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TMI BlogAgreement between the Malaysia and India for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income notifiedX X X X Extracts X X X X X X X X Extracts X X X X ..... E REPUBLIC OF INDIA FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME THE GOVERNMENT OF MALAYSIA AND THE GOVERNMENT OF THE REPUBLIC OF INDIA DESIRING to conclude an Agreement 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 co-operation between the two countries, have agreed as follows: ARTICLE 1 PERSONAL SCOPE This Agreement shall apply to persons who are residents of one or both of the Contracting States. ARTICLE 2 TAXES COVERED 1. This Agreement shall apply to taxes on income imposed by a Contracting State or its political subdivisions or local authorities, irrespective of the manner in which they are levied. 2. The taxes which are the subject of this Agreement are: (a) in Malaysia - (i) the income tax; and (ii) the petroleum income tax; (hereinafter referred to as "Malaysian tax"); (b) in India - the income tax including any surcharge thereon; (hereinafter referred to as "Indian tax"). 3. This Agreement shall also apply to any identical or substantially similar taxes on income which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g State; (h) the term "national" means- (i) any individual possessing the nationality or citizenship of a Contracting State; and (ii) any legal person, partnership, association and any other entity deriving its status as such from the laws in force in a Contracting State; (i) the term "person" includes an individual, a company, and any other body of persons; (j) the term "tax" means Malaysian tax or Indian tax, as the context requires, but shall not include any amount which is payable in respect of a default or omission in relation to the taxes to which this Agreement applies or which represents a penalty or fine imposed relating to those taxes. 2. In the application of this Agreement by a Contracting State, any term not denned therein shall, unless the context otherwise requires, have the meaning which it has under the law of that State concerning the taxes to which this Agreement applies. ARTICLE 4 RESIDENT 1. For the purposes of this Agreement, the term "resident of a Contracting State" means any person who, under the tax laws of that State, is liable to tax therein by reason of his domicile, residence, place of management or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es 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 of business solely for any combination of activities mentioned in sub-paragraphs (a) to (e), provided that the overall activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary character. 4. An enterprise of a Contracting State shall be deemed to have a permanent establishment in the other Contracting State if it carries on supervisory activities in that other State for more than nin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 State. 2. The term "immovable property" shall be denned in accordance with the laws 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, oil or gas wells, quarries and other places of extracting natural resources including timber or other forest produce. Ships, boats and aircraft shall not be regarded, as immovable property - 3. The provisions of paragraph 1 shall also apply to income derived from the direct use, letting, or use in any other form of immovable property. 4. The provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in that State. 2. For the purposes of this Article, profits from the operation of ships or aircraft in international traffic shall mean profits derived by an enterprise described in paragraph 1 from the transportation by sea or air respectively of passengers, mail, livestock or goods carried on by the owners or lessees or charterers of ships or aircraft including: (a) the sale of tickets for such transportation on behalf of other enterprises; and (b) the rental of ships or aircraft incidental to any activity directly connected with such transportation. 3. Profits of an enterprise of a Contracting State described in paragraph 1 from the use, maintenance, or rental of containers (including trailers, barges and related equipment for the transport of containers) used in connection with the operation of ships or aircraft in international traffic shall be taxable only in that State. 4. The provisions of paragraphs 1 and 3 shall also apply to profits from participation in a pool, a joint business, or an international operating agency. 5. For the purposes of this Article, interest on funds connected with the operation of ships or aircraft in international traffic shall be regarded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company paying the dividends is a resident, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment or fixed base. In such a 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 in so far as such dividends are paid to a resident of that other State or in so far as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment in that other State, or 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 pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt or fixed base. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply. 6. Interest shall be deemed to arise in a Contracting State when the payer is that State itself, a political subdivision, a local authority or a statutory body thereof, or a resident of that State. 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 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 paid, 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 suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 paid, 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 a 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 Agreement. ARTICLE 13 FEES FOR TECHNICAL SERVICES 1. Fees for technical services arising in a Contracting State which are derived by a resident of the other Contracting State may be taxed in that other State. 2. However, fees for technical services may also be taxed in the Contracting State in which they arise, and according to the laws of that State, but if the recipient is the beneficial owner of the fees for technical services, the tax so charged shall not exceed 10 per cent of the gross amount of the fees for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acting State in respect of professional services or other independent activities of a similar character shall be taxable only in that State. However, in the following circumstances 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 State is for a period or periods amounting to or exceeding in the aggregate 183 days in any twelve 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; or (c) if the remuneration for his services in the other Contracting State is either derived from a resident of that State or borne by a permanent establishment or fixed base which a person not resident in that State has in that State and which, in either case exceeds in value an amount equivalent to two thousand U.S. dollars in the fiscal year concerned. 