of termination at least six months before the end of any calendar
year beginning after the expiry of five years from the date of entry into force
of the Convention. In such event, the Convention shall cease to have effect:
(a) in Namibia:
(i) in respect of taxes withheld at source, for amounts paid or
credited on or after the first day of March in the calendar year next following
that in which the notice is given; and
(ii) in respect of other taxes, for any year
of assessment beginning on or after the first day of March in the calendar year
next following that in which the notice is given;
(b) in India:
(i) in respect of taxes withheld at source, for amounts paid or
credited on or after the first day of April in the calendar year next following
that in which the notice is given; and
(ii) in respect of other taxes, for any
fiscal year beginning on or after the first day of April in the calendar year
next following that in which the notice is given.
IN WITNESS WHEREOF the
undersigned, duly authorised thereto, have signed this Convention.
DONE in duplicate at New Delhi,
this 15th day of February, 1977, in the English and Hindi languages, both the
texts being, equally authentic. In case of any divergence in interpretation,
the English text shall prevail.
Agreement between the Government
of Republic of India and his Majesty's government of Nepal for the avoidance of
double the taxation and the prevention of fiscal evasion with respect to taxes
on income
Notification No. 8198 [F.
No. 114/4/69-FTD]
G.S.R 1146(E).--Whereas
the annexed Agreement between the Government of the Republic of India and His
Majesty’s Government of Nepal for the avoidance of double taxation and the
prevention of fiscal evasion with respect to taxes on income has come into
force on 1st November, 1988, on the notification by both the Contracting States
to each other, under Article 27 of the said Agreement, of the completion of
procedures required under their respective laws for bringing the Agreement into
force;
Now, therefore, in
exercise of the powers conferred by section 90 of the Income-tax Act, 1961 (43
of 1961) and section 24A of the Companies (Profits) Surtax Act, 1964 (7 of
1964), the Central Government hereby directs that all the provisions of the
said Agreement shall be given effect to in the Union of India.
The Government of the
Republic of India and His Majesty's Government of Nepal.
Desiring to conclude an
agreement for the avoidance of double taxation and the prevention of fiscal
evasion with respect to taxes on income:
Have agreed as follows :
CHAPTER 1
Scope of the agreement
ARTICLE 1: Personal
scope.--This Agreement shall apply to persons who are residents of one or both
of the Contracting States.
ARTICLE 2: Taxes covered.--1. The taxes to which this Agreement shall apply are:
(a) in the case of India :
(i) the income-tax including any surcharge thereon imposed under the Income-tax Act, 1961 (43 of 1961);
(ii) the
surtax imposed under the Companies (Profits) Surtax Act, 1964 (7 of 1964);
(hereinafter referred to
as “Indian tax”).
(b) in the case of Nepal :
(i) income-tax imposed under the Income-tax Act, 2031
(hereinafter referred to as “Nepal tax”).
2. The Agreement shall
also apply to any identical or substantial similar taxes which are imposed by
either Contracting State after the date of signature of the present Agreement
in addition to, or in place of, the taxes referred to in paragraph 1. The
competent authorities of the Contracting States shall notify each other any
substantial changes which are made in their respective taxation laws.
CHAPTER II
Definitions
ARTICLE 3: General
definitions.--1. In this Agreement, unless the context otherwise requires.--
(a) the terms “a Contracting State” and the
“other Contracting State” mean India or Nepal as the context requires;
(b) the term “tax” means Indian tax or Nepal
tax, as the context requires, but shall not include any amount which is payable
in respect of any default or omission in relation to the taxes to which this
Agreement applies or which represents a penalty imposed relating to those
taxes;
(c) the term “person” includes an
individual, a company and any other entity, which is treated as a taxable unit,
under the taxation laws in force in the respective Contracting States;
(d) the term “company” means any body
corporate or any entity which is treated as a company or body corporate under
the taxation laws in force in the respective Contracting States;
(e) 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;
(f) the term “competent authority” means in
the case of India, the Central Government in the Ministry of Finance
(Department of Revenue) or their authorised representative; and in the case of
Nepal, His Majesty’s Government, Ministry of Finance or their authorised
representative;
(g) the term “national” means by any
individual, possessing the nationality of a Contracting State and any legal
person, partnership or association deriving its status from the laws in force
in the Contracting State;
(h) the term “international traffic” means
any transport by an aircraft operated by an enterprise of a Contracting State,
except when the aircraft is operated solely between places in the other
Contracting State.
2. As regards the
application of the Agreement by a Contracting State any term not defined
therein shall, unless the context otherwise requires, have the meaning which it
has under the law of that State concerning the taxes to which the 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 therein by
reason of his domicile, residence, place of management or any other criterion
of a similar nature.
2. Where by reason of the
provisions of paragraph 9, an individual is a resident of both Contracting
States, then his status shall be determined as follows :
(a) 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 economic activities are concentrated;
(b) 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;
(c) 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 in which his economic
activities are concentrated; and
(d) in case of dispute, the competent authorities of the
Contracting States shall settle the question by mutual agreement.
3. Where by reason of the
provisions of paragraph 1, a person other than an individual is a resident of
both Contracting States, then it shall be deemed to be a resident of the State
in which its 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
the enterprise is wholly or partly carried on.
2. The term “permanent
establishment” includes especially :
(a) a place of management;
(b) a branch;
(c) an
office;
(d) a
factory;
(e) a
workshop;
(f) a mine,
an oil or gas well, a quarry or any other place of extraction of natural
resources;
(g) a building site or construction or
assembly project, but only where such
site, project or activity continues for a period or periods aggregating more
than 183 days in any twelve-month period.
(h) the furnishing of services by an
enterprise through employees or other personnel, where activities continue
within the country for a period or periods aggregating more than 183 days in
any twelve-month period.
3. Notwithstanding the
preceding provisions of the Article, the term “permanent establishment” shall
be deemed not to include :
(a) the use of facilities solely for the purpose of storage or
display of goods or merchandise belonging to the enterprise;
(b) the maintenance of a stock of goods or merchandise belonging
to the enterprise solely for the purpose of storage or display;
(c) the maintenance of a stock of goods or merchandise belonging
to the enterprise solely for the purpose of processing by another enterprise;
(d) the maintenance of a fixed place of business solely for the
purpose of purchasing goods or merchandise, or of collecting information for
the enterprise;
(e) the maintenance of a fixed place of business solely for the
purpose of carrying on, for the enterprise, any other activity of a preparatory
or auxiliary character.
4. Notwithstanding the
provisions of paragraphs 1 and 2, where a person--other than an agent of
independent status to whom paragraph 5 applies is acting on behalf of an
enterprise and has, and habitually exercises, in a Contracting State an
authority to conclude contracts on behalf 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 the enterprise, unless the
activities of such person are limited to the purchase of goods or merchandise
for the enterprise.
5. 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, a general commission agent or any other agent of an independent status provided that such persons are acting in the ordinary course of their business. However, when the activities of such an agent are devoted wholly or almost wholly on behalf of that enterprise, he will not be considered an agent of an independent status within the meaning of this paragraph.
6. 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 which carries on
business in that other Contracting State (whether through a permanent establishment
or otherwise), 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 in question is situated. The term shall in any case
include property accessory to immovable property, livestock and equipment used
in agriculture and forestry, rights to which the provisions of general law
respecting landed property apply, usufruct of immovable property and rights to
variable or fixed payments as consideration for the working of, or the right to
work, mineral deposits, sources and other
natural resources. Ships, boats and aircraft shall not be regarded as
immovable property.
3. The provisions of
paragraph 1 shall also 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 the income from immovable property of an enterprise and 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. (a) In the
determination of the profits of a permanent establishment, there shall be
allowed as deductions, expenses of the enterprise which are incurred for the
purpose of the permanent establishment including only those executive and
general administrative expenses incurred, whether in the State in which the
permanent establishment is situated or elsewhere which are allowed under the
provisions of the domestic law of the Contracting State in which the permanent
establishment is situated.
(b) However, no such deduction shall be allowed in respect of
amounts, if any, paid (otherwise than towards reimbursement of actual expenses)
by the permanent establishment to the head office of the enterprise or any of its
other offices, by way of royalties, fees or other similar payments, in return
for the use of patents or other rights, or by way of commission, of specific
services performed or for management or except in the case of a banking
enterprise, by way of interest on moneys lent to the permanent establishment.
Likewise, no account shall be taken in the determination of the profits of a
permanent establishment of amount charged (otherwise than towards reimbursement
of actual expenses) by the permanent establishment to the head office of the
enterprise or any of its other offices, by way of royalties, fees or other
similar payments in return for the use of patents or other rights, or by way of
commission for specific services performed or for management, or, except in the
case of a banking enterprise by way of interest on moneys lent to the head
office of the enterprise or any of its other offices.
4. In so far as it has
been customary in a Contracting State to determine the 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
preclude that Contracting State from determining the profits to be taxed by
such an apportionment as may be customary, the method of apportionment adopted
shall, however, be such that the result shall be in accordance with the
principles contained in this Article.
5. No profits shall be
attributed to 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 profits include
items of income which are dealt with separately in other Articles of this
Agreement then the provisions of those Articles shall not be affected by the
provisions of this Article.
ARTICLE 8: Air transport.--1.
Profits derived by an enterprise of a Contracting State from the operation of
aircraft in international traffic shall be taxable only in that State.
2. The provisions of
paragraph 1 shall also apply to profits from the participation in a pool, a joint
business or an international operating agency.
3. For the purposes of
this Article, interest on funds connected with the operation of aircraft in
international traffic shall be regarded as income/profits derived from the
operation of such aircraft, and the provisions of Article 11 shall not apply in
relation to such interest.
4. The term “operation of
aircraft” shall mean business of transportation by air of passengers, mail,
livestock or goods carried on by the owners or lessees or charterers of aircraft,
including the sale of tickets for such transportation on behalf of other
enterprises the incidental lease of aircraft and any other activity directly
connected with such transportation.
ARTICLE 9: Associated
enterprises.--Where--
(a) 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
(b) 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, 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.
ARTICLE 10: Dividends.--1.
Dividends paid by a company which is 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 the beneficial owner of the dividends, the tax so charged shall
not exceed :
(a) 10 per cent of the gross amount of the dividends if the
beneficial owner is a company which owns at least ten per cent of the shares of
the company paying the dividends;
(b) 15 per cent of the gross amount of the dividends in all other
cases.
This paragraph shall not
affect the taxation of the company in respect of the profits out of which the
dividends are paid.
3. The term “dividends” as
used in this Article means income from shares or other rights, not being
debt-claims, participating in profits, as well as income from other corporate
rights which is subjected to the same taxation treatment as income from shares
by the laws of the State of which the company making the distribution is a
resident.
4. 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 fixed base. In such case, the provisions
of Article 7 or Article 13, 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 State may not impose any tax on the dividends
paid by the company except in so far as such dividends are paid to a resident
of that other 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 State, 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 such other State.
ARTICLE 11: Interest.--1.
Interest arising in a Contracting State and paid to a resident of the
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 recipient is the beneficial owner of the
interest the tax so charged shall not exceed 15 per cent of the gross amount of
the interest:
Provided, however, that
where the interest is paid to a bank carrying on bona fide banking business,
which is resident of the other Contracting State and is the beneficial owner of
the interest, the tax charged in the Contracting State in which the interest
arises shall not exceed 10 per cent of the gross amount of interest.
3. Notwithstanding the
provisions of paragraph 2, interest arising in a Contracting State shall be
exempt from tax in that State provided it is derived and beneficially owned by
:
(i) the Government, a political
sub-division or a local authority of the other Contracting State; or
(ii) the
Central Bank of the other Contracting State.
4. The term “interest” as
used in this Article means income from debt-claims of every kind, whether or
not secured by mortgage and whether or not 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. Penalty charges for late payment shall
not be regarded as interest for the purpose of this Article.
5. The provisions of
paragraphs 1 and 2 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 such
permanent establishment or fixed base. In such case, the provisions of Article
7 or Article 13, as the case may be, shall apply.
6. Interest shall be
deemed to arise in a Contracting State when the payer is that Contracting State
itself, a political sub-division, a local authority 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.
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 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 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 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 State, but if the recipient is the beneficial owner of the
royalties, the tax so charged shall not exceed 15 per cent of the gross amount
of the 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, or films or tapes used for the
radio or television broadcasting any patent, trade mark, 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.
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 13, as the case may be, shall apply.
5. Royalties shall be
deemed to arise in a Contracting State when the payer is that State itself, a
political sub-division, a local authority or a resident of that State. Where,
however, the person paying the royalties, whether he is resident of a
Contracting State or not, has in a Contracting State a permanent establishment
or a fixed base in connection with which the liability to pay the royalties was
incurred, 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.
6. Where, by reason of
special relationship between the payer and the beneficial owner or between both
of them and some other person, the amount of 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 Agreement.
ARTICLE 13: Independent
personal services.--1. Income derived by a resident of a Contracting State in
respect of professional services or other independent activities of a similar
character shall be taxable only in that State except in the following
circumstances when such income may also be taxed in the other Contracting State
:
(a) if he has a fixed base regularly available to him in the
other Contracting State for the purpose of performing his activities; in that
case, only so much of the income as is attributable to that fixed base may be
taxed in that other Contracting State; or
(b) if his stay in the other Contracting State is for a period or
periods amounting to or exceeding in the aggregate 183 days in the relevant
“previous year” or “year of income”, as the case may be; in that case, only so
much of the income as is derived from his activities performed in that other
State may be taxed in that other State.
2. The term “professional
services” includes independent scientific, literary, artistic, educational or
teaching activities, as well as the independent activities of physicians,
surgeons, lawyers, engineers, architects, dentists and accountants.
ARTICLE 14: Dependent
personal services.--1. Subject to the provisions of Articles 15, 16, 17, 18, 19
and 20, 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 :
(a) the recipient is present in the other State for a period or
periods not exceeding in the aggregate 183 days in the relevant “previous year”
or “year of income”, as the case may be; and
(b) the remuneration is paid by, or on behalf of, an employer who
is not a resident of the other State; and
(c) the remuneration is not borne by a permanent establishment or
a fixed base which the employer has in the other State.
3. Notwithstanding the
preceding provisions of this Article, remuneration derived in respect of an
employment exercised aboard an aircraft operated in international traffic by an
enterprise of a Contracting State shall be taxable only in that State.
ARTICLE 15: Directors’
fees.--Directors’ fees and similar payments derived by a resident of a
Contracting State in his capacity as a member of the board of directors of a
company which is a resident of the other Contracting State may be taxed in that
other State.
ARTICLE 16: Income earned
by entertainers and athletes.--1. Notwithstanding the provisions of Articles 13
and 14, income derived by a resident of a Contracting State as an entertainer
such as a theatre, motion picture, radio or television artistes or a musician
or as an athlete, from his personal activities as such exercised in the other
Contracting State may be taxed in that other State.
2. While income in respect
of personal activities exercised by an entertainer or an athlete in his
capacity as such accrues not to the entertainer or athlete himself but to another
person, that income may, notwithstanding the provisions of Articles 7, 13 and
14, be taxed in the Contracting State in which the activities of the
entertainer or athlete are exercised.
3. Notwithstanding the
provisions of paragraph 1, income derived by an entertainer or an athlete who
is a resident of a Contracting State from his personal activities as such
exercised in the other Contracting State, shall be taxable only in the
first-mentioned Contracting State, if the activities in the other Contracting
State are supported wholly or substantially from the public funds of the
first-mentioned Contracting State, including any of its political sub-divisions
or local authorities.
4. Notwithstanding the
provisions of paragraph 2 and Articles 7, 13 and 14, where income in respect of
personal activities exercised by an entertainer or an athlete in his capacity
as such in a Contracting State accrues not to the entertainer or athlete
himself but to another person, that income shall be taxable only in the other Contracting
State, if that other person is supported wholly or substantially from the
public funds of that other State, including any of its political sub-divisions
or local authorities.
ARTICLE 17: Remuneration
and pensions in respect of government service.--1. (a) Remuneration other than
a pension paid by a Contracting State or a political sub-division or a local
authority thereof to an individual in respect of services rendered to that
State or sub-division or authority shall be taxable only in that State.
(b) However, such remuneration shall be taxable only in the other
Contracting State if the services are rendered in that other State and the
individual is a resident of that State who :
(i) is a national of that State; or
(ii) did not
become a resident of that State solely for the purpose of rendering the
services.
2. (a) Any pension
paid by, or out of funds created by a Contracting State or a political
sub-division or a local authority thereof to an individual in respect of
services rendered to that State or sub-division or authority shall be taxable
only in that State.
(b) However, such pension shall be taxable only in the other
Contracting State if the individual is resident of, and a national of that
other State.
3. The provisions of
Articles 14, 15 and 16 shall apply to remuneration and pensions in respect of
services rendered in connection with a business carried on by a Contracting
State or a political sub-division or a local authority thereof.
ARTICLE 18: Non-government
pensions and annuities.--1. Any pension, other than a pension referred to in
Article 17, or any annuity derived by a resident of a Contracting State from
sources within the other Contracting State may be taxed only in the
first-mentioned Contracting State.
2. The term “pension”
means a periodic payment made in consideration of past services or by way of
compensation for injuries received in the course of performance of services.
3. The term “annuity”
means a stated sum payable periodically at stated times during life or during a
specified or ascertainable period of time, under an obligation to make the
payments in return for adequate and full consideration in money or money’s
worth.
ARTICLE 19: Payments
received by students and apprentices.--1. A student or business apprentice who
is or was a resident of one of the Contracting States immediately before
visiting the other Contracting State and who is present in that other State
solely for the purpose of his education or training, shall be exempt from tax
in that other State on :
(a) payments made to him by persons residing outside that other
State for the purposes of his maintenance, education or training; and
(b) remuneration from employment in that other State, in an
amount not exceeding Rs. 18,000 (Indian currency), or its equivalent in
Nepalese currency during any “previous year” or the “year of income”, as the
case may be, provided that such employment is directly related to his studies
or is undertaken for the purpose of his maintenance.
2. The benefits of this
Article shall extend only for such period of time as may be reasonable or
customarily required to complete the education or training undertaken but in no
event shall any individual have the benefits of this Article for more than
three consecutive years from the date of his first arrival in that other
Contracting State.
ARTICLE 20: Payments
received by professors teachers and research scholars.--1. A professor or
teacher who is or was a resident of one of the Contracting States immediately
before visiting the other Contracting State for the purpose of teaching or
engaging in research, or both, at a university, college, school or other
approved institution in that other Contracting State shall be exempt from tax
in that other State on any remuneration for such teaching or research for a
period not exceeding two years from the date of his arrival in that other
State.
2. This Article shall not
apply to income from research if such research is undertaken primarily for the
private benefit of a specific person or persons.
