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TMI BlogConvnention between the Government of Republic of India and the Government of the Hungarian People's Republic for the avoidance of double taxation with respect to taxes on incomeX X X X Extracts X X X X X X X X Extracts X X X X ..... ment hereby directs that all the provisions of the said Convention shall be given effect to in the Union of India. ANNEXURE CONVENTION BETWEEN THE GOVERNMENT OF THE REPUBLIC OF INDIA AND THE GOVERNMENT OF THE HUNGARIAN PEOPLE'S REPUBLIC FOR THE AVOIDANCE OF DOUBLE TAXATION WITH RESPECT TO TAXES ON INCOME. The Government of the Republic of India and the Government of the Hungarian People's Republic: Desiring to further expand and facilitate mutual economic relations, have resolved to conclude a Convention for the avoidance of double taxation with respect to taxes on income and 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 each Contracting State or of its political sub-divisions or local authorities, irrespective of the manner in which they are levied. 2. The taxes to which this Convention shall apply are: (a) In the case of India: (1) income-tax including any surcharge thereon; (2) surtax; (hereinafter referred to as " Indian tax " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the other Contracting State; (g) the term " national " of a Contracting State 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 law in force in a Contracting State; (h) the term " international traffic " means any transport by a ship or aircraft operated by an enterprise which has its place of effective management in a Contracting State, except when the ship or aircraft is operated solely between the places in the other Contracting State; (i) the term " competent authority " means, in the case of India, the Central Government in the Ministry of Finance (Department of Revenue); and in the case of the Hungarian People's Republic, the Ministry of Finance. 2. In the application of the provisions of this Convention by one of the Contracting States, any term not defined herein shall, unless the context otherwise requires, have the meaning which it has under the laws in force in that State relating to the taxes which are the subject of this Convention. Article 4 FISCAL DOMICILE 1. For the purposes of this Convention, the term " resident of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vity, being incidental to the sale of machinery or equipment, continues for a period not exceeding six months and the charges payable for the project or supervisory activity exceed 10 per cent. of the sale price of the machinery and equipment. 3. 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 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 activi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e property 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, oilwells, quarries and other places of extraction of natural resources, Ships, boats and aircraft shall not be designated 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 of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest on 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 reimbursements 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, or, except in the case of a banking enterprise, by way of interest on moneys lent to the head office of the enterprise or any of its other offices. 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 purpose of export to the enterprise of which it is the permanent establishment. 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 which are de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 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 and the dividends relate to a new contribution, the tax so charged shall not exceed fifteen per cent. of the gross amount of the dividends if the beneficial owner is a company which owns at least ten per cent. of the shares of the company paying the dividends. This paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid. 3. 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 from other corporate rights which is subjected to the same taxation treatment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithstanding the provisions of paragraph 2, -- (a) interest arising in a Contracting State shall be exempt from tax in that State provided it is derived and beneficially owned by: (i) the Government, a political sub-division or a local authority of the other Contracting State; or (ii) the Central Bank of the other Contracting State; (b) interest arising in a Contracting State shall be exempt from tax in that State if it is beneficially owned by a resident of the other Contracting State and is derived in connection with a loan or credit extended or endorsed by: (i) in the case of Hungarian People's Republic, the Magyar Kulkereskedelmi Bank Rt., to the extent such interest is attributable to financing of exports and imports only; (ii) in the case of India, the Export-Import Bank of India (Exim Bank), to the extent such interest is attributable to financing of exports and imports only; (iii) any institution of a Contracting State in charge of public financing of external trade; (iv) any other person provided that the loan or credit is approved by the Government of the first mentioned Contracting State. 4. The term " interest " as used in this Article means incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid to a resident of the other Contracting State may be taxed in that other State. 2. However, such royalties and fees for technical services may also be taxed in the Contracting State in which they arise and according to the law of that State; provided that where the royalties or fees for technical services are paid to a resident of the other Contracting State who is the beneficial owner thereof and they are paid in respect of a right or property which is first granted, or under a contract which is signed, after the date of entering into force of this Convention, the tax so charged shall not exceed,-- (a) in the case of royalties, 40 per cent. of the gross amount thereof; (b) in the case of fees for technical services, 20 per cent. of the gross amount thereof. 