Section 90 of the Income-tax Act, 1961 - Double taxation agreement - Agreement for Avoidance of Double Taxation and Prevention of Fiscal Evasion with Foreign Countries - With the Government of Republic of Montenegro
Notification No.
4/2009 [F.No. 503/1/1997-FTD-1]/S.O. 96(E), dated 7-1-2009
Whereas
the annexed Convention between
the Government of Republic of India and the Council of Ministers of Serbia and
Montenegro for the Avoidance of Double Taxation with respect to Taxes on Income
and on Capital was signed at New Delhi on 8-2-2006;
And
whereas the State Union of
Serbia and Montenegro was disintegrated into two independent States after
Montenegro’s formal declaration of independence on 3-6-2006 and Serbia’s formal
declaration of independence on 5-6-2006;
AND WHEREAS the Government of
Republic of Montenegro has adopted the said Convention in accordance with the
Decision on Proclamation of accordingly of the Republic of Montenegro from 3rd
June, 2006 and accordingly reference in the said Convention to ‘Serbia and
Montenegro’ shall be read as reference to Montenegro;
And
whereas the date of entry
into force of the said Convention is the 23rd day of September, 2008, being the
date of later of the notifications of completion of the procedures as required
by the respective laws for entry into force of this Convention, in accordance
with paragraph 2 of Article 30 of the said Convention;
And
whereas sub-paragraph (2)
of paragraph 2 of Article 30 of the said Convention provides that the
provisions of the Convention shall have effect in India in respect of the taxes
on income derived and taxes on capital owned in each fiscal year beginning on
or after the first day of April in the calendar year next following the year in
which the Convention enters into force;
Now,
therefore, in exercise of
the powers conferred by section 90 of the Income-tax Act, 1961 (43 of 1961) 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.
Annexure
CONVENTION
BETWEEN THE GOVERNMENT OF THE REPUBLIC OF INDIA AND THE COUNCIL OF MINISTERS OF
SERBIA AND MONTENEGRO FOR THE AVOIDANCE OF DOUBLE TAXATION WITH RESPECT TO
TAXES ON INCOME AND ON CAPITAL
THE
GOVERNMENT OF THE REPUBLIC OF INDIA AND THE COUNCIL OF MINISTERS OF SERBIA AND
MONTENEGRO
desiring to conclude a Convention for
the avoidance of double taxation with respect to taxes on income and on capital
and with a view to promoting economic co-operation between the two countries,
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. This Convention shall apply to taxes on income and on capital imposed
on behalf of a Contracting State 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:
in Serbia and Montenegro:
(1) the
tax on profit;
(2) the
tax on income;
(3) the
tax on capital;
(4) the
tax on revenue from international transport (hereinafter referred to as
“Serbian and Montenegrin tax”);
in India:
(1) the
Income-tax, including any surcharge thereon; and
(2) the
wealth tax.
(hereinafter referred to as
“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 Contracting States shall notify each other of
any substantial changes which have been made in their respective taxation laws.
Article 3 : GENERAL DEFINITIONS -
1. For the purposes of this Convention:
(1) the
terms “a Contracting State” and “the other Contracting State” mean Serbia and
Montenegro or India, as the context requires;
(2) the
term “Serbia and Montenegro” means the State community Serbia and Montenegro
and when used in a geographical sense it means the land territory of Serbia and
Montenegro, its internal sea waters and the belt of the territorial sea, the
air space thereover, as well as the seabed and subsoil of the part of the
continental shelf outside the outer limit of the territorial sea over which
Serbia and Montenegro exercises its sovereign rights for the purpose of
exploration and exploitation of their natural resources in accordance with its
internal legislation and international law;
(3) 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 U.N. Convention on the
Law of the Sea;
(4) the
term “political sub-divisions”, in the State community Serbia and Montenegro,
means Member States;
(5) the
term “national” means:
- any
individual possessing the nationality of a Contracting State;
- any
legal person, partnership or association deriving its status as such from the
laws in force in a Contracting State;
(6) the
term “person” includes an individual, a company, a body of persons and, in the
case of India, any other entity which is treated as a taxable unit under the
taxation laws in force in that country;
(7) the
term “company” means any body corporate or any entity which is treated as a
body corporate for tax purposes;
(8) 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;
(9) 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;
(10) the
term “fiscal year” means:
- in
the case of Serbia and Montenegro, the year beginning on the first day of
January;
- in
the case of India, the year beginning on the first day of April.