3. For the purposes of
this Article and Article 19, an individual shall be deemed to be a resident of
a Contracting State if he is resident in that Contracting State in the
“previous year” or the “year of income”, as the case may be, in which he visits
the other Contracting State or in the immediately preceding “previous year” or
the “year of income”.
4. For the purposes of
paragraph 1, “approved institution” means an institution which has been
approved in this regard by the competent authority of the concerned Contracting
State.
ARTICLE 21: Other
income.--1. Subject to the provisions of paragraph 2, items of income of a
resident of a Contracting State, wherever arising, which are not expressly
dealt with in the foregoing articles of this Agreement, shall be taxable only
in that Contracting 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 provisions of Article 7 or Article 13, as the case may be, shall apply.
CHAPTER IV
Methods of elimination of
double taxation
ARTICLE 22: Elimination of
double taxation.--1. The laws in force in either of the Contracting State shall
continue to govern the taxation of income in the respective Contracting States
except where provisions to the contrary are made in this Agreement. Where
income is subject to tax in both Contracting States relief from double taxation
shall be given in accordance with this Article.
2. Subject to the
provisions of the law of Nepal regarding the allowance as a credit against
Nepal’s tax of tax payable in a territory outside Nepal (which shall not affect
the general principle hereof) Indian tax payable under the law of India and in
accordance with the provisions of this Agreement whether directly or by
deduction, on income from sources within India shall be allowed as a credit
against any Nepal tax computed by reference to the same items of income by
reference to which the Indian tax is computed.
3. For the purpose of the
credit referred to in paragraph (2), the term “Indian tax payable” shall be
deemed to include any amount by which tax has been reduced by the special
incentive measures under--
(i) sections 10(4), 10(4A), 10(6)(viia),
10(15)(iv), 10(28), 10A, 32A, 33A, 80HH, 80HHA, 80-I and 80L of the Indian
Income-tax Act, 1961 (43 of 1961); and
(ii) any other provision which may
subsequently be enacted granting a deduction of tax which the competent
authorities of the Contracting States agree to be for the purposes of economic
development.
4. Subject to the
provisions of the law of India regarding the allowance as a credit against
Indian tax or tax payable in a territory outside India (which shall not affect
the general principle thereof) Nepal tax payable under the law of Nepal and in
accordance with the provisions of this Agreement whether directly or by
deduction, on income from sources within Nepal shall be allowed as a credit
against any Indian tax computed by reference to the same items of income by
reference to which Nepal tax is computed:
Provided that such credit
shall not exceed Indian tax (as computed before allowing any such credit),
which is appropriate to the income derived from sources within Nepal, so
however, that where such resident is a company by which surtax is payable in
India, the credit aforesaid shall be allowed in the first instance against
income-tax payable by the company in India, and as to the balance, if any,
against surtax payable by it in India.
5. For the purpose of
paragraph 4 of this Article the term “Nepal tax payable” shall be deemed to
include any amount which would have been payable as Nepal tax for any year but
for an exemption or reduction of tax granted for that year or any part thereof
under :
(a) sub-section (2) of section 42 of the Nepal Income-tax Act,
2031 (1974), so far as they were in force on, and have not been modified since,
the date of the signature of this Agreement, or have been modified only in
minor respects so as not to affect their general character; or
(b) any other provisions which may subsequently be made granting
an exemption or reduction of tax which is agreed by the competent authorities
to be of a substantially similar character, if it has not been modified
thereafter or has been modified only in minor respects so as not to affect its
general character.
6. Where under this Agreement a resident of a Contracting State is exempt from tax in that Contracting State in respect of income derived from the other Contracting State then the first-mentioned Contracting State may in calculating tax on the remaining income of that person apply the rate of tax which would have been applicable if the income exempted from tax in accordance with the Agreement had not been so exempted.
CHAPTER V
Special provisions
ARTICLE 23:
Non-discrimination.--1. The 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.
2. 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 in the same circumstances.
3. Nothing contained in
this Article shall be construed as obliging a Contracting State to grant
persons not resident in that State any personal allowances, reliefs, reductions
and deductions for taxation purposes which are by law available only to persons
who are so resident.
4. 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 of that first-mentioned State are or may be subjected in
the same circumstances.
5. In this Article, the
term “taxation” means taxes which are the subject of this Agreement.
ARTICLE 24: Mutual
agreement procedure.--1. Where a resident of a Contracting State considers that
the actions of one or both of the Contracting States result or will result for
him in taxation not in accordance with this Agreement, he may, notwithstanding
the remedies provided by the national laws of those States, present his case to
the competent authority of the Contracting State of which he is a resident.
This case must be presented within three years of the date of receipt of notice
of the action which gives rise to taxation not in accordance with the
Agreement.
2. The competent authority
shall endeavour, if the objection appears to it to be justified and if it is
not itself able to arrive at an appropriate solution, 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 Agreement.
Any agreement reached shall be implemented notwithstanding any time limits in
the national laws of the Contracting States.
3. The competent
authorities of the Contracting State shall endeavour to resolve by mutual
agreement any difficulties or doubts arising as to the interpretation or
application of the Agreement. They may also consult together for the
elimination of double taxation in cases not provided for in the Agreement.
4. The competent
authorities of the Contracting States may communicate with each other directly
for the purpose of reaching an agreement in the sense of the preceding
paragraphs. When it seems advisable in order to reach agreement to have an oral
exchange of opinions, such exchange may take place through a Commission consisting
of representatives of the competent authorities of the Contracting States.
ARTICLE 25: Exchange of
information.--1. The competent authorities of the Contracting States shall
exchange such information (including documents) as is necessary for carrying
out the provisions of the agreement or of the domestic laws of the Contracting
States concerning taxes covered by the Agreement, in so far as the taxation
thereunder is not contrary to the Agreement in particular for the prevention of
fraud or evasion of such taxes. 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. However, if the information is originally regarded
as secret in the transmitting State, it
shall be disclosed only to persons or authorities (including courts and
administrative bodies) involved in the assessment or collection of, the
enforcement or prosecution in respect of, or the determination of appeals in
relation to, the taxes which are the subject of the Agreement. Such persons or
authorities shall use the information only for such purposes but may disclose
the information in public court proceedings or in judicial decisions. The
competent authorities shall, through consultation, develop appropriate
conditions, methods and techniques concerning the matters in respect of which
such exchange of information shall be made, including where appropriate,
exchange of information regarding tax avoidance.
2. The exchange of
information or documents shall be either on a routine basis or on request with
reference to particular cases or both. The competent authorities of the
Contracting States shall agree from time to time on the list of the information
or documents which shall be furnished on a routine basis.
3. In no case shall the
provisions of paragraph 1 be construed so as to impose on Contracting State the
obligation :
(a) to carry out administrative measures at variance with the
laws or administrative practice of that or of the other Contracting State;
(b) to supply information or documents which are not obtainable
under the laws or in the normal course of the administration of that or of the
other Contracting State;
(c) to supply information or documents 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.
ARTICLE 26: Diplomatic and
consular activities.--Nothing in this Agreement shall affect the fiscal
privileges of diplomatic or consular officials under the general rules of
international law or under the provisions of special agreement.
CHAPTER VI
Final provisions
ARTICLE 27: Entry into
force.--Each of the Contracting States shall notify to the other completion of
the procedure required by its law for the bringing into force of this
Agreement. This Agreement shall enter into force on the date of the later of
these notifications and shall thereupon have effect :
(a) in India, in respect of income arising in any previous year
beginning on or after the first day of April next following the calendar year
in which the later of the notifications is given;
(b) in Nepal, in respect of income arising in any year of income
beginning on or after
the first day of Nepalese fiscal year next following the calendar year in which
the later of the notification is given.
ARTICLE 28:
Termination.--This Agreement shall remain in force indefinitely but either of
the Contracting States may, on or before the thirtieth day of June in any
calendar year beginning after the expiration of a period of five years from the
date of its entry into force, give the other Contracting State through
diplomatic channel, written notice of termination and, in such event, this
Agreement shall cease to have effect :
(a) in India, in respect of income arising in any previous year
beginning on or after the 1st day of April next following the calendar year in
which the notice of termination is given;
(b) in Nepal, in respect of income arising in any year of income
beginning on or after the 1st day of Nepalese fiscal year next following the
calendar year in which the notice of termination is given.
In witness whereof the
undersigned being duly authorised thereto, have signed the present Agreement.
Done in duplicate at
Kathmandu on this eighteenth day of January, One thousand nine hundred and
eighty-seven A.D. in Hindi, Nepali and English languages all the texts being
equally authentic. In case of divergence in interpretation the English text
shall prevail.
For the Government of For
his Majesty's
the Republic of India Government
of Nepal
(Narayan Datt Tiwari) (Shalendra
Kumar Upadhyaya)
Minister of External
Affairs Minister
of foreign Affairs
and land reforms
Government of Nepal
Convention between the
Republic of India and the Kingdom of the Netherlands for the avoidance of
double taxation and the prevention of fiscal evasion with respect to taxes on
income and on capital
Notification No. G.S.R.
383(E), dated 27 March, 1989
Whereas the annexed
Convention between the Government of the Republic of India and the Kingdom of
the Netherlands for the avoidance of double taxation and the prevention of
fiscal evasion with respect to taxes on income and on capital has come into
force on 21st day of January, 1989, after the notification by both the
Contracting States to each other of the completion of procedures required under
their laws for bringing into force of the said Convention in accordance with
paragraph 1 of Article 29 of the said Convention;
Now, therefore, in
exercise of the powers conferred by section 90 of the Income-tax Act, 1961 (43
of 1961), section 24A of the Companies (Profits) Surtax Act, 1964 (7 of 1964)
and section 44A of the Wealth-tax Act, 1957 (27 of 1957), the Central
Government hereby directs that all the provisions of the said Convention shall
be given effect to in the Union of India.
The Government of the
Republic of India and the Government of the Kingdom of the Netherlands.
Desiring to conclude a
Convention for the avoidance of double taxation and the prevention of fiscal
evasion with respect to taxes on income and on capital :
Have agreed as follows :
CHAPTER I
Scope of the Convention
ARTICLE 1: Personal
scope.--This Convention shall apply to persons who are residents of one or both
of the States.
ARTICLE 2: Taxes
covered.--1. This Convention shall apply to taxes on income and on capital
imposed on behalf of one of the States or of its political sub-divisions or
local authorities, irrespective of the manner in which they are levied.
2. There shall be regarded
as taxes on income and on capital all taxes imposed on total income, on total
capital, or on elements of income or of capital, including taxes on gains from
the alienation of movable or immovable property, taxes on the total amounts of
wages or salaries paid by enterprises, as well as taxes on capital
appreciation.
3. The existing taxes to
which the Convention shall apply are in particular :
(a) in the Netherlands :
--de inkomstenbelasting
(income-tax),
--de loonbelasting (wages
tax),
--de
vennootschapsbelasting (company tax) including the Government share in the net
profits of the exploitation of natural resources levied pursuant to the Mining
Act of 1810 (Mijnwet 1810) with respect to concessions issued from 1967, or
pursuant to the Netherlands Continental Shelf Mining Act of 1965 (Mijnwet
Continental Plat, 1965),
--de dividendbelasting
(dividend tax),
--de vermogensbelasting
(capital tax),
(hereinafter referred to
as the "Netherlands tax");
(b) in India :
--the income-tax including
any surcharge thereon,
--the surtax,
--the wealth-tax,
(hereinafter referred to
as the "Indian tax").
4. The Convention shall
apply also to any identical or substantially similar taxes which are imposed
after the date of signature of the Convention in addition to, or in place of,
the existing taxes. The competent authorities of the States shall notify to
each other any substantial 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.--
(a) the term "State" means the Netherlands or India, as
the context requires, the term "States" means the Netherlands and
India;
(b) the term "the Netherlands" means the part of the
Kingdom of the Netherlands that is situated in Europe and the part of the
sea-bed and the sub-soil under the North Sea, to the extent that that area in
accordance with international law has been or may hereafter be designated under
the Netherlands laws as an area within which the Netherlands may exercise
certain rights with respect to the exploration and exploitation of the natural
resources of the sea-bed or its sub-soil;
(c) the term "India" means the territory of India and
includes the territorial sea and the air space above it, as well as any other
maritime zone in which India has sovereign rights, other rights and
jurisdiction, according to the Indian law and in accordance with international
law;
(d) the term "tax" means the Indian tax or the
Netherlands tax, as the context requires, but shall not include any amount
which is payable in respect of any default or omission in relation to the taxes
to which this Convention applies or which represents a penalty imposed relating
to those taxes;
(e) the term "person" includes an individual, a
company, any other body of persons and any other entity which is treated as a
taxable unit, under the taxation laws in force in the respective States;
(f) the term "company" means any body corporate or any
entity which is treated as a company or a body corporate under the taxation
laws in force in the respective States;
(g) the terms "enterprise of one of the States" and
"enterprise of the other State" mean respectively an enterprise
carried on by a resident of one of the States and an enterprise carried on by a
resident of the other State;
(h) the term "international traffic" means any
transport by a ship or aircraft operated by an enterprise which has its place
of effective management in one of the States, except when the ship or aircraft
is operated solely between places in the other State.
(i) the term "nationals" means :
(1) all individuals, possessing the nationality of one of the
States;
(2) all legal persons, partnerships and
associations deriving their status as such from the laws in force in one of the
States;
(j) the term "competent authority" means :
(1) in the Netherlands, the Minister of Finance or his authorised
representative;
(2) in India, the Central Government in the
Ministry of Finance (Department of Revenue) or their authorised representative.
2. As regards the
application of the Convention by one of the States any term not defined herein
shall, unless the context otherwise requires, have the meaning which it has
under the law of that State concerning the taxes to which the Convention
applies.
ARTICLE 4: Resident.--1.
For the purposes of this Convention, the term "resident of one of the
States" 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.
2. Where by reason of the
provisions of paragraph 1 an individual is a resident of both States, then his
status shall be determined as follows :
(a) 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 with which
his personal and economic relations are closer (centre of vital interests);
(b) 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;
(c) 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;
(d) if he is a national of both States or of neither of them, the
competent authorities of the States shall settle the question by mutual
agreement.
3. Where by reason of the
provisions of paragraph 1 a person other than an individual is a resident of
both States, then it shall be deemed to be a resident of the State in which its
place of effective management is situated.
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 the enterprise is wholly or partly carried on.
2. The term
"permanent establishment" includes especially :
(a) a place of management;
(b) a branch;
(c) an
office;
(d) a
factory;
(e) a
workshop;
(f) a mine,
an oil or gas well, a quarry or any other place of extraction of natural
resources;
(g) a
warehouse in relation to a person providing storage facilities for others;
(h) a
premises used as a sales outlet;
(i) an installation or structure used for
the exploration of natural resources provided that the activities continue for
more than 183 days.
3. A building site or
construction, installation or assembly project constitutes a permanent
establishment only where such site or project continues for a period of more
than six months.
4. Notwithstanding the
preceding provisions of this Article, the term "permanent
establishment" shall be deemed not to include :
(a) the use of facilities solely for the
purpose of storage or display of goods or merchandise belonging to the
enterprise;
(b) the maintenance of a stock of goods or
merchandise belonging to the enterprise solely for the purpose of storage or
display;
(c) the maintenance of a stock of goods or
merchandise belonging to the enterprise solely for the purpose of processing by
another enterprise;
(d) the maintenance of a fixed place of
business solely for the purpose of purchasing goods or merchandise, or of
collecting information for the enterprise;
(e) the maintenance of a fixed place of
business solely for the purpose of advertising, for the supply of information
for scientific research, or for other activities which had a preparatory or
auxiliary character, for the enterprise;
(f) the maintenance of a fixed place of
business solely for any combination of activities mentioned in sub-paragraphs
(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 one of the States
on behalf of an enterprise of the other State, that enterprise shall be deemed
to have a permanent establishment in the first-mentioned State, if--
(a) he has and habitually exercises in that
State an authority to conclude contracts on behalf of the enterprise, unless
his activities are limited to the purchase of goods or merchandise for the
enterprise; or
(b) he has no such authority, but habitually
maintains in the first-mentioned State a stock of goods or merchandise from
which he regularly delivers goods or merchandise on behalf of the enterprise.
6. An enterprise of one of the States shall not be deemed to have a permanent establishment in the other State merely because it carries on business in that other State through a broker, a general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business. However, when the activities of such an agent are devoted wholly or almost wholly on behalf of that enterprise, he will not be considered an agent of an independent status within the meaning of this paragraph if it is shown that the transactions between the agent and the enterprise were not made under at arm's length conditions.
7. The fact that a company
which is a resident of one of the States controls or is controlled by a company
which is a resident of the other State, or which carries on business in that
other State (whether through a permanent establishment or otherwise), 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 one of the States from
immovable property (including income from agriculture or forestry) situated in
the other 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 State in which the property in question is situated. The term shall
in any case include property accessory to immovable property, livestock and
equipment used in agriculture and forestry, right to which the provisions of
general law respecting landed property apply, usufruct of immovable property
and rights to variable or fixed payments as consideration for the working of,
or the right to work, mineral deposits, sources and other natural resources;
ships and aircraft 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 the income from immovable property of an
enterprise and to income from immovable property used for the performance of
independent personal services.
ARTICLE 7: Business
profits.--1. The profits of an enterprise of one of the States shall be taxable
only in that State unless the enterprise carries on business in the other 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 one of the States carries on
business in the other State through a permanent establishment situated therein,
there shall in each 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. In any case, where the correct amount of profits
attributable to a permanent establishment is incapable of determination or the
determination thereof presents exceptional difficulties, the profits
attributable to the permanent establishment may be estimated on the basis of an
apportionment of the total profits of the enterprise to its various parts,
provided, however, that the result shall be in accordance with the principles
contained in this Article.
3. (a) 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 so
incurred, whether in the State in which the permanent establishment is situated
or elsewhere, in accordance with the provisions of and subject to the
limitations of the taxation laws of that State. Provided that where the law of
the State in which the permanent establishment is situated imposes a
restriction on the amount of the executive and general administrative expenses
which may be allowed, and that restriction is relaxed or overridden by any
Convention between that State and a third State which enters into force after
the date of entry into force of this Convention, the competent authority of
that State shall notify the competent authority of the other State of the terms
of the corresponding paragraph in the Convention with that third State
immediately after the entry into force of that Convention and, if the competent
authority of the other State so requests, the provisions of this sub-paragraph
shall be amended by Protocol to reflect such terms.