3. The term " royalties " as used in this Article means payments of any kind including rentals received as a consideration: (a) for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films and films or tapes for television or radio broadcasting; (b) for the use of, or the right to use, any patent, trade mark, design or model, plan, secret formula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of this Article shall apply only to the last mentioned amount. In that case, the excess part of the payments shall remain taxable according to the law 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 Contracting State from the alienation of immovable property referred to in Article 6 and situated in the other Contracting State may be taxed in the other State. 2. Gains from the alienation of movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or of movable property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, including such gains from the alienation of such a permanent establishment (alone or with the whole enterprise) or of such fixed base, may be taxed in that other State. 3. Gains arising from a capital asset being ships or aircraft operated in international traffic or movable property pertaining to the operation of such ships ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egate 183 days in the relevant " previous year " or " taxable year ", as the case may be, and (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 of this Article, remuneration in respect of an employment exercised aboard a ship or aircraft operated in international traffic may be taxed in the Contracting State in which the place of effective management of the enterprise is situated. Article 16 DIRECTORS' FEES Directors' fees and similar payments derived by a resident of a Contracting State in his capacity as a member of the Board of Directors or the Supervisory Board or any other similar organ of a company which is a resident of the other Contracting State may be taxed in that other State. Article 17 ARTISTES AND ATHLETES 1. Notwithstanding the provisions of Articles 14 and 15, income derived by public entertainers (such as stage, motion picture, radio or television artistes and musicians) or athletes, from their personal activities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Article shall not apply to payments in respect of services rendered in connection with any business carried on by the Government of either of the Contracting States for the purposes of profit. 5. For the purposes of this Article, the term " Government " shall include any State Government, a political sub-division or a local authority of either Contracting State and, in particular, the Reserve Bank of India and the National Bank of Hungary. Article 20 STUDENTS 1. An individual who is or was immediately before visiting the other Contracting State a resident of a Contracting State and who visits the other Contracting State solely as a student at an approved university, college, school or other similar approved institution in that other Contracting State or as a business or technical apprentice therein, for a period not exceeding five years from the date of his first arrival in that other Contracting State in connection with that visit shall be exempt from tax in that other Contracting State on --- (a) all remittances from abroad for the purposes of his maintenance, education or training; and (b) any remuneration not exceeding Rs. 20,000 or 75,000 forints, during an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is undertaken primarily for the private benefit of a specific person or persons. 3. For the purposes of paragraph 1, " approved institution " means an educational or research institution which has been approved in this regard by the competent authority of the concerned Contracting State. 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 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 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 a case, the provisions of Article 7 or Article 14, as the case may be, shall apply. 3. Notwithstanding the provisions of paragra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xation levied on enterprises of that other State carrying on the same activities in the same circumstances or under the same conditions. This provision shall not be construed as obliging a Contracting 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. 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 that first-mentioned State are or may be subjected in the same circumstances and under the same conditions. 4. In this Article, the term " taxation " means taxes which are the subject of this Convention. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of taxes which are the subject of this Convention or any fraud connected therewith, or to persons with respect to whom the information or document relates. 2. The exchange of information or documents shall be either on a routine basis or on request with reference to particular cases or both. The competent authorities of the Contracting States shall agree from time to time on the list of the information or documents which shall be furnished on a routine basis. 3. In no case shall the provisions of paragraph 1 be construed so as to impose on a Contracting State the obligation: (a) to carry out administrative measures at variance with the laws or administrative practice of that or of the other Contracting State; (b) to supply information or 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 or documents which would disclose any trade, business, industrial, commercial or professional secret or trade process or information, the disclosure of which would be contrary to public policy. Article 27 MEMBERS OF DIPLOMATIC OR CONSULAR MISSIONS Nothi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Finance Minister For the Government of the Hungarian People's Republic. PROTOCOL The Government of the Republic of India and the Government of the Hungarian People's Republic. Having entered into a Convention for the Avoidance of Double Taxation with respect to Taxes on Income. Have agreed, at the time of signing the said Convention, on the following provisions which shall constitute an integral part thereof: Concerning Article 5, the term " permanent establishment " shall be deemed not to include the use of facilities or the maintenance of a stock of goods or of merchandise solely for the purpose of storage, display or delivery of spare parts or components required by way of replacement under any warranty provisions of a contract under which any machinery or equipment is supplied by an enterprise of a Contracting State to an enterprise of the other Contracting State. In witness whereof the undersigned, being duly authorised thereto, have signed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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