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TMI BlogAgreement between the Government of India and the Government of Canada for the avoidance of Double Taxation and the prevention of fiscal evasion with respect to taxes on incomeX X X X Extracts X X X X X X X X Extracts X X X X ..... EEMENT BETWEEN THE GOVERNMENT OF INDIA AND THE GOVERNMENT OF CANADA FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME. The Government of India and the Government of Canada, desiring to conclude an agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income. Have agreed as follows: CHAPTER I SCOPE OF THE AGREEMENT 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 each 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. 3. The existing taxes to which the Agreement shall apply are: (a) in the case of Canada: the income-taxes imposed under the Income-tax Act of Canada (hereinafter referred to as " Canadian tax "); (b) in the case of India: (i) the income-tax including any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns: (i) in the case of Canada, the Minister of National Revenue or his authorised representative; (ii) in the case of India, the Central Government in the Ministry of Finance (Department of Revenue); (g) the term " tax " means Canadian tax or Indian tax, as the context requires; (h) the term " national " means:- (i) any individual possessing the nationality of a Contracting State; (ii) any legal person, partnership and association deriving its status as such from the law in force in a Contracting State; (i) the term " international traffic " means any voyage of a ship or aircraft operated by a resident of a Contracting State except where the principal purpose of the voyage is to transport passengers or goods between places in the other Contracting State. 2. As regards the application of the Agreement by a Contracting State, any term not defined in this Agreement shall, unless the context otherwise requires, have the meaning which it has under the laws of that Contracting State relating to the taxes which are the subject of the Agreement. Article 4 FISCAL DOMICILE 1. For the purposes of this Agreement, the term " resident of a Contracting State " means any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly for the purpose of storage or display of goods or merchandise belonging to the enterprise; (b) the maintenance of 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 for collecting information, for the enterprise; (e) the maintenance of a fixed place of business solely for the purpose of advertising, for the supply of information, for scientific research, or for similar activities which have a preparatory or auxiliary character, for the enterprise. 4. A person acting in a Contracting State for or on behalf of an enterprise of the other Contracting State-other than an agent of an independent status to whom paragraph 5 applies-shall be deemed to be a permanent establishment of that enterprise in the first-mentioned State if:- (a) he has and habitually exercised in that State, an authority to conclude contracts for or on behalf of the enterprise, unless his activities a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty including income from agriculture or forestry may be taxed in the Contracting State in which such property is situated. 2. For the purpose of this Agreement, the term " immovable property " shall be defined in accordance with the law and usage 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 1 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 professional services. Article 7 BUSINESS PROFITS 1. The profits of an enterprise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the permanent establishment is situated or elsewhere as are in accordance with the provisions of and subject to the limitations of the taxation laws of that State. 5. 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. 6. 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. 7. Where profits include items of income which are dealt with separately in other Articles of this Agreement, then, the provisions of those Articles shall not be affected by the provisions of this Article. Article 8 AIR TRANSPORT 1. Profits derived from the operation of aircraft in international traffic by an enterprise of a Contracting State shall be taxable only in that Contracting State. 2. Paragraph 1 shall likewise apply in respect of participation in a pool, a joint business or in an international operating agency. 3. For the purposes of paragraph 1, interest on funds connected with the operation of aircraft i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) would apply in respect of dividends arising out of investments made after the date of signature of this Agreement. 4. The provisions of paragraphs 1 and 2 shall not affect the taxation of the company on the profits out of which the dividends are paid. 5. The term " dividends " as used in this Article means income from shares or other rights, not being debt-claims, participating in profits, as well as income assimilated to income from shares by the taxation law of the State of which the company making the distribution is a resident. 6. The provisions of paragraphs 1 and 2 shall not apply if the recipient of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated therein, or performs in that other State professional services from a fixed base situated therein, and the holding by virtue 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 15, as the case may be, shall apply. 7. Where a company which is a resident of a C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... permanent establishment situated therein, or performs in that other State professional services from a fixed base situated therein, and the debt-claim in respect of which the interest is paid is effectively connected with such permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 15, 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 sub-division, a local authority 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 that interest is borne by that 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, owing to a special relationship between the payer and the recipient or between both of them and some other person, the amount of the interest paid, having regard to the debt-claim for which it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich the royalties or the fees for technical services arise, through a permanent establishment situated therein, or performs in that other State professional services from a fixed base situated therein, and the right or property in respect of which the royalties or fees for technical services are paid is effectively connected with such permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 15, as the case may be, shall apply. 