(b) However, no such deduction shall be allowed in respect of
amounts, if any, paid (otherwise than towards reimbursement of actual expenses)
by the permanent establishment to the head office of the enterprise or any of
its other offices, by way of royalties, fees or other similar payments, in
return for the use of patents or other rights, or by way of commission, for
specific services performed or for management, or, except in the case of a
banking enterprise, by way of interest on monies lent to the permanent
establishment. Likewise, no account shall be taken in the determination of the
profits of a permanent establishment, for amounts charged (otherwise than towards
reimbursement of actual expenses) by the permanent establishment to the head
office of the enterprise or any of its other offices, by way of royalties, fees
or other similar payments in return for the use of patents or other rights, or
by way of commission for specific services performed or for management, or,
except in the case of a banking enterprise by way of interest on monies lent to
the head office of the enterprise or any of its other offices.
4. 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.
5. 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.
6. Where profits include
items of income which are dealt with separately in other articles of this
Convention, then the provisions of those articles shall not be affected by the
provisions of this Article.
ARTICLE 8: Air
transport.--1. Profits from the operation of aircraft in international traffic
shall be taxable only in the State in which the place of effective management
of the enterprise is situated.
2. For the purposes of
this Article :
(a) profits from the operation in
international traffic of aircraft include profits derived from the rental on a
bareboat basis of aircraft is operated in international traffic if such rental
profits are incidental to the profits described in paragraph 1;
(b) interest on funds connected with the
operation of aircraft in international traffic shall be regarded as profits
derived from the operation of such aircraft and the provisions of Article 11
shall not apply in relation to such interest.
3. The provisions of
paragraph 1 shall also apply to profits from the participation in a pool, a
joint business or an international operating agency.
ARTICLE 8A: Shipping.--1.
Profits from the operation of ships in international traffic shall be taxable
only in the State in which the place of effective management of the enterprise
is situated.
2. However, if the
operation of a ship in the other State is more than casual, such profits may
also be taxed in that other State and according to the laws of that State, but
only so much of them as is derived from that other State and provided that the
profits are in respect of any one or more of the first ten fiscal years for
which the Convention has effect.
For the purposes of this
paragraph :
(a) profits derived from the other State
means profits from the carriage of passengers or freight embarked in that other
State;
(b) the amount of such profits shall not
exceed 5 per cent of the sums receivable in respect of such carriage; and
(c) the rate of tax chargeable on such
profits shall be 50 per cent of the rate of tax on those profits which would
have been chargeable in the absence of this Convention.
3. If the place of
effective management of a shipping enterprise is aboard a ship, then it shall
be deemed to be situated in the State in which the home harbour of the ship is
situated, or, if there is no such home harbour, in the State of which the
operator of the ship is a resident.
4. For the purposes of
this Article :
(a) interest on funds connected with the
operation of ships in international traffic shall be regarded as profits from
the operation of such ships and the provisions of Article 11 shall not apply in
relation to such interest; and
(b) profits from the operation of ships include :
(i) profits derived from the use,
maintenance or rental of containers (including trailers and related equipment
for the transport of containers) in connection with the transport of goods or
merchandise in international traffic;
(ii) profits
from the rental on a full or bareboat basis of ships if operated in
international traffic.
Provided that such profits
are incidental to the profits described in paragraph 1.
5. The provisions of this
Article 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--
(a) an enterprise of one of the States
participates directly or indirectly in the management, control or capital of an
enterprise of the other State, or
(b) the same persons participate directly or
indirectly in the management, control or capital of an enterprise of one of the
States, and an enterprise of the other 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, 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 one of the States
includes in the profits of an enterprise of that State--and taxes
accordingly--profits on which an enterprise of the other State has been charged
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. In determining such adjustments, due regard shall be had to the other
provisions of this Convention and the competent authorities of the States shall
if necessary consult each other.
ARTICLE 10: Dividends.--1.
Dividends paid by a company which is resident of one of the States to a
resident of the other State may be taxed in that other State.
2. However, such dividends
may also be taxed in the State of which the company paying the dividends is a
resident and according to the laws of that State, but if the recipient is the
beneficial owner of the dividends, the tax so charged shall not exceed 15 per
cent of the gross amount of the dividends.
3. The competent
authorities of the States shall by mutual agreement settle the mode of
application of paragraph 2.
4. The provisions of
paragraph 2 shall not affect the taxation of the company in respect of the
profits out of which the dividends are paid.
5. The term
"dividends" as used in this Article means income from shares,
"jouissance" shares or "jouissance" rights, mining shares,
founders' shares or other rights participating in profits, as well as income
from debt-claims participating in profits and income from other corporate
rights which is subjected to the same taxation treatment as income from shares
by the laws of the State of which the company making the distribution is a
resident.
6. The provisions of
paragraphs 1 and 2 shall not apply if the beneficial owner of the dividends,
being a resident of one of the State, carries on business in the other 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 fixed base. In such case, the provisions of Article
7 or Article 14, as the case may be, shall apply.
7. Where a company which
is a resident of one of the States derives profits or income from the other
State, that other State may not impose any tax on the dividends paid by the
company except in so far as such dividends are paid to a resident of that other
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 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.
ARTICLE 11: Interest.--1.
Interest arising in one of the States and paid to a resident of the other State
may be taxed in that other State.
2. However, such interest
may also be taxed in the State in which it arises and according to the laws of
that State, but if the recipient is the beneficial owner of the interest the
tax so charged shall not exceed :
(a) 10 per cent of the gross amount of the
interest on loans made or guaranteed by a bank or other financial institution
carrying on bona fide banking or financing business or by an enterprise which
holds directly or indirectly at least 10 per cent of the capital of the company
paying the interest;
(b) 15 per
cent of the gross amount of the interest in all other cases.
3. Notwithstanding the
provisions of paragraph 2 :
(a) the Government of one of the States
shall be exempt from tax in the other State in respect of interest derived
directly or indirectly by that Government from that other State;
(b) interest arising in one of the States
and paid in respect of a loan guaranteed or insured by the Government of the
other State shall be exempt from tax in the first-mentioned State.
4. For the purposes of
paragraph 3, the term "Government" means :
(a) in the case of the Netherlands, the Government of the Kingdom
of the Netherlands and shall include
--the local authorities;
--the Netherlands Bank
(Central Bank);
--Such institutions, the
capital of which is wholly owned by the Government of the Kingdom of the
Netherlands or the local authorities;
--the Netherlands
Financierings Maatshappji voor Ontwikkelingslanden N.V. (Netherlands Finance
Company for Developing Countries) and the Netherlands Investerings bank voor
Ontwikkelingslanden N.V. (Netherlands Investment Bank for Developing
Countries);
--all other institutions
as may be agreed from time to time between the competent authorities of the
States;
(b) In the case of India, the Government of India and shall
include :
--a political
sub-division;
--a local authority;
--the Reserve Bank of
India (Central Bank);
--the Export-Import Bank
of India;
--such institutions, the
capital of which is wholly owned by the Government of India or a political
sub-division or a local authority;
--all other institutions
as may be agreed from time to time between the competent authorities of the
States.
5. The competent
authorities of the States shall by mutual agreement settle the mode of
application of paragraph 2.
6. The term
"interest" as used in this Article means income from debt-claims of
every kind, whether or not secured by mortgage, but not carrying a right to
participate in the debtors' 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. Penalty charges for late
payment shall not be regarded as interest for the purpose of this Article.
7. The provisions of
paragraphs 1, 2 and 3 shall not apply if the beneficial owner of the interest,
being a resident of one of the States, carries on business in the other 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 such permanent establishment or
fixed base. In such a case, the provisions of Article 7 or Article 14, as the
case may be, shall apply.
8. Interest shall be
deemed to arise in one of the States when the payer is that State itself, a
political sub-division, a local authority or a resident of that State. Where,
however, the person paying the interest, whether he is a resident of one of the
States or not, has in one of the States 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 State in which
the permanent establishment or fixed base is situated.
9. Where, by reason of a
special relationship between the payer and 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 a case, the excess part of the payments shall
remain taxable according to the laws of each State, due regard being had to the
other provisions of this Convention.
ARTICLE 12: Royalties,
fees for technical services and payments for the use of equipment.--1.
Royalties, fees for technical services and payments for the use of equipment
arising in one of the States and paid to a resident of the other State may be
taxed in that other State.
2. However, such
royalties, fees and payments may also be taxed in the State in which they arise
and according to the laws of that State, but if the recipient is the beneficial
owner of these categories of income, the tax so charged shall not exceed 20 per
cent of the gross amount of the royalties, of the fees and payments.
3. The competent
authorities of the States shall by mutual agreement settle the mode of
application of paragraph 2.
4. 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 motion picture films and
works on film or video tape for use in connection with television, any patent,
trade mark, design or model, plan, secret formula or process, or for
information concerning industrial, commercial or scientific experience.
5. The term "fees for
technical services" as used in this Article means payments of any kind to
any person, other than payments to an employee of the person making the
payments and to any individual for independent personal services mentioned in
Article 14, in consideration for services of a managerial, technical or
consultancy nature.
6. The term "payments
for the use of equipment" as used in this Article means payments of any
kind received as a consideration for the use of, or the right to use
industrial, commercial or scientific equipment.
7. The provisions of paragraphs
1 and 2 shall not apply if the beneficial owner of the royalties, fees for
technical services or the payments for the use of equipment, being a resident
of one of the States, carries on business in the other State in which the
royalties, fees for technical services or the payments for the use of equipment
arise, through a permanent establishment situated therein, or performs in that
other State independent personal services from a fixed base situated therein,
and the royalties, fees for technical services or the payments for the use of
equipment are 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.
8. Royalties, fees for
technical services or payments for the use of equipment shall be deemed to
arise in one of the States when the payer of that State itself, a political
sub-division, a local authority or a resident of that State. Where, however,
the person paying the royalties, fees for technical services or the payments
for the use of equipment, whether he is a resident of one of the States or not,
has in one of the States a permanent establishment or a fixed base in
connection with which the contract under which the royalties, fees for technical
services or the payments for the use of equipment are paid was concluded, and
such royalties, fees for technical services or payments for the use of
equipment are borne by such permanent establishment or fixed base, then such
royalties, fees for technical services or payments for the use of equipment
shall be deemed to arise in the State in which the permanent establishment or
fixed base is situated.
9. Where, by reason of
special relationship between the payer and the beneficial owner or between both
of them and some other person, the amount of royalties, fees for technical
services or the payments for the use of equipment, having regard to the
royalties, technical services or the use of equipment, 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 payment shall remain taxable according to the laws of each State,
due regard being had to the other provisions of this Convention.
ARTICLE 13: Capital
gains.--1. Gains derived by a resident of one of the States from the alienation
of immovable property referred to in Article 6 and situated in the other State
may be taxed in that other State.
2. Gains from the
alienation of movable property forming part of the business property of a
permanent establishment which an enterprise of one of the States has in the
other State or of movable property pertaining to a fixed base available to a
resident of one of the States in the other State for the purpose of performing
independent personal services, including such gains from the alienation of such
permanent establishment (alone or 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 movable
property pertaining to the operation of such ships or aircraft, shall be
taxable only in the State in which the place of effective management of the
enterprise is situated. For the purposes of this paragraph, the provisions of
paragraph 3 of Article 8A shall apply.
4. Gains derived by a
resident of one of the States from the alienation of shares (other than shares
quoted on an approved stock exchange) forming part of a substantial interest in
the capital stock of a company which is a resident of the other State, the
value of which shares is derived principally from immovable property situated
in that other State other than property in which the business of the company
was carried on, may be taxed in that other State. A substantial interest exists
when the resident owns 25 per cent or more of the shares of the capital stock
of a company.
5. Gains from the
alienation of any property other than
that referred to in paragraphs 1, 2, 3 and 4, shall be taxable only in the
State of which the alienator is a resident. However, gains from the alienation
of shares issued by a company resident in the other State which shares form
part of at least a 10 per cent interest in the capital stock of that company,
may be taxed in that other State if the alienation takes place to a resident of
that other State. However, such gains shall remain taxable only in the State of
which the alienator is a resident if such gains are realized in the course of a
corporate organization, re-organization, amalgamation, division or similar
transaction, and the buyer or the seller owns at least 10 per cent of the
capital of the other.
6. The provisions of
paragraph 3 shall not affect the right of each of the States to levy according
to its own law a tax on gains from the alienation of the shares or
"jouissance" rights in a company, the capital of which is wholly or
partly divided into shares and which under the laws of that State is a resident
of that State, derived by an individual who is a resident of the other State
and has been a resident of the first-mentioned State in the course of the last
five years preceding the alienation of the shares or "jouissance"
rights.
ARTICLE 14: Independent
personal services.--1. Income derived by a resident of one of the States in
respect of professional services or other activities of an independent
character shall be taxable only in that State except in the following
circumstances, when such income may also be taxed in the other State :
(a) if he has a fixed base regularly
available to him in the other State for the purpose of performing his
activities; in that case, only so much of the income as is attributable to that
fixed base may be taxed in that other State; or
(b) if his stay in the other State is for a
period or periods amounting to or exceeding in the aggregate 183 days in the
fiscal year concerned; in that case, only so much of the income as is derived
from his activities performed in that other State may be taxed in that other
State.
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: Dependent
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 one
of the States in respect of an employment shall be taxable only in that State
unless the employment is exercised in the other 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 one of the
States in respect of an employment exercised in the other State shall be
taxable only in the first-mentioned State if :
(a) the recipient is present in the other
State for a period or periods not exceeding in the aggregate 183 days in the
fiscal year concerned; and
(b) the remuneration is paid by, or on
behalf of, an employer who is not a resident of the other State; and
(c) the remuneration is not borne by a
permanent establishment or a fixed base which the employer has in the other
State.
3. Notwithstanding the
preceding provisions of this Article, remuneration derived by a resident of one
of the States in respect of an employment exercised aboard a ship or aircraft
operated in international traffic shall be taxable only in that State.
ARTICLE 16: Directors'
fees.--Directors' fees or other remuneration derived by a resident of one of
the States in his capacity as a member of the board of directors, of a company
which is a resident of the other Contracting States may be taxed in that other
State.
ARTICLE 17: Artistes and
athletes.--1. Notwithstanding the provisions of Articles 14 and 15, income
derived by a resident of one of the States as an entertainer, such as a
theatre, motion picture, radio or television artiste or a musician or as an
athlete, from his personal activities as such exercised in the other State, may
be taxed in that other State.
2. Where income in respect
of personal activities exercised by an entertainer or an athlete in his
capacity as such accrues not to the entertainer or athlete himself but to
another person, that income may, notwithstanding the provisions of Articles 7,
14 and 15, be taxed in the State in which the activities of the entertainer or
athlete are exercised.
3. Notwithstanding the
provisions of paragraphs 1 and 2, income derived by an entertainer or an
athlete who is a resident of one of the States from his personal activities as
such exercised in the other State, shall be taxable only in the first-mentioned
State, if the activities in the other State are supported wholly or
substantially from the public funds of the first-mentioned State, including any
of its political sub-divisions or local authorities, and such activities are
exercised under the terms of a bilateral cultural Agreement between the two
States.
ARTICLE 18: Pensions and
annuities.--1. Subject to the provisions of paragraph 2 of Article 19, pensions
and other similar remuneration paid to a resident of one of the States in
consideration of past employment as well as any annuity paid to such a resident
shall be taxable only in that State.
2. However, where such
remuneration is not of a periodical nature and it is paid in consideration of
past employment in the other State, it may be taxed in that other State.
3. Any pension paid out
under the provisions of a social security system of one of the States to a
resident of the other State may be taxed in the first-mentioned State.
4. The term
"annuity" means a stated sum payable periodically at stated times
during life or during a specified or ascertainable period of time, under an
obligation to make the payments in return for adequate and full consideration
in money or money's worth.
ARTICLE 19: Government
service.--1 (a) Remuneration, other than a pension, paid by one of the States
or a political sub-division or a local authority thereof to an individual in
respect of services rendered to that State or sub-division or authority may be
taxed in that State.
(b) However, such remuneration shall be taxable only in the other
State if the services are rendered in that State and the individual is a
resident of that State who :
(i) is a national of that State, or
(ii) did not become a resident of that State
solely for the purpose of rendering the services.
2. (a) Any pension
paid by, or out of funds created by, one of the States or a political
sub-division or a local authority thereof to an individual in respect of
services rendered to that State or sub-division or authority may be taxed in
that State.
(b) However, such pension shall be taxable only in the other
State if the individual is a resident of, and a national of, that State.
3. The provisions of
Articles 15, 16 and 18 shall apply to remuneration and pensions in respect of
services rendered in connection with a business carried on by one of the States
or a political sub-division or a local authority thereof.
ARTICLE 20: Professors,
teachers and research scholars.--1. A professor or teacher who is or was a
resident of one of the States immediately before visiting the other State for
the purpose of teaching or engaging in research, or both, at a university,
college, school or other approved institution in that other State shall be
taxable only in the first-mentioned State on any remuneration for such teaching
or research for a period not exceeding two years from the date of his arrival
in that other State.
2. This Article shall not
apply to income from research if such research is undertaken primarily for the
private benefit of a specific person or persons.
3. For the purposes of
paragraph 1, "approved institution" means an institution which has
been approved in this regard by the competent authority of the State concerned.
ARTICLE 21: Students and
apprentices.--1. A student or business apprentice who is or was a resident of
one of the States immediately before visiting the other State and who is
present in that other State solely for the purpose of his education or
training, shall be exempt from tax in that other State on :
(a) payments made to him by persons residing
outside that other State for the purposes of his maintenance, education or
training; and
(b) remuneration from employment in that
other State, in an amount not exceeding Rs. 5,000 guilders or its equivalent in
Indian currency during any fiscal year, provided that such employment is
directly related to his studies or is undertaken for the purpose of his
maintenance.
2. The benefits of this
Article shall extend only for such period of time as may be reasonably or
customarily required to complete the education or training undertaken, but in
no event shall any individual have the benefits of this Article, for more than
five consecutive years from the date of his first arrival in that other State.
CHAPTER IV
Taxation on capital
ARTICLE 22: Capital.--1.
Capital represented by immovable property referred to in Article 6, owned by a
resident of one of the States and situated in the other State, may be taxed in
that other State.
2. Capital represented by
movable property forming part of the business property of a permanent
establishment which an enterprise of one of the States has in the other State
or by movable property pertaining to a fixed base available to a resident of
one of the States in the other State for the purpose of performing independent
personal services, may be taxed in that other State.
3. Capital represented by ships and aircraft operated in international traffic and movable property pertaining to the operation of such ships and aircraft shall be taxable only in the State in which the place of effective management of the enterprise is situated. For the purposes of this paragraph, the provisions of paragraph 3 of Article 8A shall apply.
4. All other elements of
capital of a resident of one of the States shall be taxable only in that State.
CHAPTER V
Elimination of double
taxation
ARTICLE 23: Elimination of
double taxation.--1. The Netherlands, when imposing tax on its residents, may
include in the basis upon which such taxes are imposed the items of income or
capital which, according to the provisions of this Convention, may be taxed in
India.