(11) the
term “competent authority” means:
- in
the case of Serbia and Montenegro, the Ministry for International Economic
Relations or its authorized representative;
- in
the case of India, the Central Government in the Ministry of Finance
(Department of Revenue) or their authorized representatives.
2. As regards the application of the Convention
at any time by a Contracting State, any term not defined therein shall, unless
the context otherwise requires, have the meaning that it has at that time under
the law of that State for the purposes of the taxes to which the Convention
applies, any meaning under the applicable tax laws of that State prevailing
over a meaning given to the term under other laws of that State.
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, and also includes that State and any political
sub-division or local authority thereof. 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, or capital situated therein.
2. Where by reason of the provisions of
paragraph 1 an individual is a resident of both Contacting States, then his
status shall be determined as follows:
(1) he
shall be deemed to be a resident only of the State in which he has a permanent
home available to him; if he has a permanent home available to him in both
States, he shall be deemed to be a resident only of the State with which his
personal and economic relations are closer (centre of vital interests);
(2) 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 only of the State in which he has an habitual abode;
(3) if
he has an habitual abode in both States or in neither of them, he shall be
deemed to be a resident only of the State of which he is a national;
(4) 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 only 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.
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:
(1) a
place of management;
(2) a
branch;
(3) an
office;
(4) a
factory;
(5) a
workshop;
(6) a
mine, an oil or gas well, a quarry or any other place of extraction of natural
resources;
(7) a
sales outlet;
(8) a warehouse
in relation to a person providing storage facilities for others; and
(9) a
farm, plantation or other place where agricultural, forestry, plantation or
related activities are carried on.
3. The term “permanent establishment” likewise
encompasses a building site, or 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 twelve months;
4. Notwithstanding the preceding provisions of
this Article, the term “permanent establishment” shall be deemed not to
include:
(1) the
use of facilities solely for the purpose of storage, display or occasional
delivery of goods or merchandise belonging to the enterprise;
(2) the
maintenance of a stock of goods or merchandise belonging to the enterprise
solely for the purpose of storage, display or occasional delivery;
(3) the
maintenance of a stock of goods or merchandise belonging to the enterprise
solely for the purpose of processing by another enterprise;
(4) the
maintenance of a fixed place of business solely for the purpose of purchasing
goods or merchandise or of collecting information, for the enterprise;
(5) the
maintenance of a fixed place of business solely for the purpose of advertising,
supply of information, scientific research or similar activities which have a
preparatory or auxiliary character, for the enterprise;
(6) the
maintenance of a fixed place of business solely for any combination of
activities mentioned in sub-paragraphs (1) to (5) 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 7 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 a
person:
(1) 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
(2) 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. Notwithstanding the preceding provisions of
this Article, an insurance enterprise of a Contracting State shall, except in
regard to re-insurance, be deemed to have a permanent establishment in the
other Contracting State if it collects premiums in the territory of that other
State or insures risks situated therein through a person other than an agent of
an independent status to whom paragraph 7 applies.
7. An enterprise shall not be deemed to have a
permanent establishment in a Contracting State merely because it carries on
business in that 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 will
not be considered an agent of an independent status within the meaning of this
paragraph.
8. 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 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.
Article 7 : BUSINESS PROFITS - 1. The profits of an enterprise of a
Contracting State shall be taxable only in that State unless the enterprise
carries on business in the other Contracting State through a permanent
establishment situated therein. If the enterprise carries on business as
aforesaid, the profits of the enterprise may be taxed in the other State but
only so much of them as is attributable to that permanent establishment.
