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TMI BlogCONVENTION BETWEEN THE GOVERNMENT OF THE REPUBLIC OF INDIA AND THE GOVERNMENT OF THE KINGDOM OF SAUDI ARABIA FOR THE AVOIDANCE OF DOUBLE TAXATION-DTAA COMES INTO EFFECT FROM 1-11-06X X X X Extracts X X X X X X X X Extracts X X X X ..... Notification No. 287/2006-FTD/F. No. 501/7/91-FTD] POONAM DUTT, Jt. Secy. ANNEXURE CONVENTION BETWEEN THE GOVERNMENT OF THE REPUBLIC OF INDIA AND THE GOVERNMENT OF THE KINGDOM OF SAUDI ARABIA FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF TAX EVASION WITH RESPECT TO TAXES ON INCOME The Government of the Republic of India and the Government of the Kingdom of Saudi Arabia, desiring to conclude a Convention for the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income and with a view to promoting economic cooperation between the two countries, have agreed as follows: ARTICLE 1 PERSONS COVERED 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 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 all taxes imposed on total income, or on elements of income, including taxes on gains from the alienation of movable or immovable property, and taxes on the to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ship or aircraft is operated solely between places in the other Contracting State; (h) the term "competent authority" means: (i) In the case of India: The Finance Minister, Government of India or his authorized representative; (ii) In the case of the Kingdom of Saudi Arabia, the Ministry of Finance represented by the Minister of Finance or his authorized representative; (i) the term national means: (i) any individual possessing the nationality of a Contracting State; (ii) any legal person, partnership or association deriving its status as such from the laws in force in a Contracting State; 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 this 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 (a) Any person who, under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction, 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 182 days; (b) 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 182 days within any 12-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 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 coll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 Contracting State. 2. The term "immovable property" shall have the meaning provided for in the laws of the Contracting State in which the property in question is situated. This 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 pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im with regard to 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 income from debt-claim with regard to moneys 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, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise 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 Contracting 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 5 percent of the gross amount of the dividends. This paragraph shall not affect the taxation of the company in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ragraph 2, income from debt-claims arising in a Contracting State shall be exempt from tax in that State, provided that 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) (i) in the case of India, the Reserve Bank of India, the Export-Import Bank of India, the National Housing Bank; and (ii) in the case of the Kingdom of Saudi Arabia, the Saudi Arabian Monetary Agency; or (c) any other financial institution wholly owned directly and controlled by the Government of the other Contracting State. 4. The term "Income from Debt-Claims" as used in this Article means income from government securities and bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor's profits; and debt-claims of every kind as well as all other income included as income from moneys lent under the taxation laws of the State in which the income arises. Penalty charges for late payment shall not be regarded as income from debt-claims for the purpose of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films or films or tape used for radio or television broadcasting, any patent, trade mark, design or mode, 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, Article 14, as the case may be, shall apply. 5. Royalties shall be deemed to arise in a Contracting State when the payer a resident of that State. Where, however, the person paying the royalties, whether he is a resi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay 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 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 a 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 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 any 12-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 State may be taxed in that other State. 2. The term "professional serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sportsperson 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 sportsperson are exercised. 3. The provisions of paragraphs 1 and 2, shall not apply to income from activities performed in a Contracting State by entertainers or sportspersons if the activities are substantially supported by public funds of one or both of the Contracting States or of political sub-divisions or local authorities thereof or takes place under a cultural agreement or arrangement between the Governments of the Contracting States. In such a case, the income shall be taxable only in the Contracting State of which the entertainer or sportsperson is a resident. ARTICLE 18 PENSIONS Subject to the provisions of paragraph 2 of Article 19, 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 19 GOVERNMENT SERVICE 1. (a) Salaries, wages and other similar remuneration, other than a pension, paid by a Contracting State or a political sub-division or a local authority th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve the benefits of this Article, for more than six consecutive years from the date of his first arrival in that other State. ARTICLE 21 TEACHERS AND RESEARCHERS 1. A teacher or researcher who is or was a resident of the Contracting State immediately before being invited to or visiting the other Contracting State for the purpose of teaching or engaging in research, or both, at a university, college or other similar 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 apply to income from research only if such research is undertaken by the individual in the public interest. ARTICLE 22 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 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 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time limits in the domestic law of the Contracting States. 3. The competent authorities of both Contracting States shall endeavour to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of this Convention. They may also consult together for the elimination of double taxation in cases not provided for in this 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 25 EXCHANGE OF INFORMATION 1. The competent authorities of the Contracting States shall exchange such information as is necessary for carrying out the provisions of this Convention or of the domestic laws of the Contracting States concerning taxes covered by this Convention insofar as the taxation thereunder is not contrary to the Convention. The exchange of information is not restricted by Article 1. Any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se notifications was received. 3. The provisions of this Convention shall have effect: (a) In India, in respect of income derived in any fiscal year beginning on or after the first day of April next following the calendar year in which the Convention enters into force; and (b) In Saudi Arabia: (i) with regard to taxes withheld at source, in respect of amounts paid or credited on or after the first day of January next following the Calendar Year in which the Convention enters into force; and (ii) with regard to other taxes, in respect of taxable years beginning on or after the first day of January next following the calendar year in which the Convention enters into force. ARTICLE 29 TERMINATION This Convention shall remain in force indefinitely 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 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 India, in respect of income derived in any fiscal year o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s totaling in the aggregate at least 183 days in the fiscal year concerned. (c) A legal person organized under the laws of a Contracting State and that is generally exempt from tax in that State and is established and maintained in that State either: (i) Exclusively for a religious, charitable, educational, scientific, or other similar purpose; or (ii) To provide pensions to employees pursuant to a plan. 5. For the purposes of para 2 of Article 5, Permanent Establishment shall include the following: (a) a sales outlet; (b) a farm, plantation or other place where agricultural, forestry, plantation or related activities are carried on. 6. For the purposes of paragraph 6 of Article 5, the person, who is not an agent of independent status and whose activities may create a Permanent Establishment for the insurance enterprise, may be either individual or company and need not be resident of, nor have a place of business in, the state in which it acts for the enterprise. 7. With regard to Article 7, the term 'business profits' in the case of a Contracting State means the profits from business as defined under the laws of that Contracting State. 8. In respect of Articl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g State, requested by the other Contracting State. 14. When Saudi Arabia introduces a provision in its domestic law regarding assistance in collection of taxes to other treaty partners or agrees to extend such assistance to any other treaty partner, then the competent authorities of the two Contracting States shall by mutual agreement settle the mode of application for extending assistance in the collection of tax to each other. 15. It is understood that the two Contracting States will review the provisions of this Convention after a period of 5 years from the date on which this Convention enters into force in order to consider the inclusion of an Article on 'Fees for Technical Services' within the scope of this Convention. IN WITNESS WHEREOF the undersigned, duly authorized thereto, have signed this Protocol. DONE in duplicate at New Delhi, this 25th day of January, 2006, corresponding to 25 -12 -1426 h, each in the Hindi, Arabic and English languages, all texts being equally authentic. In case of divergence of interpretation, the English text shall prevail. For the Government of the Republic of India PRANAB MUKHERJEE Defence Minister For The Government of Kingdom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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