2. However, where a
resident of the Netherlands derives items of income or owns items of capital
which, according to Article 6, Article 7, paragraph 6 of Article 10, paragraph
7 of Article 11, paragraph 7 of Article 12, paragraphs 1, 2, 4 and 5 of Article
13, Article 14, paragraph 1 of Article 15, Article 16, paragraph 3 of Article
18, Article 19 and paragraphs 1 and 2 of Article 22 of this Convention may be
taxed in India and are included in the basis referred to in paragraph 1, the
Netherlands shall exempt such items of income or capital by allowing a
reduction in its tax. These reductions shall be computed in conformity with the
provisions of the Netherlands law for the avoidance of double taxation. For
that purpose, the said items of income or capital shall be deemed to be
included in the total amount of the items of income or capital which are
exempted from the Netherlands tax under those provisions.
3. Further, the
Netherlands shall allow a deduction from the Netherlands tax so computed for
items of income which, according to paragraph 2 of Article 8A, paragraph 2 of
Article 10, paragraph 2 of Article 11,
paragraph 2 of Article 12, Article 17 and paragraph 2 of Article 18 of this
Convention may be taxed in India to the extent that these items are included in
the basis referred to in paragraph 1. The amount of this deduction shall be
equal to the tax paid in India on these items of income, but shall not exceed
the amount of the reduction which would be allowed if the items of income so
included were the sole items of income which are exempted from the Netherlands
tax under the provisions of the Netherlands tax for the avoidance of double
taxation.
Where, by reason of
special relief given under the provisions of Indian law for the purpose of
encouraging investment in India, the Indian tax actually levied on interest
arising in India is lower than the tax India may levy according to
sub-paragraphs (a) and (b) of paragraph 2 of Article 11, then the amount of the
tax paid in India on such interest shall be deemed to have been paid at the
rates of tax mentioned in the said provisions. However, if the general tax
rates under the Indian law applicable to the aforementioned interest are
reduced below those mentioned in the foregoing sentence, these lower rates
shall apply for the purposes of that sentence. The provisions of the two
foregoing sentences shall apply only for a period of ten years after the date
on which the Convention became effective. This period may be extended by mutual
agreement between the competent authorities.
4. In India, double
taxation shall be eliminated as follows :
Where a resident of India
derives income or owns capital which, in
accordance with the provisions of this Convention, may be taxed in the
Netherlands, India shall allow as a deduction from the tax on the income of
that resident an amount equal to the income-tax paid in the Netherlands,
whether directly or by deduction; and as a deduction from the tax on the
capital of that resident, an amount equal to the capital tax paid in the
Netherlands. Such deduction in either case shall not, however, exceed that part
of the income-tax or capital tax (as computed before the deduction is given)
which is attributable, as the case may be, to the income or the capital which
may be taxed in the Netherlands. Further, where such resident is a company by
which surtax is payable in India, the deduction in respect of income-tax paid
in the Netherlands shall be allowed in the first instance from income-tax
payable by the company in India and as to the balance, if any, from surtax
payable by it in India:
Provided that income which
in accordance with the provisions of this Convention is not to be subjected to
tax may be taken into account in calculating the rate of tax to be imposed.
For the purposes of this
paragraph in determining the taxes on income paid to the Netherlands, the
investment premiums and bonuses and disinvestment payments as meant in the
Netherlands Investment Account Law ("Wet invest eringsrekening")
shall not be taken into account. For the purposes of this paragraph, the taxes
referred to in paragraphs 3 (a) and 4 of Article 2, other than the capital tax,
shall be considered as taxes on income.
5. Where a resident of one
of the States derives gains which may be taxed in the other State in accordance
with paragraph 6 of Article 13, that other State shall allow a deduction from
its tax on such gains to an amount equal to the tax levied in the
first-mentioned State on the said gains.
CHAPTER VI
ARTICLE 24:
Non-discrimination.--1. Nationals of one of the States shall not be subjected
in the other 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. These provisions shall, notwithstanding the provisions of Article 1,
also apply to persons who are not residents of one or both of the States.
2. Except where the
provisions of paragraph 3 of Article 7 apply, the taxation on a permanent
establishment which an enterprise of one of the States has in the other 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.
3. The provisions of
paragraph 2 shall not be construed as obliging one of the States to grant to
residents of the other State any personal allowances, reliefs and reductions
for taxation purposes on account of civil status or family responsibilities
which it grants to its own residents.
4. Except where the
provisions of paragraph 1 of Article 9, paragraph 9 of Article 11, or paragraph
9 of Article 12, apply, interest, royalties and other disbursements paid by an
enterprise of one of the States to a resident of the other 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. Similarly, any debts of an enterprise of one of the
States to a resident of the other State shall, for the purpose of determining
the taxable capital of such enterprise, be deductible under the same conditions
as if they had been contracted to a resident of the first-mentioned State.
5. Enterprises of one of
the States, the capital of which is wholly or partly owned or controlled,
directly or indirectly, by one or more residents of the other State, shall not
be subjected in the first-mentioned 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 of the first-mentioned
State are or may be subjected.
ARTICLE 25: Mutual
agreement procedure.--1. Where a person considers that the actions of one or
both of the 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 State of which he is a resident or if his case comes under
paragraph 1 of Article 24, to that of the State of which he is a national. The
case must be presented within three years from the first notification of the
action resulting in taxation not in accordance with the provisions of the
Convention.
2. The competent authority
shall endeavour, if the objection appears to it to be justified and if it is
not itself able to arrive at a satisfactory solution, to resolve the case by
mutual agreement with the competent authority of the other State, with a view
to the avoidance of taxation which is not in accordance with the Convention. Any
Agreement reached shall be implemented
notwithstanding any time limits in the domestic law of the States.
3. The competent
authorities of the 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 together for the elimination of double
taxation in cases not provided for in the Convention.
4. The competent
authorities of the States may communicate with each other directly for the
purpose of reaching an agreement in the sense of the preceding paragraphs. When
it seems advisable in order to reach agreement to have an oral exchange of
opinions, such exchange may take place through a Commission consisting of
representatives of the competent authorities of the two States.
ARTICLE 26: Exchange of
information.--1. The competent authorities of the States shall exchange such
information as is necessary for carrying out the provisions of the Convention
or of the domestic laws of the States concerning taxes covered by the
Convention, in so far as the taxation thereunder is not contrary to the
Convention, in particular for the prevention of fraud or evasion of such taxes.
Any information received by one of the States 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 courts or bodies)
involved in the assessment or collection of, the enforcement in respect
of, or the determination of appeals in relation to, the taxes which are the
subject of the Convention. Such persons or authorities shall use the
information only for such purposes but may disclose the information in public
court proceedings or in judicial decisions.
2. In no case shall the
provisions of paragraph 1 be construed so as to impose on one of the States the
obligation :
(a) to carry out administrative measures at
variance with the laws and administrative practices of that or of the other
State;
(b) to supply information which is not
obtainable under the laws or in the normal course of the administration of that
or of the other State;
(c) 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).
ARTICLE 27: Diplomatic
agents and consular officers.--1. Nothing in this Convention shall affect the
fiscal privileges of diplomatic agents or consular officers under the general
rules of international law or under the provisions of special agreements.
2. For the purposes of the
Convention an individual, who is a member of a diplomatic or consular mission
of one of the States in the other State or in a third State and who is a
national of the sending State, shall be deemed to be a resident of the sending
State if he is subjected therein to the same obligations in respect of taxes on
income or on capital as are residents of that State.
3. International
organisations, organs and officials thereof and members of a diplomatic or
consular mission of a third State, being present in one of the States, are not
entitled, in the other State, to the reductions or exemptions from tax provided
for in Articles 10, 11 and 12 in respect of the items of income dealt with in
these Articles and arising in that other State, if such items of income are not
subject to a tax on income in the first-mentioned State.
ARTICLE 28: Territorial extension.--1. This Convention may be extended, either in its entirety or with any necessary modifications, to either or both of the countries of Aruba or the Netherlands Antilles, if the country concerned imposes taxes substantially similar in character to those to which the Convention applies. Any such extension shall take effect from such date and subject to such modifications and conditions including conditions as to terminations, as may be specified and agreed in notes to be exchanged through diplomatic channels.
2. Unless otherwise agreed,
the termination of the Convention shall not also terminate any extension of the
Convention to any country to which it has been extended under this Article.
CHAPTER VII
Final provisions
ARTICLE 29: Entry into
force.--1. Each of the States shall notify to the other the completion of the
procedures required by its law for the bringing into force of this Convention .
This Convention shall enter into force on the thirtieth day after the latter of
the dates on which the respective Governments have notified each other in
writing that the formalities constitutionally required in their respective
States have been complied with, and its provisions shall have effect :
(a) in the Netherlands for taxable years and periods beginning on
or after the first day of January next following the calendar year in which the
latter of the notifications is given;
(b) in India in respect of income arising in any fiscal year
beginning on or after the first day of April next following the calendar year
in which the latter of the notifications is given.
2. Notwithstanding the
provisions of paragraph 1, the provisions of Article 8 shall have effect :
(a) In the Netherlands for taxable years and
periods beginning on or after the first day of January, 1987;
(b) in India in respect of income arising in
any fiscal year beginning on or after the first day of April, 1987.
ARTICLE 30:
Termination.--This Convention shall remain in force until terminated by one of
the contracting parties. Either party may terminate the Convention, 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 of its entry into force. In such event, the Convention shall
cease to have effect :
(a) in the Netherlands for taxable years and
periods beginning on or after the first day of January next following the
calendar year in which the notice of termination has been given;
(b) in India, in respect of income arising
in any fiscal year beginning on or after the 1st day of April next following
the calendar year in which the notice of termination has been given.
In witness whereof the
undersigned, duly authorised thereto, has signed this Convention.
Done at New Delhi this
thirtieth day of July, 1988, in duplicate, in the Hindi, Netherlands and
English languages, the three texts being equally authentic. In case of
divergence between the Hindi and Netherlands texts, the English text shall be
the operative one.
For the Government of the
Republic of India, (Sd.)
P. K. Appachoo
(Sd.) Ajit Kumar Panja Joint
Secretary,
Minister of State for
Finance (Revenue). Foreign
Tax Division.
For the Government of the
Kingdom of the Netherlands,
(Sd.) E. M. Schoo
(Sd.) H. E. Koning Ambassador of the
Minister of State for
Finance. Netherlands.
At the moment of signing,
the Convention for the avoidance of double taxation and the prevention of
fiscal evasion with respect to taxes on income and on capital, this day
concluded between the Kingdom of the Netherlands and the Republic of India, the
undersigned have agreed to the following provisions shall form an integral part
of the Convention.
I. Ad Article 7.--In
respect of paragraphs 1 and 2 of Article 7, where an enterprise of one of the
States sells goods or merchandise or carries on business in the other State
through a permanent establishment situated therein, the profits of that
permanent establishment shall not be determined on the basis of the total
amount received by the enterprise, but shall be determined only on the basis of
the remuneration which is attributable to the actual activity of the permanent
establishment for such sales or business. Especially, in the case of contracts
for the survey, supply, installation or construction of industrial, commercial
or scientific equipment or premises, or of public works, when the enterprise
has a permanent establishment, the profits of such permanent establishment
shall not be determined on the basis of the total amount of the contract, but
shall be determined only on the basis of that part of the contract which is
effectively carried out by the permanent establishment in the State where the
permanent establishment is situated. The profits related to that part of the
contract which is carried out by the head office of the enterprise shall be
taxable only in the State of which the enterprise is a resident.
2. It is understood that
with respect to paragraph 2 of Article 7, no profits shall be attributed to a
permanent establishment by reason of the facilitation of the conclusion of
foreign trade or loan agreements or the mere signing thereof.
3. Where the law of the
State in which a permanent establishment is situated imposes in accordance with
the provisions of sub-paragraph (a) of paragraph (3) of Article 7 a restriction
on the amount of the executive and general administrative expenses which may be
allowed as a deduction in determining the profits of such permanent
establishment, it is understood that in determining the profits of such
permanent establishment the deduction in respect of such executive and general
administrative expenses in no case shall be less than what is allowable under
the Indian Income-tax Act as on the date of signature of this Convention.
II. Ad Article 8A.--It is
understood that in case the percentage as is specified in section 44B of the
Indian Income-tax Act as on the date of signature of this Convention for the
purpose of determining the amount of shipping profits is reduced by any change
in the Indian law, the percentage as is mentioned in sub-paragraph (b) of
paragraph 2 of Article 8A will be reduced in the same proportion.
III. Ad Article 9.--It is
understood that the fact that associated enterprises have concluded
arrangements, such as cost sharing arrangements or general services agreements,
for or based on the allocation of executive, general administrative, technical
and commercial expenses, research and development expenses and other similar
expenses, is not in itself a condition as meant in paragraph 1 of Article 9.
IV. Ad Articles 10, 11 and
12.--1. Where the tax has been levied at source in excess of the amount of tax
chargeable under the provisions of Articles 10, 11 and 12, applications for the
refund of the excess amount of tax have to be lodged with the competent
authority of the State having levied the tax, within a period of three years
after the expiration of the calendar year in which the tax has been levied.
2. If after the signature
of this Convention, under any Convention or Agreement between India and a third
State which is a member of the OECD, India, should limit its taxation at source
on dividends, interest, royalties, fees for technical services or payments for
the use of the equipment to a rate lower or a scope more restricted than the
rate or scope provided for in this Convention on the said items of income,
then, as from the date on which the relevant Indian Convention or Agreement
enters into force the same rate or scope as provided for in that Convention or
Agreement on the said items of income shall also apply under this Convention.
V. Ad Article 12.--It is
understood that in case India applies a levy, not being a levy covered by
Article 2, such as the Research and Development Cess, on payments meant in
Article 12, and if after the signature of this Convention under any Convention
or Agreement between India and a third State which is a member of the OECD,
India should give relief from such levy, directly, by reducing the rate or the
scope of the levy, either in full or in part, or, indirectly, by reducing the
rate or the scope of the Indian tax allowed under the Convention or Agreement
in question on payments as meant in Article 12 of this Convention with the
levy, either in full or in part, then, as from the date on which the relevant
Indian Convention or Agreement enters into force, such relief as provided for
in that Convention or Agreement shall also apply under this Convention.
VI. Ad Article 16.--It is
understood that "bestuurder" or "commissaris" of a
Netherlands company means persons, who are nominated as such by the general
meeting of shareholders or by any other
competent body of such company and are charged with the general management of
the company and the supervision thereof, respectively.
VII. Ad Article 23.--It is
understood that for the computation of the reduction mentioned in paragraph 2
of Article 23, the items of capital referred to in paragraph 1 of Article 22
shall be taken into account for the value thereof reduced by the value of the
debts secured by mortgage on that capital and the items of capital referred to
in paragraph 2 of Article 22 shall be taken into account for the value thereof
reduced by the value of the debts pertaining to the permanent establishment or
fixed base.
In witness whereof the
undersigned, duly authorised thereto, have signed this Protocol.
Done at New Delhi this
thirtieth day of July, 1988, in duplicate, in the Hindi, Netherlands and
English languages, the three texts being equally authentic. In case of
divergence between the Netherlands and Hindi texts, the English text shall be
the operative one.
For the Government of the
Republic of India, (Sd.) P .K.
Appachoo
(Sd.) Ajit Kumar Panja Joint
Secretary,
Minister of State for
Finance (Revenue). Foreign Tax
Division.
For the Government of the
Kingdom of the Netherlands, (Sd.) E. M.
Schoo
(Sd.) H. E. Koning Ambassador of the
Minister of State for Finance. Netherlands.
Amendment of Double
Taxation Avoidance Agreement between India and Netherlands
Notification No. 11050 [F.
No. 501/2/83-FTD], dated 30-8-1999
Whereas the Convention
between Republic of India and the Kingdom of Netherlands for the avoidance of
double taxation and the prevention of fiscal evasion with respect to taxes on
income and on capital came into force on the 21st day of January, 1989, after
the notification by both the Contracting States to each other of the completion
of the procedures required under their laws for bringing into force the said
Convention;
And whereas the Central
Government, in exercise of the powers conferred by section 90 of the Income-tax
Act, 1961 (43 of 1961), section 24A of the Companies (Profits) Surtax Act, 1964
(7 of 1964) and section 44A of the Wealth-tax Act, 1957 (27 of 1957), had
directed that all the provisions of the said Convention annexed to the
notification of the Government of India in the Ministry of Finance (Department
of Revenue) (Foreign Tax Division) Number GSR 382(E), dated the 27th March,
1989, shall be given effect to in the Union of India;
And whereas Article IV of
the Protocol, dated the 30th July, 1988 to the aforesaid Convention provides
that if after the signature of the aforesaid Convention under any Convention or
Agreement between India and a third State which is a member of the Organisation
for Economic Cooperation and Development, India should limit its taxation at
source on dividends, interest, royalties, fees for technical services or
payments for the use of equipment to a rate lower or a scope more restricted
than the rate or scope provided for in this Convention on the said items of
income, then, as from the date on which the relevant Indian Convention or
Agreement enters into force the same rate or scope as provided for in that
Convention or Agreement on the said items of income shall also apply under this
Convention;
And whereas in the
Convention between India and Germany which entered into force on 26th October,
1996, the Convention between India and Sweden which entered into force on 25th
December, 1997, the Convention between India and the Swiss confederation which
entered into force on 19th October, 1994 and the Convention between India and
the United States of America which entered into force on 18th December, 1990
which states are members of the Organisation for Economic Cooperation and
Development, the Government of India has limited the taxation at source on
dividends, interest, royalties, fees for technical services and payments for
the use of equipments to a rate lower or a scope more restricted than that
provided in the Convention between India and Netherlands on the said items of
income;
Now, therefore, in
exercise of the powers conferred by section 90 of the Income-tax Act, 1961 (43
of 1961), the Central Government hereby directs that the following
modifications shall be made in the Convention notified by the said notification
which are necessary for implementing the aforesaid Convention between India and
Netherlands, namely:
I. With effect from 1st
April, 1997, for the existing paragraph 2 of Article 10 relating to Dividends
the following paragraph shall be read:
"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 the
beneficial owner of the dividends, the tax so charged shall not exceed 10 per
cent of the gross amount of the dividends."
II. With effect from 1st April, 1997 for the existing paragraph 2 of Article 11 relating to Interest the following paragraph shall be read:
"2. However, such
interest may also be taxed in the Contracting State in which it arises and
according to laws of that State, but if the recipient is the beneficial owner
of the interest the tax so charged shall not exceed 10 per cent of the gross
amount of the interest."