2. Subject to the provisions of paragraph 3,
where an enterprise of a Contracting State carries on business in the other
Contracting State through a permanent establishment situated therein, there shall
in each Contracting State be attributed to that permanent establishment the
profits which it might be expected to make if it were a distinct and separate
enterprise engaged in the same or similar activities under the same or similar
conditions and dealing wholly independently with the enterprise of which it is
a permanent establishment.
3. In determining the profits of a permanent
establishment, there shall be allowed as deductions expenses which are incurred
for the purposes of the 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 and subject to the limitations of domestic tax 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 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 : INTERNATIONAL TRAFFIC - 1. Profits derived by an enterprise
of a Contracting State from the operation of ships or aircraft in international
traffic shall be taxable only in that State.
2. For the purposes of this Article, profits
from the operation of ships or aircraft in international traffic shall mean the
profits derived by an enterprise referred to in paragraph 1, from
transportation by sea or air of passengers, goods, mail or livestock.
3. Profits derived by an enterprise referred to
in paragraph 1, which is a resident of a Contracting State from the use or
rental of containers (including trailers and other equipment for the transport
of containers) used for the transport of goods or merchandise by that
enterprise in international traffic shall be taxable only in that Contracting
State unless the containers are used solely within the other Contracting State.
4. For the purposes of this Article, interest on
funds directly 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, if they are incidental to the carrying on of such
business, and the provisions of Article 11 shall not apply in relation to such
interest.
5. 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
(1) 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
(2) 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 winch 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 beneficial owner of the
dividends is a resident of the other Contracting State, the tax so charged
shall not exceed :
(1) 5
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;
(2) 15
per cent of the gross amount of the dividends in all other cases.
The competent authorities of the
Contracting States shall by mutual agreement settle the mode of application of
these limitations.
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 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 beneficial owner of the interest is a resident of the other
Contracting State, the tax so charged shall not exceed 10 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 :
(1) the
Government, a political sub-division or a local authority of the other
Contracting State; or
(2) the
Reserve Bank, Central Bank or National 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 supply 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 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 a fixed
base, then such interest shall be deemed to arise in the State in which the
permanent establishment of 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 beneficial owner of the royalties is a resident of the other
Contracting State, the tax so charged shall not exceed 10 per cent of the gross
amount, of the royalties. The competent authorities of the Contracting States
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 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 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 15, as the case may
be, shall apply.
5. Royalties shall be deemed to arise in a
Contracting State when the payer is a resident of that State. Where, however,
the person paying the royalties, whether he is a resident of a Contracting
State or not, has in a Contracting State a permanent establishment or a fixed
base in 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 : FEES FOR TECHNICAL SERVICES - 1. 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 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 fees for technical
services is a resident of the other Contracting State, the tax so charged shall
not exceed 10 per cent of the gross amount of the fees for technical services.
The competent authorities of the Contracting States shall by mutual agreement
settle the mode of application of this limitation.
3. The term “fees for technical services” as
used in this article means payments of any kind received as a consideration for
the rendering of any managerial, technical or consultancy services (including
the provision of services by technical or other personnel) but does not include
payments for services mentioned in articles 15 and 16.
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 from a fixed base situated therein, and the fees for
technical services are 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. Fees for technical services shall be deemed
to arise in a Contracting State when the payer is 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 or a fixed base in connection with which the liability
to pay the fees for technical services was incurred, and such fees for
technical services are borne by such permanent establishment or fixed base,
then such fees for technical services 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 fees for technical services, having regard to
the 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 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 derived by 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. 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 of 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 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 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 independent activities of any
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 :
(1) 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
(2) 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 twelve month period commencing or
ending in the fiscal year concerned; in that case, only so much of the income,
as is derived from his activities performed in that other Contracting 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, surgeons, dentists and accountants.