6. Royalties and fees for technical services shall be deemed to arise in a Contracting State when the payer is that State itself, a political sub-division, a local authority or a resident of that State. Where, however, the person paying the royalties or the fees for technical services, whether he is a resident of Contracting State or not, has in a Contracting State a permanent establishment or fixed base in connection with which the obligation to pay the royalties or fees for technical services was incurred, and those royalties or fees for technical services are borne by that permanent establishment or fixed base, then such royalties or fees for technical services shall be deemed to arise in the Contracting State in whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndependent activities of physicians, lawyers, engineers, architects, dentists and accountants. Article 16 DEPENDENT PERSONAL SERVICES 1. Subject to the provisions of Articles 17, 19 and 20, 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 therefrom may be taxed in that other State. 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 Contracting State for a period or periods not exceeding in the aggregate 183 days in the fiscal year concerned; (b) the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State; and (c) the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State. 3. Notwithstanding the preceding provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal sub-division or a local authority thereof. Article 21 STUDENTS AND APPRENTICES 1. Payments which a student, apprentice or business trainee who is, or was immediately before visiting one of the Contracting States, a resident of the other Contracting State and who is present in the first-mentioned Contracting State solely for the purpose of his education or training receives for the purpose of his maintenance, education or training shall not be taxed in that first-mentioned State, provided that such payments are made to him from sources outside that State. 2. Students, apprentices or business trainees who are nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which students, apprentices or business trainees who are nationals of that other State in the same circumstances, are or may be subjected. Article 22 OTHER INCOME Items of income of a resident of a Contracting State, arising in the other Contracting State, not dealt with in the foregoing Articles of this Agreement, may be taxed in bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt is not to be subjected to tax may be taken into account in calculating the rate of tax to be imposed. 4. For the purposes of paragraph 2(a), the term " tax payable in India " shall, with respect to a resident of Canada, other than an individual, be deemed to include any amount which would have been payable as Indian tax but for a deduction allowed in computing the taxable income or an exemption or reduction of tax granted for that year under: (a) sections 10(15)(iv), 32A, 80J and 80HH 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 signature of this Agreement, or have been modified only in minor respects so as not to affect their general character; or (b) any other provision which may subsequently be made granting an exemption or reduction from tax which is agreed by the competent authorities of the Contracting States 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: Provided that relief from Canadian tax shall not be given by virtue of this paragraph in respect of income from any so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e subjected. 6. In this Article, the term " taxation " means taxes which are the subject of this Agreement. 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 the provisions of this Agreement, he may, notwithstanding the remedies provided by the national laws of those States, present his case in writing to the competent authority of the Contracting State of which he is a resident. The case must be presented within two years from the first notification of the action which gives rise to taxation not in accordance with the Agreement. 2. The competent authority referred to in paragraph 1 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 not in accordance with the Agreement. 3. A Contracting State shall not, after the expiry of the time-limits provided in its national laws and in any case, af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disclosure of which would be contrary to public policy (order public). Article 27 DIPLOMATIC AND CONSULAR OFFICIAL S Nothing in this Agreement shall affect the fiscal privileges of members of diplomatic or consular missions under the general rules of international law or under the provisions of special agreements. Article 28 MISCELLANEOUS RULES 1. The provisions of this Agreement shall not be construed to restrict in any manner any exclusion, exemption, deduction, credit, or other allowance now or hereafter accorded by the laws of one of the Contracting States in the determination of the tax imposed by that Contracting State. 2. The competent authorities of the Contracting States may communicate with each other directly for the purpose of applying this Agreement. CHAPTER VI FINAL PROVISIONS Article 29 ENTRY INTO FORCE 1. This Agreement shall be ratified and the instruments of ratification shall be exchanged at...Ottawa 2. The Agreement shall enter into force upon the exchange of instruments of ratification and its provisions shall have effect: (a) in Canada: (i) in respect of tax withheld at the source on amounts paid or credited to non ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (William T. Warden) HIGH COMMISSIONER. PROTOCOL At the signing of the Agreement between Canada and India for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on income, the undersigned have agreed upon the following provisions which shall be an integral part of the Agreement: 1. With reference to paragraph 1 of Article 6, it is understood that it also applies to profits derived from the alienation of immovable property. 2. With reference to paragraph 4 of Article 7, it is understood that no deduction shall be allowed in respect of amounts, if any, paid (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, know-how or other rights, or by way of commission or other charges, for specific services performed or for management, by way of interest on money lent to the permanent establishment. Likewise, no account shall be taken, in the d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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