III. With effect from the
1st April, 1991 for the existing Article 12 relating to Royalty, Fees for
Technical Services and Payments for the use of Equipment, the following Article
shall be read:
"Article 12
Royalties and Fees for
Technical Services
1. Royalties and fees for
technical services 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
and fees for technical services 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 or fees for technical services is a resident of the
other Contracting State, the tax so charged shall not exceed:--
(a) in the case of royalties referred to in sub-paragraph (a) of
paragraph 4 and fees for technical services as defined in this Article (other
than services described in sub-paragraph (b) of this paragraph):
(i) during the first five taxable years for which this
Convention has effect,
(A) 15 per cent of the gross amount of the royalties or fees for
technical services as defined in this Article, where the payer of the royalties
or fees is the Government of that Contracting State, a political sub-division
or a public sector company; and
(B) 20 per cent of the gross amount of the royalties or fees for
technical services in all other cases; and
(ii) during the subsequent years, 15 per cent
of the gross amount of royalties or fees for technical services; and
(b) in the case of royalties referred to in sub-paragraph (b) of
paragraph 4 and fees for technical services as defined in this Article that are
ancillary and subsidiary to the enjoyment of the property for which payment is
received under paragraph 4(b) of this Article, 10 per cent of the gross amount
of the royalties or fees for technical services.
3. The competent
authorities of the States shall by mutual agreement settle the mode of
application of paragraph 2.
4. The term
"royalties" as used in this Article means:
(a) 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 motion picture films and works on film or videotape for use in
connection with television, any patent, trade mark, design or model, plan,
secret formula or process, or for information concerning industrial, commercial
or scientific experience; and
(b) payments of any kind received as consideration for the use
of, or the right to use industrial, commercial or scientific equipment, other
than payments derived by an enterprise described in paragraph 1 of Articles 8
and 8A (Shipping and Air Transport) from activities described in paragraph 2(a)
of Article 8 or paragraph 4(b) of Article 8A.
5. For purposes of this
Article, "fees for technical services" means payments of any kind to
any person in consideration for the rendering of any technical or consultancy
services (including through the provision of services of technical or other
personnel) if such services:
(a) are ancillary and subsidiary to the application or enjoyment
of the right, property or information for which a payment described in
paragraph 4 of this Article is received; or
(b) make available technical knowledge, experience, skill,
know-how or processes, or consist of the development and transfer of a
technical plan or technical design.
6. Notwithstanding
paragraph 5, "fees for technical services" does not include amounts
paid:
(a) for services that are ancillary and subsidiary, as well as
inextricably and essentially linked, to
the sale of property other than a sale described in paragraph 4(a);
(b) for services that are ancillary and subsidiary to the rental
of ships, aircraft, containers or other equipment used in connection with the
operation of ships or aircraft in international traffic;
(c) for teaching in or by educational institutions;
(d) for services for the personal use of the individual or
individuals making the payment; or
(e) to an employee of the person making the payments or to any
individual or partnership for professional services as defined in Article 14
(independent personal services) of this Convention.
7. The provisions of
paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties or
fees for technical services, being a resident of one of the States, carries on
business in the other State, in which the royalties or fees for technical
services arise, through a permanent establishment situated therein, or performs
in that other State independent personal services from a fixed base situated
therein, and the royalties or fees for technical services are 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.
8. Royalties or fees for
technical services shall be deemed to arise in one of the States when the payer
is that State itself, a political sub-division, a local authority or a resident
of that State. Where, however, the person paying the royalties or fees for
technical services, whether he is a resident of one of the States or not, has
in one of the States a permanent establishment or a fixed base in connection
with which the contract under which the royalties or fees for technical
services are paid was concluded, and such royalties or fees for technical
services are borne by such permanent establishment or fixed base, then such
royalties or fees for technical services shall be deemed to arise in the State
in which the permanent establishment or fixed base is situated.
9. 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 royalties or fees for technical
services, having regard to the royalties or fees for technical services 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 payment
shall remain taxable according to the laws of each State, due regard being had
to the other provisions of this Convention."
IV. With effect from 1st
April, 1995 for paragraph 6 of Article 12 relating to Royalties and fees for
technical services referred to in paragraph III above the following paragraph
shall be read:
"6. Notwithstanding
paragraph 5, "fees for technical services" does not include amounts
paid:
(a) for services that are ancillary and
subsidiary, as well as inextricably and essentially linked, to the sale of
property;
(b) for services that are ancillary and
subsidiary to the rental of ships, aircraft, containers or other equipment used
in connection with the operation of ships or aircraft in international traffic;
(c) for
teaching in or by educational institutions;
(d) for
services for the personal use of the individual or individuals, making the
payment; or
(e) to an employee of the person making the
payments or to any individual or partnership for professional services as
defined in Article 14 (Independent Personal Services) of this Convention."
V. With effect from 1st
April, 1997, for paragraph 2 of Article 12, relating to Royalties and Fees for
Technical Services referred to in paragraph III above the following paragraph
shall be read:
"2. However, such
royalties and fees for technical services 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 the beneficial owner of the royalties, or fees for technical services,
the tax so charged shall not exceed 10 per cent of the gross amount of the
royalties or the fees for technical services."
VI. With effect from 1st
April, 1998 for paragraph 4 of Article 12 relating to Royalties and fees for
technical services referred to in paragraph III above the following paragraph
shall be read:
"4. 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, any
patent, trade mark, design or model, plan, secret formula or process, or for
information concerning industrial, commercial or scientific experience."
VII. The memorandum of Understanding and the Confirmation of Understanding, dated 12th September, 1989, with reference to paragraph 4 of Article 12 of the Indo-USA Double Taxation Avoidance Convention (DTAC), will apply mutatis mutandis for the purpose of paragraphs III, IV, V and VI above.
Convention between the
Government of the Republic of India and the Government of New Zealand for the
avoidance of double taxation and the prevention of fiscal evasion with respect
to taxes on income
Notification No. 7204 [F.
No. 501/1/83-FTD], dated 27 March, 1987 corrected by Notification No. 7875 [
501/1/83-FTD], dated 21
April, 1988
G.S.R. 314(E).--Whereas
the annexed Convention between the Government of the Republic of India and the
Government of New Zealand for the avoidance of double taxation and the prevention
of fiscal evasion with respect to taxes on income has come into force on the
3rd December, 1986 on the notification by both the Contracting States to each
other the compliance of the constitutional requirements, as required by
paragraph 1 of Article 28 of the said Convention;
Now, therefore, in
exercise of the powers conferred by section 90 of the Income-tax Act, 1961 (43
of 1961) and section 24A of the Companies (Profits) Surtax Act, 1964 (7 of
1964), the Central Government hereby directs that all the provisions of the
said Convention shall be given effect to in the Union of India.
The Government of the
Republic of India and the Government of New Zealand,
Desiring to conclude a
Convention for the avoidance of double taxation and the prevention of fiscal
evasion with respect to taxes on income;
Have agreed as follows :
ARTICLE 1: Personal
scope.--This Convention shall apply to persons who are residents of one or both
of the Contracting States.
ARTICLE 2: Taxes
covered.--1. The existing taxes to which the Convention shall apply are :
(a) in the case of New Zealand :
the income-tax and the
excess retention tax (hereinafter referred to as "New Zealand tax");
(b) in the case of India :
the income-tax including
any surcharge thereon and the surtax, (hereinafter referred to as "Indian
tax").
2. The Convention shall
apply also to any identical or substantially similar taxes which are imposed
after the date of signature of the Convention in addition to, or in place of,
the existing taxes. 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 Convention, unless the context otherwise requires.--
(a) (i) the term
"New Zealand" means the territory of New Zealand but does not include
Tokelau or the Associated Self-Government States of the Cook Islands and Niue;
it also includes any area beyond the territorial sea which by New Zealand
legislation and in accordance with international law has been, or may hereafter
be, designated as an area in which the rights of New Zealand with respect to
natural resources may be exercised;
(ii) the term "India" means the
territory of India and includes the territorial sea and the airspace above it,
as well as any other maritime zone in which India has sovereign rights, other
rights and jurisdictions, according to the Indian law and in accordance with
international law;
(b) the terms "a Contracting State" and "the other
Contracting State" mean New Zealand or India as the context requires;
(c) the term "tax" means New Zealand tax or Indian tax
as the context requires, but shall not include any amount which is payable in
respect of any default or omission in relation to the taxes to which the
Convention applies or which represents a penalty imposed relating to those
taxes;
(d) the term "person" includes an individual, a
company, any other body or persons or entity which are defined as or deemed to
be a person under the taxation laws in force in the respective Contracting
States;
(e) the term "company" means any body corporate or any
entity which is treated as a body corporate for tax purposes;
(f) 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;
(g) the term "national" means :
(i) in respect of New Zealand any individual possessing
citizenship of New Zealand and any legal person, partnership or association
deriving its status as such from the law in force in New Zealand;
(ii) in respect of India any individual
possessing the nationality of India and any legal person, partnership or
association deriving its status as such from the law in force in India;
(h) the term "international traffic" means any
transport by a ship or aircraft operated by an enterprise of a Contracting
State except when the ship or aircraft is operated solely between places in the
other Contracting State;
(i) the term "competent authority" means :
(i) in the case of New Zealand the Commissioner of Inland
Revenue or his authorised representative;
(ii) in the case of India the Central
Government in the Ministry of Finance (Department of Revenue) or their
authorised representative.
2. As regards the
application of the Convention by a Contracting State any term not defined
therein shall unless the context otherwise requires have the meaning which it
has under the laws of that State concerning the taxes to which the Convention
applies.
ARTICLE 4: Resident.--1.
For the purposes of this Convention the term "resident of a Contracting
State" means any person who under the laws of that Contracting State is
liable to tax therein by reason of his domicile residence place of management
or any other criterion of a similar nature. But 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.
2. Where by reason of the
provision of paragraph 1 an individual is a resident of both Contracting
States, then his status shall be determined as follows :
(a) 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 with which
his personal and economic relations are closer (centre of vital interests);
(b) 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;
(c) 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 is he is a
national;
(d) if he is a national of both States or of neither of them, the
competent authorities of the Contracting State shall, settle the question by
mutual agreement.
3. Where by reason of the
provisions of paragraph 1 a person other than an individual is a resident of
both Contracting States, then it shall be deemed to be a resident of the State
in which its place of effective management is situated.
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 :
(a) a place of management;
(b) a branch;
(c) an
office;
(d) a
factory;
(e) a
workshop;
(f) a mine,
an oil or gas well, a quarry or any other place of extraction of natural
resources;
(g) a
warehouse in relation to a person providing storage facilities for others;
(h) a farm, plantation or other place where
agricultural, forestry or plantation activities are carried on;
(i) premises
used as a sales outlet;
(j) a building site or a construction or
installation or assembly project or supervisory activities in connection
therewith, where such site or project or supervisory activities (together with
other such sites or projects or activities, if any) or any combination thereof
continue for a period of more than six months; and
(k) an
installation or structure for the exploration or exploitation of natural
resources:
provided that for the
purposes of this paragraph an enterprise shall be deemed to have a permanent
establishment in a Contracting State and to carry on business through that
permanent establishment if it carries on activities in that State in connection
with the exploration or exploitation of natural resources in that State.
3. Notwithstanding the
preceding provisions of this Article, the term "permanent
establishment" shall be deemed not to include :
(a) the use of facilities solely for the purpose of storage or
display of goods or merchandise belonging to the enterprise;
(b) the maintenance of a stock of goods or merchandise belonging
to the enterprise solely for the purpose of storage or display;
(c) the maintenance of a stock of goods or merchandise belonging
to the enterprise solely for the purpose of processing by another enterprise;
(d) the maintenance of a fixed place of business solely for the
purpose of purchasing goods or merchandise or of collecting information, for
the enterprise;
(e) the maintenance of a fixed place of business solely for the
purpose of advertising, for the supply of information, for scientific research
or for any other activities which have a preparatory or auxiliary character,
for the enterprise.
4. Notwithstanding the
provisions of paragraphs 1 and 2, where a person--other than an agent of an
independent status to whom paragraph 5 applies--is acting in a Contracting
State on behalf of an enterprise of the other Contracting State, that
enterprise shall be deemed to have a permanent establishment in the
first-mentioned State if :
(a) he has and habitually exercises in that State an authority to
conclude contracts on behalf of the enterprise, unless his activities are
limited to the purchase of goods or merchandise for the enterprise;
(b) he has no such authority, but habitually maintains in the
first-mentioned State a stock of goods or merchandise from which he regularly
delivers goods of merchandise on behalf of the enterprise.
5. 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.
6. 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 which carries on business in that other State
(whether through a permanent establishment or otherwise), shall not itself
constitute either company 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 (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 in question is situated. The
term shall in any case include property accessory to immovable property,
livestock and equipment used in agriculture and forestry, rights to which the
provisions of general law respecting landed property apply, usufruct of
immovable property and rights to variable or fixed payments as consideration
for the working of, or the right to work, mineral deposits, sources and other
natural resources. Ships, boats and aircraft shall not be regarded as immovable
property.
3. The provisions of
paragraph 1 shall also 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 the income from immovable property of an
enterprise and 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 to much of them as is attributable to
(a) that permanent establishment; or (b) sales in that other State of goods or
merchandise of the same or similar kind as those sold through 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. In
any case where the correct amount of profits attributable to a permanent
establishment is incapable of determination or the determination thereof
presents exceptional difficulties, the profits attributable to the permanent
establishment may be estimated on a reasonable basis.
3. In determining the
profits of a permanent establishment, there shall be allowed as deductions
expenses which are incurred for the purposes of the business of the permanent
establishment, including executive and general administrative expenses so
incurred, whether in the State in which the permanent establishment is situated
or elsewhere, in accordance with the provisions of and subject to the
limitations of the taxation laws of that State.
4. Insofar as it has been customary
in a Contracting State to determine the 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 preclude that
Contracting State from determining the profits to be taxed by such an
apportionment as may be customary; the method of apportionment adopted shall,
however, be such that the result shall be 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. Nothing in this Article
shall affect any provisions of the law of either Contracting State at any time
in force regarding the taxation of any income or profits from the business of
any form of insurance.
8. Where profits include
items of economic which are dealt with separately in other Articles of this
Convention, then the provisions of those Articles shall not be affected by the
provisions of this Article.
ARTICLE 8: Air
transport.--1. Profits of an enterprise of a Contracting State from the
operation of aircraft in international traffic shall be taxable only in that
State.
2. The provisions of
paragraph 1 shall also apply to profits from the participation in a pool, a
joint business or an international operating agency.
3. The term
"operation of aircraft" shall mean the business carried on by the
owners or lessees or charterers of aircraft in respect of transportation by air
of passengers, mail, livestock or goods, including the sale of tickets for such
transportation on behalf of other enterprises, the incidental lease of aircraft
and any other activity directly connected with such transportation.
ARTICLE 8A: Shipping.--1.
Profits of an enterprise of a Contracting State derived from the operation of
ships in international traffic shall be taxed only in that Contracting State.
2. Notwithstanding the
provisions of paragraph 1, such profits to the extent that they are derived
from the other Contracting State may also be taxed in that Contracting State
but the tax so imposed shall not exceed 50 per cent of the tax which would have
been chargeable on those profits in the absence of this Convention.
3. The provisions of
paragraphs 1 and 2 shall also apply to profits from the participation in a
pool, a joint business or an international operating agency.
4. Profits of an
enterprise of a Contracting State referred to in paragraphs 1, 2 and 3 includes
profits of that enterprise from the use, maintenance or rental of containers
(including trailers and related equipment for the transport of containers), to
the extent that those containers are used in international traffic.
ARTICLE 9: Associated
enterprises.--1. Where--
(a) 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
(b) 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 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 the profits of an enterprise of that State--and taxes
accordingly--profits on which an enterprise of the other Contracting State has
been charged 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 tax charged therein on those profits.
3. In determining such
adjustment, due regard shall be had to the other provisions of this Convention
and the competent authorities of the 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 the beneficial owner of the dividends the tax so charged shall not
exceed 20 per cent of the gross amount of the dividends. The competent
authorities of the Contracting States shall by mutual agreement settle the mode
of application of this limitation.
The paragraph shall not
affect the taxation of the company in respect of the profits out of which the
dividends are paid.
3. The term
"dividends" as used in this Article means income from shares or other
rights, not being debt-claims, participating in profits, as well as income from
other corporate rights which is subjected to the same taxation treatment as
income from shares by the laws of the State of which the company making the
distribution is a resident.
4. 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 fixed base. In such case the provisions of
Article 7 or Article 14, as the case may be, shall apply.
5. Where a company which
is 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.
ARTICLE 11: Interest.--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 recipient is the beneficial owner of the
interest the tax so charged shall not exceed 15 per cent of the gross amount of
the interest. The competent authorities of the Contracting States shall by
mutual agreement settle the mode of application of this limitation.
3. Notwithstanding the
provisions of paragraph 2, interest arising in a Contracting State shall be
exempt from tax in that State provided it is derived and beneficially owned by
:
(i) the Government, a political
sub-division or a local authority of the other Contracting State; or
(ii) the
Central Bank of other Contracting State;
(iii) in the case of India, the Export Import
Bank of India; in the case of New Zealand, any financial institution agreed to
be of a similar nature to the Export Import Bank of India by the competent
authorities of both Contracting States.
4. The term
"interest" as used in this Article means income from debt-claims of
every kind, whether or not secured by mortgage and whether or not 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. However, this
term does not include income dealt with in Article 10. Penalty charges for late
payment shall not be regarded as interest for the purpose of this Article.
5. The provisions of
paragraphs 1 and 2 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 such
permanent establishment or fixed base. In such case the provisions of Article 7
or Article 14, as the case may be, shall apply.
6. Interest shall be
deemed to arise in a Contracting State where the correct amount of profits
attributable to a permanent local authority or a resident of that State. Where,
however, the person paying the interests, 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 State in
which the permanent establishment or fixed is situated.
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 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: Royalties and
fees for technical services.--1. Royalties and fees for technical services
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
and fees for technical services 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 the beneficial owner of the royalties or fees for technical services the tax
so charged shall not exceed 30 per cent of the gross amount of the royalties or
fees for technical services. The competent authorities of the Contracting State
shall by mutual agreement settle the mode of application of this limitation.
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, films
or video tapes for use in connection with television or tapes for use in
connection with radio broadcasting, any patent, trade mark, 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.
4. The term "fees for
technical services" as used in this Article means payments of any kind to
any person, other than payments to an employee of the person making the
payments and to any individual for independent personal services mentioned in Article
14, in consideration for services of a managerial, technical or consultancy
nature, including the provision of services of technical or other personnel.
5. The provisions of
paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties or
fees for technical services, being a resident of a Contracting State, carries
on business in the other Contracting State in which the royalties or fees for
technical services 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 or contract in respect of which the
royalties or fees for technical services
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.
6. Royalties and fees for
technical services shall be deemed to arise in a Contracting State when the
payer is that State itself a political sub-division, a local authority or a
resident of that State. Where, however, the person paying the royalties or fees
for technical services, 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 liability to pay the royalties or fees for technical
services was incurred, and such royalties or fees for technical services are
borne by such permanent establishment or fixed base, then such royalties or
fees for technical services shall be deemed to arise in the State in which the
permanent establishment or fixed base is situated.