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of personal activities exercised by an entertainer or a sportsman in his capacity as such accrues not to the entertainer or sportsman 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 sportsman are exercised. 3. The provisions of paragraphs 1 and 2 shall not apply to remuneration or profits derived from activities exercised in a Contracting State if the visit to that State is directly or indirectly supported wholly or substantially from the public funds of the other Contracting State, a political subdivision, a local authority or a statutory body thereof. ARTICLE 18 NON-GOVERNMENT PENSIONS AND ANNUITIES 1. Subject to the provisions of paragraph 2 of Article 19, any pension and other similar remuneration for past employment or any annuity arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in that other State. 2. The term "annuity" includes a stated sum payable periodically at stated times during life or during a specified or ascertainable period of time, under an obligation to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of services in that other State provided the services are performed in connection with his study, research or training or are necessary for the purposes of his maintenance. 2. The benefits in respect of this Article shall extend only for such period of time as may be reasonable or customarily required to complete the education or training undertaken. However, in no event shall any individual have the benefits of paragraph (iii) of this Article for more than seven consecutive years from the date he first arrived for such purpose in that other Contracting State. ARTICLE 21 TEACHERS AND RESEARCH SCHOLARS 1. An individual who is or was a resident of a Contracting State immediately before making a visit to the other Contracting State, and who, at the invitation of any university, college or other similar educational institution, visits that other State for a period not exceeding two years solely for the purpose of teaching or research or both at such educational institution shall be exempt from tax in that other State on any remuneration for such teaching or research which is subject to tax in the first-mentioned Contracting State. 2. This Article shall not apply to income from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this Agreement or any other provisions which may subsequently be introduced in India in modification of, or in addition to, those laws so far as they are agreed by the competent authorities of the Contracting States to be of a substantially similar character. 4. In the case of India, double taxation shall be eliminated as follows: Where a resident of India derives income which, in accordance with the provisions of this Agreement, may be taxed in Malaysia, India shall allow as a deduction from the tax on the income of that resident an amount equal to the amount of tax paid in Malaysia whether directly or by deduction at source. Such amount shall not, however, exceed that part of the tax (as computed before the deduction is given) which is attributable to the income which may be taxed in Malaysia. 5. For the purposes of paragraph 4, the term "tax paid in Malaysia" shall be deemed to include the tax which would, under the laws of Malaysia and in accordance with this Agreement, have been payable on any income derived from sources in Malaysia had the income not been taxed at a reduced rate or exempted from Malaysian tax in accordance with the provisions of this Agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned to promote economic development in that State. 5. In this Article, the term "taxation" means taxes to which this Agreement applies. ARTICLE 25 MUTUAL AGREEMENT PROCEDURE 1. Where a resident of a Contracting State considers that the actions of one or both of the Contracting States result or will result for him in taxation not in accordance with this Agreement, he may, notwithstanding the remedies provided by the taxation laws of those States, present his case to the competent authority of the State of which he is a resident or, if his case comes under paragraph 1 of Article 24, to that of the State of which he is a national. The case must be presented within three years from the first notification of the action resulting in taxation not in accordance with the provisions of this Agreement. 2. The competent authority shall endeavour, if the objection appears to it to be justified and if it is not itself able to arrive at an appropriate solution, to resolve the case by mutual agreement with the competent authority of the other Contracting State, with a view to the avoidance of taxation which is not in accordance with the Agreement notwithstanding any time limits in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng, through diplomatic channels, the completion of the procedures required by the respective laws for the entry into force of this Agreement. 2. This Agreement shall enter into force thirty days after the receipt of the latter of the notifications referred to in paragraph 1 of this Article. 3. The provisions of this Agreement shall have effect; (a) in Malaysia: (i) in respect of Malaysian tax, other than petroleum income tax, to tax chargeable for any year of assessment beginning on or after the first day of January in the calendar year following the year in which this Agreement enters into force; (ii) in respect of petroleum income tax, to tax chargeable for any year of assessment beginning on or after the first day of January of the second calendar year following the year in which this Agreement enters into force; and (b) in India: in respect of income in any fiscal year beginning on or after the first day of April next following the calendar year in which the Agreement enters into force. 4. The Agreement between the Government of Malaysia and the Government of India for the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payable by way of a penalty or fine for any default or omission in relation to taxes to which this Agreement applies or which represents any other penalty or fine imposed relating to those taxes. 3. With reference to paragraph 7 of Article 5, the term "arm's length conditions" means the conditions which would have been made or imposed between two enterprises in their commercial or financial relations which would not have differed from those which would have been made or imposed between independent enterprises. 4. With reference to paragraph 1 of Article 6, this paragraph should not be construed as preventing the country of residence to also tax the income under this Article. 5. With reference to subparagraphs 3(a)(i) and (ii) of Article 28 and subparagraphs a(i) and (ii) of Article 29, the term "year of assessment" has the meaning assigned to under section 2 of the income Tax Act 1967. DONE in duplicate at Putrajaya this 14th day of May 2001, each in the Malay, Hindi and English language, all texts being equally authentic. In the event of there being a dispute in the interpretation and the application of this Agreement, the English text shall prevail. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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