Article 16 : DEPENDENT PERSONAL SERVICES - 1. Subject to
the provisions of articles 17, 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 :
(1) the
recipient is present in the other State for a period or periods not exceeding
in the aggregate 183 days in any twelve months period commencing or ending in
the fiscal year concerned; and
(2) the
remuneration is paid by, or on behalf of, an employer who is not a resident of
the other State; and
(3) the
remuneration is not borne by a permanent establishment or a fixed base which
the employer has in the other State.
2. 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.
Article 17 : 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 18 : ENTERTAINERS AND SPORT PERSONS - 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 artiste, or a musician, or as a sportsperson, from
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 a sportsperson in his capacity as
such accrues not to the entertainer or sportsperson 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
sportsperson are exercised.
3. Notwithstanding the provisions of paragraphs
1 and 2, income derived by a resident of a Contracting State from his personal
activities as an entertainer or as a sportsperson shall be taxable only in that
State if the activities are exercised in the other Contracting State within the
framework of a cultural or sports exchange programme approved by both
Contracting States.
Article 19 : PENSIONS - Subject to the provisions of paragraph 2 of
Article 20, pensions and other similar remuneration paid to a resident of a
Contracting State in consideration of past employment shall be taxable only in
that State.
Article 20 : GOVERNMENT SERVICE - 1. (1) Salaries, wages and other
similar 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.
(2) However, such salaries, wages
and other similar remuneration shall be taxable only in the other Contracting
State if the services are rendered in that State and the individual is a
resident of that State who :
- is
a national of that State; or
- did
not become a resident of that State solely for the purpose of rendering the
services.
2. (1) 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.
(2) 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 16, 17, 18 and 19
shall apply to salaries, wages and other similar remuneration and to 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 : STUDENTS - 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 referred to 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 Contracting State which he is
visiting.
3. The benefit 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 five years from the
date of his first arrival in that other Contracting State.
Article 22 : PROFESSORS, TEACHERS AND RESEARCHERS - 1. A professor
or teacher who visits a Contracting State for the purpose of teaching or
carrying out research at a university, college, school or other approved
educational institution in that State and who is or was immediately before that
visit a resident of the other Contracting State, shall be exempt from taxation
in the first-mentioned Contracting State on remuneration for such teaching or
research for a period not exceeding two years from the date of his first visit
for that purpose, provided that such remuneration arise from sources outside
that State.
2. The provisions of paragraph 1 of this Article
shall not apply to remuneration from research, if such research is undertaken
primarily for the private benefit of a specific person or persons.
Article 23 : OTHER INCOME - 1. Items of income of a resident of a
Contracting State, wherever arising, not dealt with in the foregoing Articles
of this Convention shall be taxable only in that State.
2. The provisions of paragraph 1 shall not apply
to income, other than income from immovable property as defined in paragraph 2
of Article 6, if the recipient of such income, being a resident of a
Contracting State, carries on business in the other Contracting State through a
permanent establishment situated therein, or performs in that other State
independent personal services from a fixed base situated therein, and the right
or property in respect of which the income is paid is effectively connected
with such permanent establishment or fixed base. In such case the provisions of
Article 7 or Article 15, as the case may be, shall apply.
3. Notwithstanding the provisions of paragraph
1, if a resident of a Contracting State derives income from sources within the other
Contracting State in the form of lotteries, crossword puzzles, races including
horse races, card games and other games of any sort or gambling or betting of
any form or nature whatsoever, such income may be taxed in that other
Contracting State.
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 pertaining to the
operation of such ships and aircraft shall be taxable only in the Contracting
State of which the enterprise owning such 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. Where a resident of a Contracting State derives income or owns
capital which, in accordance with the provisions of this Convention, may be
taxed in the other Contracting State, the first-mentioned State shall allow:
- as
a deduction from the tax on the income of that resident, an amount equal to the
income-tax paid in that other State;
- as
a deduction from the tax on the capital of that resident, an amount equal to
the capital tax paid in that other State.
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 that other State.
2. Where in accordance with any provision of the
Convention income derived or capital owned by a resident of a Contracting State
is exempt from tax in that State, such State may nevertheless, in calculating
the amount of tax on the remaining income or capital of such resident, take into
account the exempted income or capital.