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 royalties or fees for
technical services, 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: Alienation of
property.--1. Income or 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 State.
2. Income or 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
income or gains from the alienation of such a permanent establishment (alone or
with the whole enterprise) or of such a fixed base, may be taxed in that other
State.
3. Income or gains of an
enterprise of a Contracting State from the alienation of ships or aircraft
operated in international traffic or movable property pertaining to the
operation of such ships or aircraft, shall be taxable only in that State.
4. Income or gains from
the alienation of shares of the capital stock of a company where the property
of the company consists directly or indirectly principally of immovable
property situated in a Contracting State may be taxed in that State.
5. Income or gains from
the alienation of shares other than those mentioned in paragraph 4 in a company
which is a resident of a Contracting State may be taxed in that State.
6. Income or gains from
the alienation of any property other than that referred to in paragraphs 1, 2,
3, 4 and 5 shall be taxable only in the Contracting State of which the
alienator 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 character shall be taxable only in that State except in the
following circumstances when such income may also be taxed in the other
Contracting State :
(a) if he has a fixed base regularly available to him in the
other Contracting State for the purpose of performing his activities; in that
case only so much of the income as is attributable to that fixed base may be
taxed in that other State; or
(b) if his stay in the other Contracting State is for a period or
periods amounting to or exceeding in the aggregate 183 days in any consecutive
twelve months period; in that case, only so much of the income as is derived
from his activities performed in that other State may be taxed in that other
State.
2. The term
"professional services" includes independent scientific, literary,
artistic, educational or teaching activities as well as the independent
activities of physicians, surgeons, lawyers, engineers, architects, dentists
and accountants.
ARTICLE 15: Dependent
personal services.--1. Subject to the provisions of Articles 16, 17, 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 :
(a) the recipient is present in the other State for a period or
periods not exceeding in the aggregate 183 days in any consecutive twelve
months period; and
(b) the remuneration is paid by, or on behalf of, an employer who
is not a resident of the other State; and
(c) the remuneration is not borne by a permanent establishment or
a fixed base which the employer has in the other State.
3. Notwithstanding the
preceding provisions of this Article, remuneration derived in respect of an
employment exercised aboard a ship or aircraft operated in international
traffic by an enterprise of a Contracting State may be taxed 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 of a
company which is a resident of the other Contracting State may be taxed in that
Other State.
ARTICLE 17: Artistes and
athletes.--1. Notwithstanding the provisions of Articles 14 and 15, income
derived by a resident of a Contracting State as an entertainer, such as a
theatre, motion picture, radio or television artiste or a musician, or as an
athlete, from his personal activities as such 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 an athlete in his
capacity as such accrues not to the entertainer or athlete himself but to
another person, that income may, notwithstanding the provisions of Articles 7,
14 and 15, be taxed in the Contracting State in which the activities of the
entertainer or athlete are exercised.
3. The provisions of
paragraphs 1 and 2 shall not apply if the visit to a Contracting State of the
entertainer or the athlete is directly or indirectly supported, wholly or
substantially, from the public funds of the other Contracting State, including
a political sub-division, a statutory body or a local authority of that other
State.
ARTICLE 18: Pensions and
annuities.--1. Subject to the provisions of paragraph 2 of Article 19, pensions
and other similar remuneration paid in consideration of past employment to a
resident of a Contracting State and any annuity paid to such a resident shall
be taxable only in that State.
2. The term
"annuity" as used in this Article means a stated sum payable
periodically at stated times during life or during a specified or ascertainable
period of time under an obligation to make the payments in return for adequate
and full consideration in money or money's worth.
ARTICLE 19: Government
service.--1. (a) Remuneration, other than a pension, paid by a Contracting
State or a political sub-division or a local authority thereof to an individual
in respect of services rendered to that State or sub-division or authority
shall be taxable only in that State.
(b) 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 :
(i) is a national of that State; or
(ii) did not
become a resident of that State solely for the purpose of rendering the
services.
2. (a) Any pension
paid by, or out of funds created by, a Contracting State or a political
sub-division or a local authority thereof to an individual in respect of
services rendered to that State or sub-division or authority shall be taxable
only in that State.
(b) However, such pension 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 and 18 shall apply to remuneration and pensions in respect of
services rendered in connection with a business carried on by a Contracting
State or a political sub-division or a local authority thereof.
ARTICLE 20: Students and
apprentices.--1. Payments which a student or business or technical 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 State solely
for the purpose of his education or training receives for the purpose of his
maintenance, education or training shall not be taxed in that State, provided
that such payments arise from sources outside that State.
2. An individual who was a
resident of a Contracting State immediately before visiting the other
Contracting State and is temporarily present in that Contracting State solely
for the purpose of study or training as a recipient of a grant, allowance or
award from an arrangement for assistance programme entered into by the
Government of that Contracting State shall be exempt from tax in that
Contracting State on the amount of such grant, allowance or award.
ARTICLE 21: Professors and
teachers.--1. A professor or teacher who visits a Contracting State for a
period not exceeding two years for the purpose of teaching or carrying out
advanced study or research at a university, college, school or other approved
educational institution in that Contracting State and who immediately before
that visit was a resident of the other Contracting State shall be exempt from
tax in the first-mentioned Contracting State on any remuneration for such
teaching, advanced study or research in respect of which he is subject to tax
in the other Contracting State.
2. This Article shall not
apply to income from research if such research is undertaken not in the public
interest but primarily for the private benefit of a specific person or persons.
ARTICLE 22: Other
income.--Items of income of a resident of a Contracting State not dealt with in
the foregoing Articles of this Convention shall be taxable only in that State
except that, if such income arises in the other Contracting State, it may also
be taxed in that other State.
ARTICLE 23: Elimination of
double taxation.--1. (a) Subject to the provisions of the law of New Zealand
relating to the allowance as a credit against New Zealand tax of tax paid in
any country other than New Zealand (which shall not affect the general
principle hereof), Indian tax paid under the law of India and consistently with
Convention, whether directly or by deduction, in respect of income derived by a
resident of New Zealand from sources in India (excluding, in the case of a
dividend, tax paid in respect of the profits out of which the dividend is
paid), shall be allowed as a credit against New Zealand tax payable in respect
of that income;
(b) For the purposes of this Article, income of a resident of New
Zealand which in accordance with the provisions of this Convention may be taxed
in India shall be deemed to arise from sources in India.
2. (a) Subject to
the provisions of the law of India relating to the allowance as a credit
against Indian tax of tax paid in any country other than India (which shall not
affect the general principle hereof), New Zealand tax paid under the law of New
Zealand and consistently with this Convention, whether directly or by
deduction, in respect of income derived by a resident of India from sources in
New Zealand (excluding, in the case of a dividend, tax paid in respect of the
profits out of which the dividend is paid), shall be allowed as a credit against
Indian tax payable in respect of that income;
(b) For the purposes of this Article, income of a resident of
India which in accordance with the provisions of this Convention may be taxed
in New Zealand shall be deemed to arise from sources in New Zealand.
3. For the purposes of
paragraph 1 the term "Indian tax paid" shall be deemed to include any
amount which would have been payable as Indian tax but for a deduction allowed
in computing the taxable income or an exemption or reduction of tax granted for
that year under sections 10(4), 10(4A), 10(15)(iv) of the Income-tax Act, 1961
and any other provision to be agreed between the competent authorities of both
Contracting States. Provided that the credit for the Indian tax to be so
allowed shall not exceed the smaller of :
(a) the New Zealand tax which would have
been payable under New Zealand law but for the provisions of this paragraph;
and
(b) where
applicable, the limitation of tax agreed to in the relevant Articles of this
Convention.
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.
2. 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.
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 State to any taxation or
any requirement connected therewith which is other or more burdensome than the
taxation and connected requirements to which enterprises of the first-mentioned
State carrying on the same activities, the capital of which is owned or
controlled by residents of the first-mentioned State, are or may be subjected.
4. Nothing in this Article
shall be construed as preventing a Contracting State from distinguishing in its
taxation laws between residents and non-residents solely on the basis of their
residence and to levy taxes or grant exemption, relief, reduction or allowance
for tax purposes accordingly.
5. In this Article the
term "taxation " means taxes to which this Convention applies.
ARTICLE 25: Mutual
agreement procedure.--1. Where a resident of a Contracting State 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. This case must be presented within three years from the date
of receipt notice of the action giving rise to taxation not in accordance with
the Convention.
2. The competent authority
shall endeavour, if the objection appears to it to be justified and if it is
not itself able to arrive at a satisfactory solution, to resolve the case by
mutual agreement with the competent authority of the other Contracting State,
with a view to the avoidance of taxation which is not in accordance with the
Convention. Any agreement reached shall be implemented notwithstanding any time
limits in the domestic law of the Contracting State.
3. The competent
authorities of the Contracting State 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 together for the
elimination of double taxation in cases not provided for in the Convention.
4. The competent
authorities of the Contracting States may communicate with each other directly
for the purpose of reaching an agreement in the sense of the preceding
paragraphs. When it seems advisable in order to reach agreement to have an oral
exchange of opinions, such exchange may take place through a Commission
consisting of representatives of the competent authorities of the Contracting
States.
ARTICLE 26: Exchange of
information.--1. The competent authorities of the Contracting States shall
exchange such information (including documents) as is necessary for carrying
out the provisions of this Convention or of the domestic law of the Contracting
State concerning taxes covered by the Convention insofar as the taxation
thereunder is not contrary to the Convention, in particular for the prevention
of fraud or evasion of such taxes. The exchange of information is not
restricted by Article 1. Any information received by a Contracting State shall
be treated as secret in the same manner as information obtained under the
domestic law of that State and shall be disclosed only to persons or
authorities (including courts and administrative bodies) involved in the
assessment or collection of, the enforcement or prosecution in respect of, or
the determination of appeals in relation to, the taxes covered by the
Convention. Such persons or authorities shall use the information only for such
purposes. They may disclose the information in public court proceedings or in
judicial decisions.
2. In no case shall the
provisions of paragraph 1 be construed so as to impose on a Contracting State
the obligation :
(a) to carry out administrative measures at
variance with the laws and administrative practice of that or of the other
Contracting State;
(b) 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;
(c) 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.
ARTICLE 27: Diplomatic and
Consular Officers.--Nothing in this Convention shall effect the fiscal
privileges of diplomatic or consular officers under the general rules of
international law or under the provisions of special international agreements.
ARTICLE 28: Entry into
force.--1. The Contracting States shall notify each other that the
constitutional requirements for the entry into force of this Convention have
been complied with.
2. This Convention shall
enter into force on the date of the later of notifications referred to in
paragraph 1 and its provisions shall have effect :
(a) in New Zealand : for any income year
beginning on or after 1 April in the calendar year next following the date on
which the Convention enters into force;
(b) in India : for any "previous
year" (as defined in the Income-tax Act, 1961) beginning on or after 1
April in the calendar year next following the date on which the Convention
enters into force.
ARTICLE 29:
Termination.--This Convention shall remain in force until terminated by one of
the Contracting States. Either Contracting State may terminate the Convention
by giving notice of termination, through diplomatic channels, at least six
months before the end of any calendar year beginning after the expiration of
five years from the date of entry into force of the Convention. In such event,
the Convention shall cease to have effect :
(a) in New Zealand : for any income year
beginning on or after 1 April in the calendar year next following that on which
the notice of termination is given :
(b) in India: for any "previous
year" (as defined in the Income-tax Act, 1961) beginning on or after 1
April in the calendar year next following the date on which the notice of
termination is given.
In witness whereof the
undersigned, duly authorised thereto, have signed the present Convention.
Done in duplicate at
Auckland this 17th day of October, 1986 in the Hindi and English languages,
both the texts being equally authentic. In case of divergence between the two
texts, the English text shall be the operative one.
/Sd /Sd/-
Rajiv Gandhi David
Lange
Prime Minister Prime
Minister
For the Government of For
the Government of
the Republic of India New
Zealand
Whereas the annexed Second
Protocol to the Convention between the Government of the Republic of India and
the Government of New Zealand for the avoidance of double taxation and the
prevention of fiscal evasion with respect to taxes on income comes into force
on 30th December, 1999, thirty days after the date of receipt of later of
notifications by both the Contracting States to each other, under Article 9 of
the Second Protocol, of the completion of the procedures required under their
respective laws for bringing into force of the said Second Protocol.
Now, therefore, in
exercise of the powers conferred by section 90 of the Income-tax Act, 1961 (43
of 1961), the Central Government hereby directs that all the provisions of the
said Second Protocol shall be given effect to in the Union of India.
Second Protocol to the
Convention between the Government of the Republic of India and the Government
of New Zealand for the avoidance of double taxation and the prevention of
fiscal evasion with respect to taxes on income.
To the Convention between
the Government of the Republic of India and the Government of New Zealand for
the avoidance of double taxation and the prevention of fiscal evasion with
respect to taxes on income.
The Government of the
Republic of India and the Government of New Zealand,
Having regard to the
Convention between the Government of the Republic of India and the Government
of New Zealand for the avoidance of double taxation and the prevention of
fiscal evasion with respect to taxes on income done at Auckland on the 17th day
of October, 1986 (hereinafter referred to as "the Convention"),
Have agreed as follows:
Paragraph 1(a)(ii) of
Article 3 of the Convention is replaced by the following:
"(ii) the term "India" means the
territory of India and includes the territorial sea and the airspace above it,
as well as any other maritime zone in which India has sovereign rights, other
rights and jurisdiction, according to the Indian law and in accordance with
international law, including the UN Convention on the Law of the Sea;"
Paragraph 3 of Article 4
of the Convention is replaced by the following:
"3. Where by reason
of the provisions of paragraph 1 a person other than an individual is a
resident of both Contracting States, then it shall be deemed to be a resident
of the State in which its place of effective management is situated. If the
State in which its place of effective management is situated cannot be
determined, then the competent authorities of the Contracting States shall
settle the question by mutual agreement."
Paragraph 1 of Article 6
of the Convention is replaced by the following:
"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 also
be taxed in that other State."
In paragraph 2 of Article
10 of the Convention, "20 per cent" is replaced by "15 per
cent".
In paragraph 2 of Article
11 of the Convention, "15 per cent" is replaced by "10 per
cent".
In paragraph 2 of Article
12 of the Convention, "30 per cent" is replaced by "10 per
cent".
Paragraph 1 of Article 13
of the Convention is replaced by the following:
"1. Income or 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 also be taxed in that other State."
2. Paragraph 2 of Article
24 of the Convention is replaced by the following:
"2. 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 preventing a
Contracting State from charging the profits of a permanent establishment which
a company of the other Contracting State has in the first-mentioned State at a
rate of tax which is higher than that imposed on the profits of a similar
company of the first-mentioned Contracting State."
2. A new paragraph 5 is
inserted immediately after paragraph 4 of Article 24 of the Convention and the
original paragraph 5 of the Article is renumbered paragraph 6.
"5. This Article
shall not apply to any provisions of the taxation laws of a Contracting State
which are reasonably designed to prevent or defeat the avoidance or evasion of
taxes."
1. The Contracting States
shall notify each other through diplomatic channels of the completion of the
procedures required by the respective laws for the entry into force of this
Protocol.
2. This Protocol shall
enter into force 30 days after the date of receipt of the later of the
notifications referred to in paragraph 1 of this Article and its provisions
shall have effect:
(a) in New Zealand for any income year beginning on or after 1st
April in the calendar year next following the date on which the Protocol enters
into force;
(b) in India, for any "previous year" (as defined in
the Income-tax Act, 1961) beginning on or after 1st April in the calendar year
next following the date on which the Protocol enters into force.
IN WITNESS WHEREOF the
undersigned, duly authorised by their respective Governments, have signed this
Protocol.
Done in duplicate at New
Delhi this twenty-first day of June,
1999 in the Hindi and English languages, both texts being equally
authentic. In case of divergence between the two texts, the English text shall
be the operative one.
Convention between the
Republic of India and the Kingdom of Norway for the avoidance of double
taxation andthe prevention of fiscal evasion with respect to taxes on
income and on capital
Notification No. 7514 [F.
No. 505-3A/81-FTD], dated 9 September, 1987 as corrected by Notification No.
8124 [F.No. 505/3A/81-FTD] dated 24 October, 1988
G.S.R. 756(E).--Whereas
the annexed Convention between the Republic of India and the Kingdom of Norway
for the avoidance of double taxation and the prevention of fiscal evasion with
respect to taxes on income and on capital has entered into force in the year
one thousand nine hundred and eighty-six, being the year in which it was
signed, on the notification by both the Contracting States to each other of the
completion of the procedures required under their laws, as required by
paragraph 1 of Article 31 of the said Convention;
Now, therefore, in
exercise of the powers conferred by section 44A of the Wealth-tax Act, 1957 (27
of 1957), section 90 of the Income-tax Act, 1961 (43 of 1961) and section 24A
of the Companies (Profits) Surtax Act, 1964 (7 of 1964), the Central Government
hereby directs that all the provisions of the said Convention shall be given
effect to in the Union of India.
The Government of the
Republic of India and the Government of the Kingdom of Norway desiring to
conclude a Convention for the Avoidance of Double Taxation and Prevention of
Fiscal Evasion with respect to taxes on income and on capital;
Have agreed as follows :
ARTICLE 1: Personal
scope.--This Convention shall apply to persons who are resident of one or both
the Contracting States.
ARTICLE 2: Taxes
covered.--1. The existing taxes to which the Convention shall apply are in
particular :
(a) In India :
(i) the income-tax including any surcharge
thereon imposed under the Income-tax Act, 1961 (43 of 1961);
(ii) the
surtax imposed under the Companies (Profits) Surtax Act, 1964 (7 of 1964);
(iii) the
wealth-tax imposed under the Wealth-tax Act, 1957 (27 of 1957);
(hereinafter referred to
as "Indian tax").
(b) In Norway :
(i) the national tax on income (inntektsskatt til staten);
(ii) the
county municipal tax in income (inntektsskatt til fylkeskommunen);
(iii) the
municipal tax on income (inntektsskatt til kommunen);
(iv) the national contributions to the Tax
Equalisation Fund (fellesskatt til Skattefordelingsfondet);
(v) the
national tax on capital (formuesskatt til staten);
(vi) the
municipal tax on capital (formuesskatt til kommunen);
(vii) the national tax relating to income and
capital from the exploration for and the exploitation of submarine petroleum
resources and activities and work relating thereto, including pipelines
transport of petroleum produced (skatt til staten vedro rende inntekt go formue
iforbindelsmed under-sØkelse etter og utnyttes av unders jØske
petroleumsforekomster og dertil knyttet virksomhet og arbeid, hereunder
rØredning stransport av utvunnet petroleum);
(viii) the national dues on remuneration to non
resident artists (avgift til staten av honorarer som tilfaller kunstnere bosatt
i utlandet);
(ix) the seamen's tax (sjØmannsskatt);
(hereinafter referred to
as "Norwegian tax").
