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TMI BlogConvention between the India and Hungary for the Avoidance of Double TaxationX X X X Extracts X X X X X X X X Extracts X X X X ..... C OF INDIA AND THE REPUBLIC OF HUNGARY FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME The Republic of Hungary and the Republic of India desiring to conclude a , Convention for the avoidance of double taxation and the prevention of fiscal 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 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 imposed on behalf of a Contracting State, 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, taxes on the total amount 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: (a) in Hungary: (i) the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ational" means: (i) any individual possessing the nationality of a ContractingState; (ii) any legal person, partnership, association, company or other entity deriving its status as such from the laws in force in a Contracting State (j) the term "fiscal year" means : (i) in the case of India, the financial year beginning on the first day of April; (ii) the case of Hungary, the calendar year; (k) the term "tax" means Indian tax or Hungarian tax, as the context requires, but shall not include any amount which is payable in respect of any default or omission in relation to the taxes to which this Convention applies or which represents a penalty or fine imposed relating to those taxes. 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of extraction of natural resources. 3. A building site or construction, installation or assembly project or supervisory activities in connection therewith constitute a permanent establishment only if such site, project or activity lasts more than nine months. 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, display or delivery 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, display or delivery; (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 collecting information, for the enterprise; (e) the maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, any other activity of a preparatory or auxiliary character; (f) the maintenance of a fixed place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 and aircraft shall not be regarded as immovable property. 3. The provisions of paragraph I 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 BUSI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prise from the operation of ships and aircraft in international traffic. 2. For the purposes of this Article, interest on bank accounts excluding term deposits earned 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, and the provisions of Article 11 shall not apply in relation to such interest. 3.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 (a) 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 (b) 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 pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, 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 recipient is the beneficial owner of the interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te. 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 fixed base, then such interest shall be deemed to arise in the Contracting State in which the permanent establishment or 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 AND FEES FOR TECHNICAL SERVICES 1. Royalties or fees for technical services arising in a Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esident 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 or fees for technical services was incurred, and such royalties or fees for technical services are borne by such permanent establishment or fixed base, then such royalties or 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 royalties or fees for technical services, 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 CAPITAL GAINS 1. Gains derived by a resident of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 15 DEPENDENT PERSONAL SERVICES 1. Subject to the provisions of Articles 16, 18, 19 and 21, 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 there from 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: (a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in any twelve-month period commenci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other similar remunerations paid under the compulsory pension system of Hungary" to a resident of India in consideration of past employment shall be taxable only in Hungary. 3. Notwithstanding the provisions of paragraph 1 any pension paid by, or out of funds created by India or a political sub-division, or a local authority thereof to a resident of Hungary in consideration of past employment shall be taxable only in India. Article 19 GOVERNMENT SERVICE 1. (a) Remuneration, other than a pension, paid by a Contracting State or a political subdivision or a local authority thereof to an individual in respect of services rendered to that State or subdivision or authority shall be taxable only in that State. (b) However, such 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: (i) is a national of that State; or (ii) did not become a resident of that State solely for the purpose of rendering the services. 2. The provisions of Articles 15, 16, 17 and 18 shall apply to remuneration and pensions in respect of services rendered in connection with a bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 beneficial owner 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 14, 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 the other Contracting State. Article 23 ELIMINATION OF DOUBLE TAXATION 1. In Hungary double t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... racting 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 paragraph 1 of Article 9, paragraph 4 of Article 11, or paragraph 4 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. 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 Contracting State to any taxation or any requirement connected therewith which is 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, notwithstanding the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... courts and administrative bodies) involved in 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 1be construed so as to impose on a Contracting State the obligation: (a) to carry out administrative measures at variance with the laws and administrative practice of that or of the other Contracting State; (b) to supply information (including documents) which are not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State; (c) to supply information which would disclose any trade business industrial, commercial or professional secret or trade process or information the disclosure or which would be contrary to public policy (order public) Article 27 DIPLOMATIC AGENTS AND CONSULAR OFFICERS Nothing in this Convention shall affect the fiscal privileges of diplomatic agents or consular o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hree texts being equally authentic. In case of divergence between the texts the English text shall prevail. FOR THE REPUBLIC OF FOR THE REPUBLIC OF INDIA HUNGARY (Murli Manohar Joshi) (Istvan Csillag) PROTOCOL At the moment of signing the Convention between the Republic of Hungary and the Republic of India for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, the undersigned have agreed that the following provisions shall form an integral part of the Convention: With reference to Articles 6, 13 and 16: With reference to paragraphs 1 of Article 6 and Article 13 it is understood that income from immovable property and capital gains on alienation of immovable property respectively may be taxed in both the Contracting States. With reference to Article 16 it is understood that Directors' fees and other similar payments referred to in the said Article may be taxed in both the Contracting States. With reference to Article 7: (a) In the determination of the profits of a building site or construction, assembly or installation project there shall be attributed to that per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of Article 24 paragraph 2 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 being in conflict with the provisions of paragraph 3 of Article 7. However the difference in tax rate shall not exceed 13 percentage points. (b) Notwithstanding the provisions of Article 10 paragraph 5 and Article 24 paragraph 2, a company which is a resident of India and which has a permanent establishment in Hungary may be subject to tax in Hungary in addition to the tax on profits attributable to that permanent establishment. However such additional tax may not exceed 10 per cent of the profits of the enterprise attributable to the permanent establishment after deducting therefrom the tax on profits chargeable on the profits of a company which is a national of Hungary and imposed on the profits of the enterprise attributable to the permanent establishment by Hungary. IN WITNESS WHEREOF the undersigned, being d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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