Article 25 - Elimination of double taxation - Spain

ARTICLE 25 ELIMINATION OF DOUBLE TAXATION 1. The laws in force in either of the Contracting States will continue to govern the taxation of income and capital in the respective Contracting States except where express provisions to the contrary are made in this Convention. 2. In India, double taxation will be avoided in the following manner : (a) Where a resident of India derives income or owns capital which, in accordance with the provisions of this Convention, may be taxed in Spain, India shall allow : (i) as a deduction from the tax on the income of that resident, an amount equal to the income-tax paid in Spain, whether directly or by deduction; and (ii) as a deduction from the tax on the capital of that resident, an amount equal to the capital tax paid in Spain. 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 Spain. (b) Where a resident of India derives income or owns capital which in accordance with the provisions of this Convention, shall be taxable only in Spain, India may include this income or capital in the tax base but shall allow as a deduction from the income-tax or capital tax, that part of the income-tax or capital tax which is attributable, as the case may be, to the income derived from or the capital owned in Spain. 3. In Spain, subject to the provisions of its internal law, double taxation will be avoided in the following manner : (a) Where a resident of Spain derives income or owns capital which, in accordance with the provisions of this Convention, may be taxed in India, Spain shall allow : (i) as a deduction from the tax on the income of that resident, an amount equal to the income-tax paid in India; (ii) as a deduction from the tax on the capital of that resident, an amount equal to the capital tax paid in India. (b) In the case of a dividend paid by a company which is a resident of India to a company which is a resident of Spain and which holds at least 25 per cent of the capital of the company paying the dividend, the deduction shall take into account [in addition to the deduction provided under sub-paragraph (a)] the income-tax paid in India by the company in respect of the profits out of which such dividend is paid provided that such tax is taken into account in calculating the base of the Spanish tax. 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 India. (c) Where in accordance with any provision of the Convention income derived or capital owned by a resident of Spain is exempt from tax in Spain, Spain 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. 4. For the purposes of deduction referred to in paragraph 3, the term income-tax paid in India shall be deemed to include any amount which would have been payable as Indian tax under the laws 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 : (i) sections 10(4), 10(15)(iv), 10A, 10B, 32A, 32AB, 80HH, 80HHC and 80-I 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 (ii) any other provision which may be enacted hereafter 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 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. 5. The provisions of paragraph 4 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.