2. The Convention shall
also apply to any identical or substantially similar taxes which are imposed by
either Contracting State after the date of signature of the present Convention
in addition to, or in place of, the existing taxes referred to in paragraph 1.
The competent authorities of the Contracting States shall notify each other of
any substantial changes which are made in their respective taxation laws.
ARTICLE 3: General
definitions.--1. In this Convention, unless the context otherwise requires:
(a) the term "India" means the territory of India and
includes territorial sea and the air space above it, as well as any other
maritime zone in which India has sovereign rights, other rights and
jurisdiction, according to the Indian law and in accordance with international
law.
(b) the term "Norway" means the Kingdom of Norway,
including any area outside the territorial waters of the Kingdom of Norway
where the Kingdom of Norway, according to Norwegian legislation and in
accordance with international law, may exercise her rights with respect to the
seabed and sub-soil and their natural resources; the term does not comprise
Svalbard, Jan Mayen and the Norwegian dependencies outside Europe;
(c) the terms "a Contracting State" and "the other
Contracting State" mean India or Norway as the context requires;
(d) the term "tax" means Indian tax or Norwegian tax,
as the context requires, but shall not include any amount which is payable in
respect of any default or omission in relation to the taxes to which this
Convention applies or which represents a penalty imposed relating to those
taxes;
(e) the term "person" includes an individual, a company
and any other entity which is treated as a taxable unit under the taxation laws
in force in the respective Contracting States;
(f) the term "company" means any body corporate or any
entity which is treated as a company or body corporate under the taxation laws
in force in the respective Contracting States;
(g) 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;
(h) the term "competent authority" means in the case of
India, the Central Government in the Ministry of Finance (Department of
Revenue) or their authorised representative; and in the case of Norway, the
Minister of Finance and Customs or his authorised representative;
(i) the term "nationals" means any individual
possessing the nationality of a Contracting State and any legal person,
partnership and association deriving its status as such from the laws in force
in a Contracting State;
(j) the term "international traffic" means any
transport by a ship or aircraft operated by an enterprise of a Contracting
State, except when the ship or aircraft is operated solely between places in
the other Contracting State.
2. As regards the
application of the Convention by a Contracting State and term not defined
therein shall, unless the context otherwise requires, have the meaning which it
has under the law of that State concerning the taxes to which the Convention
applies.
ARTICLE 4: Resident.--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.
2. Where by reason of the
provisions of paragraph 1, an individual is a resident of both Contracting
States, then his status shall be determined as follows :
(a) 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 with
which his personal and economic relations are closer (centre of vital
interests).
(b) if the State in which he has his centre of vital interest
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;
(c) 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;
(d) if he is a national of both States or of neither of them, the
competent authorities of the Contracting States shall settle the question by
mutual agreement.
3. Where by reason of the
provisions of paragraph 1, a person other than an individual is a resident of
both Contracting States, then it shall be deemed to be a resident of the State
in which its place of effective management is situated.
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 :
(a) a place of management;
(b) a branch;
(c) an
office;
(d) a
factory;
(e) a
workshop;
(f) a mine,
an oil or gas well, a quarry or any other place of extraction of natural
resources;
(g) a warehouse
in relation to a person providing storage facilities for others;
(h) a farm, plantation or other place where
agriculture, forestry, plantation or related activities are carried on;
(i) a
premises used as a sales outlet or for receiving or soliciting orders;
(j) an installation or structure used for the exploration of
natural resources;
(k) a building site, a construction, assembly
or installation project or supervisory activities in connection therewith, but
only where such site, project or activities continue for a period of more than
three months together with other such sites, projects or activities, if any;
(l) the furnishing of services, including
consultancy services, by an enterprise through employees or other personnel
engaged by the enterprise for such purpose, but only where activities of that
nature continue (for the same or a connected project) within the country for a
period or periods aggregating more than six months within any 12 months period.
3. Notwithstanding the
preceding provisions of this Article, the term "permanent
establishment" shall be deemed not to include :
(a) the use of facilities solely for the
purpose of storage or display of goods or merchandise belonging to the
enterprise;
(b) the maintenance of a stock of goods or
merchandise belonging to the enterprise solely for the purpose of storage or
display;
(c) the maintenance of a stock of goods or
merchandise belonging to the enterprise solely for the purpose of processing by
another enterprise;
(d) the maintenance of a fixed place of
business solely for the purpose of purchasing goods or merchandise, or of
collecting information, for the enterprise;
(e) the maintenance of a fixed place of
business solely for the purpose of advertising, for the supply of information,
for scientific research or for other activities which have a preparatory or
auxiliary character, for enterprise.
However, the provisions of
sub-paragraphs (a) to (e) shall not be applicable where the enterprise
maintains any other fixed place of business in the other Contracting State for
any purposes other than the purposes specified in the said sub-paragraphs.
4. Notwithstanding the
provisions of paragraphs 1 and 2 where a person--other than an agent of an
independent status to whom paragraph 5 applies--is acting in a Contracting
State on behalf of an enterprise of the other Contracting State, that
enterprise shall be deemed to have a permanent establishment in the
first-mentioned State, if:
(a) he has and habitually exercises in that State an authority to
conclude contracts on behalf of the enterprise, unless his activities are
limited to the purchase of goods or merchandise for the enterprise;
(b) he has no such authority but habitually maintains in the
first-mentioned State a stock of goods or merchandise from which he regularly
delivers goods or merchandise on behalf of the enterprise; or
(c) he habitually secures orders in the first-mentioned State,
wholly or almost wholly for the enterprise itself or for the enterprise and
other enterprises controlling, controlled by, or subject to the same common
control as, that enterprise.
5. 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. However, when the activities of such an agent are devoted wholly or
almost wholly on behalf of that enterprise itself or on behalf of that
enterprise and other enterprise controlling controlled by or subject to the
same common control as, that enterprise, he shall not be considered as an agent
of an independent status within the meaning of this paragraph if it is shown
that the transactions between the agent and the enterprise were not made under
arms length conditions. In that case the provisions of paragraph 4 shall apply.
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 which carries on
business in that other State (whether through a permanent establishment or
otherwise), shall not of itself constitute either company 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 (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 in question is situated. The
term shall in any case include property accessory to immovable property, livestock
and equipment used in agriculture and forestry, rights to which the provisions
of general law respecting landed property apply, usufruct of immovable property
and rights to variable of fixed payments as consideration for the working of,
or the right to work, mineral deposits, sources and other natural resources.
Ships, boats and aircraft 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 the income from immovable property of an
enterprise and 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 :
(a) that permanent establishment;
(b) sales in that other State of goods or merchandise of the same
or similar kind as those sold through that permanent establishment; or
(c) other business activities carried on in that other State of
the same or similar kind as those effected through 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 the determination of
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 so incurred whether in
the State in which the permanent establishment is situated or elsewhere, in
accordance with the provisions of and subject to the limitations of the
taxation laws of that State. However, no such deduction shall be allowed in
respect of amounts, if any, paid (otherwise than towards reimbursement of
actual expenses) by the permanent establishment to the head office of the
enterprise or any of the other offices, by way of royalties, fees or other
similar payments in return for the use of patents, know-how or other rights, or
by way of commission or other charges, for specific services performed or for
management, or, except in the case of a banking enterprise, by way of interest
on moneys lent to the permanent establishment. Likewise, no account shall be
taken, in the determination of the profits of a permanent establishment, for
amounts charged (otherwise than towards reimbursement of actual expenses), by
the permanent establishment to the head office of the enterprise or any of its
other offices, by way of royalties, fees or other similar payments in return
for the use of patents, know-how or other rights, or by way of commission or
other charges for specific services performed or for management, or, except in
the case of banking enterprises, by way of interest on moneys lent to the head
office of the enterprise or any of its other offices.
4. Insofar as it has been
customary in a Contracting State to determine the 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 preclude
that Contracting State from determining the profits to be taxed by such an
apportionment as may be customary; the method of apportionment adopted shall,
however, be such that the result shall be 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 profits include
items of income which are dealt with separately in other Articles of this
Convention, then the provisions of those Articles shall not be affected by the
provisions of this Article.
ARTICLE 8: Air
transport.--1. Profits derived by an enterprise of a Contracting State from the
operation of aircraft in international traffic shall be taxable only in that
State.
2. The provisions of
paragraph 1 shall also apply to profits from the participation in a pool, a
joint business or an international operating agency.
3. The provisions of
paragraphs 1 and 2 shall apply to profits derived by the joint Norwegian,
Danish and Swedish air transport consortium Scandinavian Airlines System (SAS),
but only in so far as profits derived by Det Norske Luftfartsselskap A/s (DNL),
the Norwegian partner of the Scandinavian Airlines System (SAS), are in
proportion to its share in that organisation.
4. For the purposes of
this Article, interest on funds connected with the operation of aircraft in
international traffic shall be regarded as profits derived from the operation
of such aircraft, and the provisions of Article 12 shall not apply in relation
to such interest.
5. The term
"operation of aircraft" shall mean business of transportation by air
of passengers, mail, livestock or goods carried on by the owners or lessees or
charterers of aircraft, including the sale of tickets for such transportation
on behalf of other enterprises, the incidental lease of aircraft and any other
activity directly connected with such transportation.
ARTICLE 9: Shipping.--1.
Profits derived by an enterprise of a Contracting State from the operation of
ships in international traffic shall be taxable only in that State.
2. Notwithstanding the
provisions of paragraph 1 profits derived from the operation of ships in
international traffic may be taxed in the Contracting State in which such
operation is carried on; but the tax so charged shall not exceed 50 per
cent of the tax otherwise imposed by
the internal law of that State. For purposes of this paragraph, the amount of
such profits subject to tax in India shall not exceed 7.5 per cent of the sums
receivable in respect of the carriage of passengers or freight embarked in
India.
3. The provisions of
paragraphs 1 and 2 shall also apply to profits derived from the participation
in a pool, in a joint business or in an international operating agency.
4. An enterprise shall be
deemed to be an enterprise of both Contracting States if:
(a) the enterprise is carried on by a company or any other body
of persons where all the partners are jointly and severally liable and at least
one of the partners has unlimited liability; and
(b) at least one of the partners is a resident of one of the
Contracting States and one or more of them is a resident of the other
Contracting State; and
(c) the effective management of the enterprise is not carried on
solely in one of the Contracting States.
In that case, the profits
of the enterprise, subject to paragraph 2 of this Article, shall be taxable in
the State where partners mentioned in sub-paragraph (b) are residents in
proportion to their part of the profits. The provisions of this paragraph shall
not be construed as to grant any benefits to partners resident of a State other
than the Contracting States.
5. For the purposes of
this Article, income from the operation of ships includes income derived from
the use, maintenance or rental of containers (including trailers and related
equipment for the transport of containers) in connection with the transport of
goods or merchandise in international traffic.
ARTICLE 10: Associated
enterprises.--Where--
(a) 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
(b) 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 enterprise, then any profits which would, but for those conditions,
have accrued to one of the enterprise, but, by reason of those conditions, have
not so accrued, may be included in the profits of that enterprise and taxed
accordingly.
ARTICLE 11: 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 the beneficial owner of the dividends the tax so charged shall not
exceed :
(a) 15 per cent of the gross amount of the dividends if the
beneficial owner is a company (other than a partnership) which holds directly
at least 25 per cent of the capital of the company paying the dividends and the
dividends are attributable to a new contribution;
(b) 25 per cent of the gross amount of the dividends in all other
cases.
This paragraph shall not
affect the taxation of the company in respect of the profits out of which the
dividends are paid.
3. The term
"dividends" as used in this Article means income from shares or other
rights, not being debt-claims, participating in profits, as well as income from
other corporate rights which is subjected to the same taxation treatment as
income from shares by the laws of the State of which the company making the distribution
is a resident.
4. 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 fixed base. In such case, the provisions of
Article 7 or Article 15, 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 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 or profits or income
arising in such other State.
6. As used in paragraph 2
of this Article the term "new contribution" means share capital,
other than bonus shares, issued after the date of entry into force of this
Convention by a company which is a resident of a Contracting State, and
beneficially owned by a resident of the other Contracting State.
ARTICLE 12: Interest.--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 recipient is the beneficial owner of the
interest and it is paid in respect of a loan or debt first created after the
date of entry into force of this Convention, the tax so charged shall not
exceed 15 per cent of the gross amount of the interest.
3. Notwithstanding the
provisions of paragraph 2,--
(a) interest arising in a Contracting State shall be exempt from
tax in that State provided it is derived and beneficially owned by:
(i) the Government, a political
sub-division or a local authority of the other Contracting State; or
(ii) the
Central Bank of the other Contracting State;
(b) interest arising in a Contracting State shall be exempt from
tax in that Contracting State to the extent approved by the Government of that
State if it is derived and beneficially owned by any person other than a person
referred to in sub-paragraph (a) who is a resident of the other Contracting State
provided that the transaction giving rise to the debt-claim has been approved
in this regard by the Government of the first-mentioned Contracting State to be
in the interest of the industrial development of that State.
4. The term
"interest" as used in this Article means income from debt-claims of
every kind, whether or not secured by mortgage, and in particular, income from
government securities and income from bonds or debentures, including premiums
and prizes attaching to such securities, bonds or debentures. Penalty charges
for late payment shall not be regarded as interest for the purpose of this
Article.
5. The provisions of
paragraphs 1 and 2 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 such
permanent establishment or fixed base. In such case, the provisions of Article
7 or Article 15, as the case may be, shall apply.
6. Interest shall be
deemed to arise in a Contracting State when the payer is that State itself, a
political sub-division, a local authority 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 State in which the permanent
establishment or fixed base is situated.
7. Where, by reason of
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 for whatever reason, 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: Royalties and
fees for technical services.--1. Royalties and fees for technical services
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
and fees for technical services may also be taxed in the Contracting State in
which they arise and according to the laws of that State. But insofar as fees
for technical services are considered, to the extent such fees are paid in
respect of a contract which is signed after the date of entry into force of
this Convention, the tax so charged shall not exceed 20 per cent of such fees.
For the purposes of this paragraph, if a lower rate of Indian tax is agreed
upon with any other State than Norway after the entry into force of this
Convention such rate shall be applied.
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 or
films or tapes used for radio or television broadcasting, any patent, trade
mark, 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.
4. The term "fees for
technical services" as used in this Article means payments of any amount
to any person other than payments to an employee of a person making payments,
in consideration for the services of a managerial, technical or consultancy
nature, including the provision of services of technical or other personnel.
5. The provisions of
paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties or
fees for technical services, being a resident of a Contracting State, carries
on business in the other Contracting State in which the royalties or fees for
technical services arise, through a permanent establishment situated therein,
or perform in that other State independent personal services from a fixed base
situated therein, and the right, property or contract in respect of which the
royalties or fees for technical services are paid is effectively connected with
such permanent establishment or fixed base. In such case, the provisions of
Article 7 or Article 15, as the case may be, shall apply.
6. Royalties and fees for
technical services shall be deemed to arise in a Contracting State when the
payer is that State itself, a political sub-division, a local authority or a
resident of that State. Where, however, the person paying the royalties or fees
for technical services, whether he is a resident of a Contracting State or not,
has in a Contracting State a permanent establishment or fixed base in
connection with which the liability to pay the royalties or fees for technical
services was incurred, and such royalties or fees for technical services are
borne by such permanent establishment or fixed base, then such royalties or
fees for technical services shall be deemed to arise in the State in which the
permanent establishment or fixed base is situated.
7. Where, by reason of
special relationship between the payer and the beneficial owner or between both
of them and some other persons, the amount of royalties or fees for technical
services paid exceeds the amount which would have been paid 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 14: 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 State.
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 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 movable
property (including containers and related equipment) pertaining to the
operation of such ships or aircraft shall be taxable only in the Contracting
State of which the alienator is a resident.
4. Gains from the
alienation of shares of the capital stock of a company the property of which
consists directly or indirectly principally of immovable property situated in a
Contracting State may be taxed in that State.
5. Gains from the
alienation of shares other than those mentioned in paragraph 4 in a company
which is a resident of a Contracting State may be taxed in that State.
6. Gains from the
alienation of any property other than that mentioned in the preceding
paragraphs shall be taxable only in the Contracting State of which the
alienator is a resident.
ARTICLE 15: Independent
personal services.--1. Income derived by an individual who is a resident of a
Contracting State from the performance of professional services or other
activities of a similar character shall be taxable only in that State except in
the following circumstances when such income may also be taxed in the other
Contracting State:
(a) if he has a fixed base regularly available to him in the
other Contracting State for the purpose of performing his activities; in that
case, only so much of the income as is attributable to that fixed base may be
taxed in that other State; or
(b) if his
stay in the other Contracting State is for a period or periods amounting to or
exceeding in the aggregate 183 days in any two consecutive years of income; in
that case, only so much of the income as is derived from his activities
performed in that other State may be taxed in that other State.
However, to the extent the
above-mentioned remuneration is not taxed in the State where the recipient is a
resident, the remuneration may be taxed in the other State.
2. The term
"professional services" includes especially independent scientific,
literary, artistic, educational or teaching activities, as well as the
independent activities of physicians, surgeons, lawyers, engineers, architects,
dentists and accountants.
ARTICLE 16: Dependent
personal services.--1. Subject to the provisions of Articles 17, 18, 19, 20, 21
and 22, 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:
(a) the recipient is present in that other State for a period or
periods not exceeding in the aggregate 183 days in any two consecutive years of
income; and
(b) the remuneration is paid by, or on behalf of, an employer who
is a resident of the State of which the recipient is a resident; and
(c) the remuneration is not reasonably connected with the
activities of a permanent establishment or a fixed base which the employer has
in the other State.
3. Notwithstanding the
preceding provisions of this Article, remuneration derived in respect of an
employment exercised aboard a ship or aircraft operated in international
traffic by an enterprise of a Contracting State may be taxed in that state.
Where a resident of Norway derives remuneration in respect of an employment
exercised aboard an aircraft operated in international traffic by the
Scandinavian Airlines System (SAS) consortium, such remuneration shall be
taxable only in Norway.
ARTICLE 17: Directors'
fees and remuneration of top level managerial officials.--1. Directors' fees
and similar payments derived by a
resident of a Contracting State in his capacity as a member of the board of
directors or of a similar organ of a company which is a resident of the other
Contracting State may be taxed in that other State.
2. Salaries, wages and
other similar remuneration derived by a resident of a Contracting State in his
capacity as an official in a top level managerial position of a company which
is a resident of the other Contracting State may be taxed in that other State.
