Protocol - Protocol - Germany

PROTOCOL The Republic of India and the Federal Republic of Germany have agreed at the signing at Bonn on 19th June, 1995 of the Agreement between the two States for the avoidance of double taxation with respect to taxes on income and capital upon the following provisions which shall form an integral part of the said Agreement. With reference to Article 7 1. (a) In the determination of the profits of a building site or construction, assembly or installation project there shall be attributed to that permanent establishment in the Contracting State in which the permanent establishment is situated only the profits resulting from the activities of the permanent establishment as such. If machinery or equipment is delivered from the head office or another permanent establishment of the enterprise (situated outside that Contracting State) or a third person (situated outside the Contracting State) in connection with those activities or independently therefrom there shall not be attributed to the profits of the building site or construction, assembly or installation project the value of such deliveries. (b) Income derived by a resident of a Contracting State from planning, project, construction or research activities as well as income from technical services exercised in that State in connection with a permanent establishment situated in the other Contracting State, shall not be attributed to that permanent establishment. (c) In respect of paragraph 1 of Article 7, profits derived from the sale of goods or merchandise of the same or similar kind as those sold, or from other business activities of the same or similar kind as those effected, through that permanent establishment, may be considered attributable to that permanent establishment if it is proved that : (i) this transaction has been resorted to in order to avoid taxation in the Contracting State where the permanent establishment is situated, and (ii) the permanent establishment in any way was involved in this transaction. (d) It is understood that the deductions in respect of the head office expenses as referred to in paragraph 3 of Article 7 shall in no case be less than those allowable under the Indian Income-tax Act as on the date of entry into force of this Agreement. (e) No deduction shall be allowed in respect of amounts paid or 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 : (i) royalties, fees or other similar payments in return for the use of patents or other rights ; (ii) commission for specific services performed or for management ; and (iii) interest on moneys lent to the permanent establishment except in case of a banking institution. With reference to Article 8 2. For the purposes of Article 8, 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. With reference to Article 10 3. For the purpose of taxation in the Federal Republic of Germany, the term dividends includes income derived by a sleeping partner ( stiller Gesellschafter ) from his participation as such and distributions on certificates of an investment fund or investment trust. For the purpose of taxation in the Republic of India, any income of a similar kind will be treated alike. With reference to Articles 10 and 11 4. Notwithstanding the provisions of these Articles, dividends and interest may be taxed in the Contracting State in which they arise, and according to the law of that State, (a) if they are derived from rights or debt claims carrying a right to participate in profits (including income derived by a sleeping partner from his participation as such, from a partiarisches Darlehen and from Gewinnobligationen within the meaning of the tax law of the Federal Republic of Germany) and (b) under the condition that they are deductible in the determination of profits of the debtor of such income. With reference to Article 13 5. In view of the position confirmed on behalf of the Government of the Federal Republic of Germany that the Deutsche Investitionsund Entwicklungsgesellschalt (DEG) is wholly owned by the Government of the Federal Republic of Germany and is exempted from paying income-tax in Germany, it is agreed that the long-term capital gains arising to the DEG due to alienation of shares in Indian companies will be exempt from taxation in India. With reference to Article 23 6. (a) The exemption provided for in sub-paragraph (a) of paragraph 1 of Article 23 is granted irrespective of whether the income or capital concerned is effectively taxed in the Republic of India or not. (b) Where a company being a resident of the Federal Republic of Germany distributes incomes derived from sources within the Republic of India paragraph 1 of Article 23 shall not preclude the compensatory imposition of corporation tax on such distributions in accordance with the provisions of German tax law. (c) The Federal Republic of Germany shall avoid double taxation by a tax credit as provided for in paragraph (1b) of Article 23, and not by a tax exemption under paragraph (1a) of Article 23, (aa) if in the Contracting States income is placed under differing provisions of the Agreement or attributed to different persons (other than under Article 9) and this conflict cannot be settled by procedure pursuant to Article 25 and (i) if as a result of such placement or attribution the relevant income would be subject to double taxation ; or (ii) if as a result of such placement or attribution the relevant income would remain untaxed or be subject only to inappropriately reduced taxation in the Republic of India and would (but for the application of this paragraph) remain exempt from tax in the Federal Republic of Germany ; or (bb) if the Federal Republic of Germany has, after due consultation and subject to the limitations of its internal law, notified the Republic of India through diplomatic channels of other items of income to which it intends to apply this paragraph in order to prevent the exemption of income from taxation in both Contracting States or other arrangements for the improper use of the Agreement. In the case of a notification under sub-paragraph (bb), the Republic of India may, subject to notification through diplomatic channels, characterise such income under the Agreement consistently with the characterisation of that income by the Federal Republic of Germany. A notification made under this paragraph shall have effect only from the first day of the calendar year following the year in which it was transmitted and any legal prerequisites under the domestic law of the notifying State for giving it effect have been fulfilled. With reference to Article 26 7. (a) It is also understood that in relation to the Agreement, the term information shall include documents. It is further understood that the German tax law provides for the transmission of information in terms of paragraph 3 of Article 117 of the Fiscal Code (Abgabenordnung) - upon request - and it would be possible to furnish information to the competent authority in the Republic of India under these provisions irrespective of this Article. (b) If personal data is exchanged under this Article, the following additional provisions shall apply subject to the domestic laws of each Contracting State : (i) The data supplying Contracting States shall be responsible for the accuracy of the data they supply. If it emerges that inaccurate data or data which should not have been supplied have been communicated, the receiving State shall be notified of this without delay. That State shall be obliged to correct or destroy said data; (ii) The Contracting States shall be obliged to keep official records of the transmission and receipt of personal data ; (iii) The Contracting States shall be obliged to take effective measures to protect the personal data communicated against unauthorised access, unauthorised alteration and unauthorised disclosure ; (iv) Upon application, the person concerned shall be informed of the information stored about him and of the use planned to be made of it. There shall be no obligation to give this information if on balance it appears that the public interest in withholding if outweighs the interest of the person concerned in receiving it. In all other respects, the right of the person concerned to be informed of the data stored about him shall be governed by the domestic law of the Contracting State in whose sovereign territory the application for the information is made. Done at Bonn on 19th June, 1995 in two originals, each in the German, Hindi and English languages, all three texts being authentic. In case of divergent interpretation of the German and the Hindi text, the English text shall prevail. For the Republic of India For the Federal Republic of Germany [Notification No. 10235/96-FTD./ F.No. 500/47/90-FTD.] N.P. SAHNI, Jt. Secy.