Application of the agreement between India and Belgium dated February 7, 1974, as modified by the Supplementary Protocol of October 20, 1984--Procedure regarding - Income Tax - 553/1990

Application of the agreement between India and Belgium dated February 7, 1974, as modified by the Supplementary Protocol of October 20, 1984--Procedure regarding Circular No. 553 Dated 13/2/1990 The Supplementary Protocol (signed on October 20, 1984), modifying the existing Agreement between the Government of India and the Government of Belgium for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and the Protocol signed on February 7, 1974 (See [1975] 101 ITR (St.) 6), was notified in the Gazette of India, Extraordinary, vide G.S.R. No.321 (E), dated March 2, 1988 (See [1988] 171 ITR (St.) 231). The Supplementary Protocol has effect in India in respect of income derived during any "previous year" beginning on or after the 1st January, 1987. 2. Under the new Article 10 (Dividends), the source country- tax rate on dividends has been limited to 15 per cent. of the gross dividends. This lower rate of tax applies only if the beneficial owner of dividends is a company and the dividends arise out of the investments made after January 23, 1988. Article 11 (Interest) provides that the source country-tax rate on interest will be limited to 15 per cent. of the gross interest, provided it is in respect of a loan advanced or debt created after January 23, 1988. Under Article 12 (Royalties and fees for technical services), the source country tax rate on royalties and fees for technical services has been restricted to 30 per cent. of the gross royalties or fees. This rate applies only if the royalties and fees for technical services are paid in respect of a right or property which is granted, or under a contract which is signed after January 23, 1988. The terms "dividends", "interest", "royalties and fees for technical services" have been defined in the respective articles. The rates of tax mentioned above will be applicable provided the beneficial owner is a resident of the other country under Article 4 of the Agreement; and (a) the shares in respect of which the dividends are paid; or (b) the loan or debt in respect of which the interest is paid; or (c) the right, property or contract under which the royalty or fees for technical services are paid, is not effectively connected with a permanent establishment or a fixed base which the beneficial owner has in the source country. 3. The competent authorities of the two countries have finalised the procedure to be followed by the residents of India and Belgium for obtaining the tax relief in the other country under the new Articles 10, 11 and 12 of the Agreement. The procedure will be as follows: 1. Relief from Belgian tax to the Indian residents: Relief to the Indian residents from Belgian tax in respect of dividends and interest income arising in Belgium may be granted in two ways. Under the first procedure, the tax is levied at source in accordance with the Belgian law, the excess amount of tax being refunded afterwards. Under the second procedure, the Belgian withholding tax is forthwith limited to the Agreement rate when the income is paid. Irrespective of how the reduction is applied, the beneficial owner of dividends or interest income has to make an application to the Belgian tax office in Form No. 276 Div.-Aut. for dividends and Form No. 276 Int.-Aut. for interest. These forms have to be filed by the Indian residents in duplicate; one copy is for the Belgian tax administration and the other for the concerned Income-tax Assessing Officer in India. Relief from the Belgian tax will be granted only if a certificate is granted by the concerned Assessing Officer in India that the beneficial owner of income is a resident of India under Article 4 of the Agreement. For this purpose, the Indian residents must complete Parts I and II of both copies of these forms and present the two signed copies to the concerned Assessing Officer in India. The Assessing Officer, after completing the required certification in Part IV of the first copy of the form (meant for Belgian tax authorities), will return this to the claimant and keep the second copy for his record. For claiming the reduction or exemption of tax directly at source, the first copy of the duly certified claim must reach the payer of the income within ten days after the date of payment of dividends or the date of maturity of the interest, as the case may be. If, for any reason, it has not been possible for the reduction or exemption to be applied at source, the refund of excess tax can be obtained by sending the first copy of the forms mentioned above duly certified by the Indian tax authorities to the Bureau Central De Taxation Bruxelles. "Etranger", Boulevard Saint Lazare, 10, bte 1, 1210, Bruxelles, Belgium. The claim has to be filed before the expiry of a period of three years from the 1st January of the year following that of the payable date of dividends or the maturity of the interest, as the case may be. Forms 276 Div.-Aut. and 276 Int.-Aut. (and also explanatory notes) can be obtained free of charge from the Bureau Central de Taxation Bruxelles--"Etranger", Boulevard Saint Lazare 10 bte 1, 1210 Bruxelles, Belgium. In respect of royalties arising in Belgium, the withholding tax rate of 25 per cent. will be applicable in accordance with the Belgian law. With regard to fees for technical services, no tax is deductible at source and the Agreement limitation if applicable shall be granted without any special procedure when the final tax liability of the Indian resident is assessed. II. Relief from Indian tax to the Belgian residents: In respect of dividends, interest, royalties and fees for technical services arising in India to a resident of Belgium, the payer of these incomes can deduct the tax at source at the reduced rates specified in Article 10, 11 or 12 of the Agreement, as the case may be. The lower rate of tax will be applicable only if a certificate is granted by the concerned Belgian tax office that the beneficial owner of income is a resident of Belgium under Article 4 of the Agreement. For this purpose, the Belgian resident will be required to obtain a certificate of residence from the Belgian tax office in Form No.276, Conv. One copy of this form must be submitted to the concerned Assessing Officer and the second copy must be filed with the Indian payer of the income. The no objection certificate for the remittance of these items of income from India will be issued by the Assessing Officer only after tax has been deducted at source by the payer. If, for any reason, tax is deducted at source at the rate higher than that prescribed in the Agreement, a refund of the excess tax can be obtained by lodging an income-tax return with the concerned income-tax Assessing Officer as soon as possible and in any case before the expiry of a period of two years from the end of the relevant assessment year. (Sd.) Dinesh Verma, Under Secretary (FTD)