ARTICLE 18: Income earned
by entertainers and athletes.--1. Notwithstanding the provisions of Articles 15
and 16, income derived by a resident of a Contracting State as an entertainer,
such as a theatre, motion picture, radio or television artistes, or a musician
or as an athlete, from his personal activities as such 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 an athlete in his
capacity as such accrues not to the entertainer or athlete himself but to
another person, that income may, notwithstanding the provisions of Articles 7,
15 and 16, be taxed in the Contracting State in which the activities of the
entertainer or athlete are exercised.
3. Notwithstanding the
provisions of paragraphs 1 and 2, income derived from such activities as
defined in paragraph 1 shall be exempt from tax in the Contracting State in
which these activities are performed if the visit of the entertainer or athlete
is within the framework of cultural exchange between the two Contracting
States, or is directly or indirectly supported, wholly or substantially, from
the public funds of the other Contracting State, including a political
sub-division or local authority of that other State.
ARTICLE 19: Remuneration
and pensions in respect of government service.--1. (a) Remuneration, other than
a person, paid by a Contracting State or a political sub-division or a local
authority thereof to an individual in respect of services rendered to that
State or sub-division or authority thereof in the discharge of functions of a
governmental nature shall be taxable only in that State.
(b) 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 :
(i) is a national of that State; or
(ii) did not become a resident of that State
solely for the purpose of rendering the services.
2. (a) any pension paid
by, or out of funds created by a Contracting State or a political sub-division
or a local authority thereof to an individual in respect of services rendered
to that State or sub-division or authority shall be taxable only in that State.
(b) However, such pension shall be taxable only in the other
Contracting State if:
(i) the individual is a resident of, and a national of that
other State; or
(ii) such
pension is exempt from tax in the first-mentioned State.
3. The provisions of
Articles 16, 17 and 20 shall apply to remuneration and pensions in respect of
services rendered in connection with a business carried on by a Contracting
State or a political sub-division or a local authority thereof.
ARTICLE 20: Non-government
pensions, annuities and alimony.--1. Any pensions, other than a pension
referred to in Article 19, or any annuity derived by a resident of Contracting
State from sources within the other Contracting State may be taxed in the
first-mentioned Contracting State.
2. The term
"pension" means a periodic payment made in consideration of past
services or by way of compensation for injuries received in the course of
performance of services.
3. The term
"annuity" means a stated sum payable periodically at stated times
during life or during a specified or
ascertainable period of time under an obligation to make the payments in return
for adequate and full consideration in money or money's worth.
4. Alimony received by a
resident of Norway and paid by a resident of India shall be exempt from tax in
Norway to the extent such payments are not deductible for the purposes of
Indian tax.
ARTICLE 21: Payments
received by students and apprentices.--1. Payments which a student or business
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 State solely for the purpose of his education or training
receives for the purpose of his maintenance, education or training shall not be
taxed in that State, provided that such payments arise from sources outside
that State.
2. In respect of grants,
scholarships and remuneration from employment not covered by paragraph 1, a
student or business apprentice described in paragraph 1 shall, in addition, be
entitled during such education or
training to the same exemptions, reliefs or reductions in respect of taxes
available to residents of the State which he is visiting.
ARTICLE 22: Other income.--1. Subject to the
provisions of paragraph 2, items of income of a resident of a Contracting
State, wherever arising, which are not expressly dealt with in the foregoing
Articles of this Convention, shall be taxable only in that Contracting 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 provisions of Article 7 or Article 15, as the case may be,
shall apply.
3. Notwithstanding the
provisions of paragraphs 1 and 2, items of income of a resident of a
Contracting State not dealt with in the foregoing Articles of this Convention,
and arising in the other Convention, State may also be taxed in that other
State.
ARTICLE 23: Offshore
activities.--1. The provisions of this Article have effect notwithstanding any
other provision of this Convention.
2. A person who is a
resident of a Contracting State and carries on activities offshore in the other
Contracting State in connection with the exploration of exploitation of the
seabed and sub-soil and their natural resources situated in that other State
shall, subject to paragraphs 3 and 4 of this Article, be deemed in relation to
those activities to be carrying on business in that other State through a
permanent establishment or fixed base situated therein.
3. The provisions of
paragraph 2 shall not apply where the activities are carried on for a period
not exceeding 30 days in the aggregate in any 12 months period. However, for
the purposes of this paragraph :
(a) activities carried on by an enterprise associated with
another enterprise shall be regarded as carried on by the enterprise with which
it is associated if the activities in question are substantially the same as
those carried on by the last-mentioned enterprise;
(b) two enterprises shall be deemed to be associated if one is
controlled directly or indirectly by the other, or both are controlled directly
or indirectly by a third person or persons.
4. Profits derived by a
resident of a Contracting State from the transportation of supplies or
personnel to a location, or between locations, where activities in connection
with the exploration or exploitation of the seabed and sub-soil and their
natural resources are being carried on in a Contracting State, or from the
operation of tugboats and other vessels auxiliary to such activities, shall be taxable
only in the Contracting State in which the place of effective management of the
enterprise is situated.
Notwithstanding the
provisions of this paragraph profits derived from such operation may also be
taxed in the Contracting State in which the operation is carried on; but the
tax so charged shall not exceed 50 per cent of the tax otherwise imposed by the
internal law of that State. For purposes of this paragraph, the amount of such
profits subject to tax in India shall not exceed 7.5 per cent of the sums
receivable. However, if a lower rate of Indian tax is agreed upon with any
other State than Norway after the entry into force of this Convention such rate
shall be applied for the purposes of this paragraph.
5. (a) Subject to
sub-paragraph (b) of this paragraph, salaries, wages and similar remuneration
derived by a resident of a Contracting State in respect of an employment
connected with the exploration or exploitation of the seabed and their natural
resources situated in the other Contracting State shall, to the extent that the
duties are performed offshore in that other State, be taxable only in that
other State provided that the employment offshore is carried on for a period
exceeding 30 days in the aggregate in any 12 months period.
(b) Salaries, wages and similar remuneration derived by a
resident of a Contracting State in respect of an employment exercised aboard a
ship or aircraft engaged in the transportation of supplies or personnel to a
location, or between locations, where activities connected with the exploration
or exploitation of the seabed and sub-soil and their natural resources are
being carried on in a Contracting State, or in respect of an employment
exercised abroad tugboats or other vessels operated auxiliary to such
activities, shall be taxable only in the Contracting State in which the place
of effective management of the enterprise is situated.
ARTICLE 24: 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 property 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 and aircraft operated in international traffic and by movable property
(including containers and related equipment) pertaining to the operation of
such ships and aircraft, shall be taxable only in the Contracting State of
which the owner of such ships, aircraft or property is a resident.
4. All other elements of
capital of a resident of a Contracting State shall be taxable only in that
State.
ARTICLE 25: Elimination of
double taxation.--1. The laws in force in either of the Contracting States
shall continue to govern the taxation of income and capital in the respective
Contracting States except where express provision to the contrary is made in
this Convention.
2. Where a resident of
India derives income or owns capital which, in accordance with the provisions
of this Convention, may be taxed in Norway, India shall allow as a deduction
from the tax on the income of that resident an amount equal to the income-tax
paid in Norway, whether directly or by deduction and as a deduction from the
tax on the capital of that resident an amount equal to the capital tax paid in
Norway. Such deduction in either case shall not, however, exceed that part of
the income-tax or capital tax (as computed before the deduction is given which
is attributable, as the case may be, to the income or the capital which may be
taxed in Norway, further, where such resident is a company by which surtax is
payable in India, the deduction in respect of income-tax paid in Norway shall be allowed in the first instance from
income-tax payable by the company in India and as to the balance, if any, from
surtax payable by it in India.
3. Where a resident of
Norway derives income or owns capital which, in accordance with the provisions
of the Convention, may be taxed in India, Norway shall, subject to the
provisions of paragraphs 4, 5, 6 and 7, exempt such income or capital from tax.
4. Where a resident of
Norway derives items of income which, in accordance with the provisions of
Articles 9, 11, 12, 13, 14 paragraph 5, 17, 22 and 23 may be taxed in India,
Norway shall allow as a deduction from the tax on the income of that person an
amount equal to the tax paid in India. Such deduction shall not, however,
exceed that part of the tax, as computed before the deduction is given, which
is attributable to such items of income derived from India.
5. For the purposes of the
deduction referred to in paragraph 4, the term "income-tax paid in
India" shall be deemed to include any amount which would have been payable
as Indian tax under the law of India and in accordance with this Convention for
any year but for an exemption from, or reduction of, tax granted for that year
under:
(a) sections 10(4), 10(4A), 10(4B), 10(6)(viia), 10(15)(iv) and
80L of the Income-tax Act, 1961 (43 of 1961), so far as they were in force on,
and have not been modified since, the date of the signature of this Convention,
or have been modified only in minor respects so as not to affect their general
character; or
(b) any other provisions which may be enacted after 11 November,
1983 granting a deduction in computing the taxable income or an exemption or
reduction from tax which the competent authorities of the Contracting States
agree to be for the purposes of the economic development of India, if it has
not been modified thereafter or has been modified only in minor respects so as
not to affect its general character.
This paragraph does not
apply to Article 17.
6. For the deduction
indicated in paragraph 4, Indian tax on interest shall be considered as having
been paid at a rate of not less than 15 per cent.
7. The provisions of
paragraphs 5 and 6 of this Article shall apply for the first 10 years for which
this Convention is effective but the competent authorities of the Contracting
States may consult each other to determine whether this period shall be
extended.
8. Whether under this
Convention a resident of a Contracting State is exempt from tax in that
Contracting State in respect of income derived or capital owned in the other
Contracting State, then the first-mentioned
Contracting State may, in calculating tax on the remaining income or capital of
that person, apply the rate of tax which would have been applicable if the
income or capital exempted from tax in accordance with this Convention had not
been so exempted.
ARTICLE 26:
Non-discrimination.--1. Nationals of a Contracting State shall not be subjected
in 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, notwithstanding the provisions
of Article 1, also apply to persons who are not residents of one or both of the
Contracting States.
2. Stateless persons who
are residents 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.
3. 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 in the same circumstances and under the same conditions.
4. Nothing containing in
this Article shall be construed as obliging a Contracting State to grant to
persons not resident in that State any personal allowances, reliefs, reductions
and deductions for taxation purposes which are by law available only to persons
who are so resident.
5. Except where the
provisions of Article 9, paragraph 7 of Article 12 or paragraph 7 of Article 13
apply, 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. Similarly, any debts 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 such
enterprise, be deductible under the same conditions as if they had been
contracted to a resident of the first-mentioned State.
6. 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 of the first-mentioned State are or may be subjected in the
same circumstances and under the same conditions.
7. The provisions of this
Article shall not be construed as obliging a Contracting State to grant to nationals
of the other Contracting State not being nationals of the first Contracting
State any exceptional tax relief accorded to repatriating nationals of this
Contracting State.
ARTICLE 27: Mutual
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 26, to that of the Contracting State of
which he is a national. The case must be presented within three years from the
first notification of the action resulting in taxation not in accordance with
the provisions of the Convention.
2. The competent authority
shall endeavour, if the objection appears to it to be justified and if it is
not itself able to arrive at a satisfactory solution, to resolve the case by
mutual agreement with the competent authority of the other Contracting State
with a view to the avoidance of taxation which is not in accordance with the
Convention. Any agreement reached shall be implemented notwithstanding any time
limits in the domestic law of the Contracting State.
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 the Convention. They may also consult together for the
elimination of double taxation in cases not provided for in the Convention.
4. The competent
authorities of the Contracting States may communicate with each other directly
for the purpose of reaching an agreement in the sense of the preceding
paragraphs. When it seems advisable in order to reach agreement to have an oral
exchange of options, such exchange may take place through a Commission
consisting of representatives of the competent authorities of the Contracting
States.
ARTICLE 28: Exchange of
information.--1. The competent authorities of the Contracting States shall
exchange such information (including documents) as is necessary for carrying
out the provisions of the Convention or of the domestic laws of the Contracting
State concerning taxes covered by the Convention, in so far as the taxation
thereunder is not contrary to the Convention, in particular for the prevention
of fraud or evasion of such taxes. The exchange of information is not
restricted by Article 1. And 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. However, if the information is originally regarded
as secret in the transmitting State, it shall be disclosed only to persons or
authorities (including courts and administrative bodies) involved in the
assessment or collection of, the enforcement or prosecution in respect of, or
the determination of appeals in relation to, the taxes which are the subject of
the Convention. Such persons or authorities shall use the information only for
such purposes but may disclose the information in public court proceedings or
in judicial decisions. The competent authorities shall, through consultation
develop appropriate conditions, methods and techniques concerning the matters
in respect of which such exchange of information shall be made, including,
where appropriate, exchange of information regarding tax avoidance.
2. In no case shall the
provisions of paragraph 1 be construed so as to impose on a Contracting State
the obligation :
(a) to carry out administrative measures at variance with the
laws or administrative practice of that or of the other Contracting State;
(b) to supply information which are not obtainable under the laws
or in the normal course of the administration of that or of the other
Contracting State;
(c) 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.
ARTICLE 29: Assistance in
collection.--1. The Contracting States undertake to lend assistance and support
to each other in the collection for taxes covered by this Convention which may
no longer be contested in the State making the request.
2. A request for
assistance in the recovery of tax claims of either of the Contracting States
which may no longer be contested in that State will be accepted for enforcement
by the other Contracting State and such tax claims shall be recovered in
accordance with the laws and administrative practice applicable to the
enforcement and collection of its own taxes.
3. The request for
assistance in the recovery of a tax claim shall be accompanied;
(a) by a declaration that the tax claim
concerns a tax covered by the Convention and that it may no longer be
contested,
(b) by an
official copy of the instrument permitting enforcement in the State making the
request,
(c) by any
other document required for recovery, and
(d) where appropriate by a certified copy
for any relevant decision of the administrative body or a court of law.
4. In the case of Indian
tax, the request will be sent by the Central Board of Direct Taxes, Department
of Revenue to the Ministry of Finance, Government of the Kingdom of Norway and,
in the case of Norwegian tax, the request will be sent by the Ministry of
Finance to the Central Board of Direct Taxes, Department of Revenue, in India.
5. Where the tax claim has
not become final by reason of being subject to appeal or any other proceeding,
a Contracting State may, in order to protect its revenues, request the other
Contracting State to take such interim measures as are lawful under the laws of
that other Contracting State.
6. A request for assistance
in collection of taxes due from a taxpayer shall be made only if adequate
assets of that taxpayer are not available for recovering the taxes from him in
the Contracting State making the request.
7. The Contracting State
in which tax is recovered in pursuance of paragraphs 1, 2 and 5 of this Article
shall immediately thereafter remit the amount so recovered to the other
Contracting State.
ARTICLE 30: Diplomatic and
consular officials.--Nothing in this Convention shall affect the fiscal
privilege of diplomatic or consular officials under the general rules of
international law or under the provisions of special agreements.
ARTICLE 31: Entry into
force.--1. Each of the Contracting State shall notify to the other the
completion of the procedures required by its law for the bringing into force of
this Convention. This Convention shall enter into force in the year in which it
is signed and shall thereupon have effect:
(a) in India, in respect of income arising in any previous year
beginning on or after the first day of April next following the calendar year
in which the Convention is signed;
(b) in Norway, in respect of taxes on income or on capital,
relating to the calendar year (including accounting periods beginning in any
such year) next following that in which the Convention is signed.
2. The agreement between
the Government of Norway and the Government of India for the avoidance of
double taxation of income, signed on the 20th July, 1959, shall terminate and
cease to have effect in respect to taxes on income to which the present
Agreement applies in accordance with the provisions of paragraph 1 of this
Article.
ARTICLE 32:
Termination.--This Convention shall remain in force indefinitely but either of
the Contracting States may, on or before the thirtieth day of June in any
calendar year beginning after the expiration of a period of five years from the
date of its entry into force, give to the other Contracting State, through
diplomatic channels, written notice of termination. In such event, this Convention
shall cease to have effect
(a) in India, in respect of income arising in any previous year
beginning on or after the first day of April next following the calendar year
in which the notice of termination is given and in respect of capital which is
held at the expiry of any fiscal year beginning on or after the first day of
April next following the calendar year in which the notice of termination is
given;
(b) in Norway, in respect of taxes on income or on capital
relating to the calendar year (including accounting periods beginning in such
year) next following that in which the notice of termination is given.
In witness where of the
undersigned, duly authorised thereto, have signed the present Convention.
Done in duplicate at New
Delhi this 31st day of December, one thousand nine hundred and eighty-six in
the Hindi, Norwegian and English languages, all texts being equally authentic.
In case of divergence between any of the texts, the English text shall be the
operative one.
For the Government of For the
Government of
the Republic of India the
Kingdom of Norway
Sd/- Sd/-
Chand K. Tikku Kaare
Daehlen
At the signing today of
the Convention between the Government of the Republic of India and the
Government of the Kingdom of Norway for the avoidance of double taxation and
prevention of fiscal evasion with respect to taxes on income and capital, the
undersigned have agreed upon the following provision which shall form an
integral part of the Convention :
1. To Article 16
Where an enterprise engaged in the operation of ships or
aircraft in international traffic is carried on by an unlimited partnership one
or more partners of which are residents of a Contracting State and one or more
partners of which are residents of the other Contracting State, and the
competent authorities of the Contracting States cannot reach agreement as to
the question in which of the Contracting States the place of effective
management of the enterprise is situated, remuneration dealt within paragraph 3
of Article 16 may be taxed in the Contracting State in which the recipient is a
resident.
2. To Article 25
The Contracting States agree that paragraphs 3 and 4 of
Article 25 shall, at the request of Norway, which shall be forwarded by not
through diplomatic channels, be replaced by the following text, which shall enter into force on the
30th day upon the confirmation through diplomatic channels of the receipt of
that note, and shall apply for the first time in respect of taxes on income or
capital relating to the calendar year (including accounting periods beginning
in such year next following that in which the exchange of notes is made.
"3 and 4 :
where a resident of Norway
derives income or owns capital which in accordance with the provisions of this
Convention may be taxed in India, Norway shall allow as a deduction from the
income-tax or capital tax of that person an amount equal to the tax paid in
India. Such deduction shall not, however, exceed, that part of the Norwegian
tax, as computed before the deduction is given, which is appropriate to the
income derived from or capital owned in India."
In witness whereof the
undersigned duly authorised thereto, have signed the Protocol.
Done in duplicate at New
Delhi this 31st day of December, one thousand nine hundred and eighty-six in
the Hindi, Norwegian and English languages, all texts being equally authentic.
In case of divergence between any of the texts, the English text shall be
operative.
For the Government of For
the Government of
the Republic of India The
Kingdom of Norway
Sd/- Sd/-
Chand K. Tikku Kaare
Daehlen