3. For the purpose of allowance as a credit in a
Contracting State the tax paid in the other Contracting State shall be deemed
to include the tax which is otherwise payable in that other State but has been
reduced or waived by that State under its legal provisions for tax incentives.
4. For the purposes of this Article, the term
“tax paid” shall not include any amount which is payable in respect of any
default or omission in relation to taxes to which this Convention applies.
Article 26 : 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, in particular
with respect to residence, 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. Further, this provision shall
also not 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.
3. Except where the provisions of Article 9,
paragraph 7 of Article 11, or paragraph 6 of Article 12, 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.
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 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.
5. The provisions of this Article shall apply to
the taxes referred to in Article 2.
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 this Convention. Any
agreement reached shall be implemented notwithstanding any time limits in the
domestic law 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. When it seems advisable in
order to reach an agreement to have oral exchange of opinions, 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 or certified copies of the documents) as
is 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) concerned with 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 the competent authority of a Contracting
State the obligation:
(1) to
carry out administrative measures at variance with the laws and administrative
practice of that or of the other Contracting State;
(2) 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;
(3) 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 29 : MEMBERS OF DIPLOMATIC MISSIONS AND CONSULAR
POSTS - Nothing in this Convention shall affect the
fiscal privileges of members of diplomatic missions or consular posts under the
general rules of international law or under the provisions of special
agreements.
Article 30 : ENTRY INTO FORCE -
1. The Contracting States shall notify each other in writing, through
diplomatic channels, the completion of the procedure required by the respective
laws for the entry into force of this Convention.
2. The Convention shall enter into force on the
date of the later of the notifications referred to in paragraph 1 of this
Article and its provisions shall have effect:
(1) in
Serbia and Montenegro : in respect of the taxes on income derived and the taxes
on capital owned in each fiscal year beginning on or after the first day of
January in the calendar year next following the year in which this Convention
enters into force;
(2) in
India: in respect of the taxes on income derived and the taxes on capital owned
in each fiscal year beginning on or after the first day of April in the
calendar year, next following the year in which this Convention enters into
force.
Article 31 : TERMINATION - This Convention shall
remain in force until terminated by a Contracting State. 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
after the fifth year from the date of entry into force of the Convention. In
such event the Convention shall cease to have effect:
|
(1) |
in Serbia and Montenegro: |
in respect of the taxes on
income derived and the taxes on capital owned in each fiscal year beginning
on or after the first day of January in the calendar year next following the
year in which the notice of termination is given; |
|
(2) |
in India: |
in respect of the taxes on
income derived and the taxes on capital owned each fiscal year beginning on
or after the first day of April in the calendar year next following the year
in which the notice of termination is given. |
In Witness whereof the undersigned,
being duly authorised thereto, have signed this Convention.
Done in duplicate at New Delhi
this 8th day of February, 2006 in the English, Hindi and Serbian languages, all
three texts being equally authentic. In case of any divergence of interpretation,
the English text shall prevail.
|
For the Government of the
Republic of India |
For the Council of Ministers of
Serbia and Montenegro |
|
|
|
|
Sd/- Shri P. Chidambaram |
Sd/- Prof. Dr. Predrag Ivanovic |
PROTOCOL
At the moment of signing the
Convention between the Council of Ministers of Serbia and Montenegro and the
Government of the Republic of India for the Avoidance of Double Taxation with respect
to taxes on Income and on Capital, the undersigned have agreed that the
following provision shall form an integral part of the Convention.
Ad. Articles 6 and 14
With reference to paragraphs 1 of
Article 6 and Article 14, it is understood that income from immovable property
and capital gains on alienation of immovable property respectively may be taxed
in both Contracting States.
IN WITNESS whereof the undersigned, being duly authorized
thereto, have signed this Protocol.
DONE in duplicate at New Delhi this 8th day of
February, 2006 in the, English, Hindi and Serbian languages, all three texts
being equally authentic. In case of any divergence of interpretation, the
English text shall prevail.