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TMI BlogConvention between the Government of the Republic of India and the Government of the Socialist Republic of Romania 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 ..... of 1964), the Central Government 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 SOCIALIST REPUBLIC OF ROMANIA FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME The Government of the Republic of India and the Government of the Socialist Republic of Romania desiring to conclude a Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and to promote and strengthen the economic relations between the two countries on the basis of equality in rights and reciprocal advantage. 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. The taxes to which this Convention shall apply are: (a) In the case of India: (1) Income-tax and any surcharge thereon; and (2) Surtax; (hereinafter referred to as " Indian tax "). (b) In the case of Romania: (1) the tax on incomes derived by individuals and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the respective Contracting States; (g) the term " enterprise of a Contracting State " and " enterprise of the other Contracting State " mean, respectively, an enterprise carried on by a resident of a Contracting State and an enterprise carried on by a resident of the other Contracting States; (h) the term " competent authority " means in the case of India the Central Government in the Ministry of Finance (Department of Revenue) or their authorised representative, and in the case of Romania the Ministry of Finance or its authorised representative; (i) the term " national " means:-- in the case of India, any individual possessing the nationality of India and any legal person, partnership or association deriving its status from the laws in force in India; in the case of Romania, any individual possessing the citizenship of Romania and any legal person, partnership or association deriving its status from the laws in force in Romania; (j) the term " a political sub-division " means a political sub-division in India; (k) the term " an administrative territorial unit " means an administrative territorial unit in Romania; (l) the term " international traffic " means any transpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The term " permanent establishment " includes especially: (a) a place of management; (b) a branch; (c) an office; (d) a factory; (e) a workshop; (f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources; (g) a warehouse in relation to a person providing storage facilities for others; (h) a farm, plantation or other place where agriculture, forestry, plantation or related activities are carried on; (i) a premises used as a sales outlet or for receiving or soliciting orders; (j) an installation or structure used for the exploration of natural resources; (k) a building site or construction, installation or assembly project or supervisory activities in connection therewith, where such site, project or supervisory activity (together with other such sites, projects or activities, if any) continues for a period of more than six months, or where such project or supervisory activity, 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 or equipment. 3. Notwithstanding the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he enterprise itself or for the enterprise and other enterprises controlling, controlled by, or subject to the same common control as, that enterprise. 5. An enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because it carried on business in that other State through a broker, general commission agent or any other agent of an independent status provided that such persons are acting in the ordinary course of their business. However, when the activities of such an agent are devoted wholly or almost wholly on behalf of that enterprise itself or on behalf of that enterprise and other enterprises controlling, controlled by, or subject to the same common control as, that enterprise, he will not be considered an agent of an independent status within the meaning of this paragraph. 6. 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 carried on business in that other Contracting State (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rprise of which it is a permanent establishment. In any case where the correct amount of profits attributable to a permanent establishment is incapable of determination or the determination thereof presents exceptional difficulties, the profits attributable to the permanent establishment may be estimated on a reasonable basis. 3. In the determination of the profits of a permanent establishment, there shall be allowed as deductions expenses which are incurred for the purposes of the business of the permanent establishment including executive and general administrative expenses so incurred whether in the State in which the permanent establishment is situated or elsewhere, in accordance with the provisions of the taxation laws of that State. However, no such 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, or except ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he operation of ships in international traffic shall be taxable only in that State. 2. Notwithstanding the provisions of paragraph 1, such profits may also be taxed in the other Contracting State if the shipping activities connected with the operation of ships in international traffic are carried on in that other State, but the tax so charged shall not exceed 2.50 per cent. of the gross amount payable in respect of operation of ships in that other State. 3. The provisions of paragraphs 1 and 2 shall also apply to profits from the participation in a pool, a joint business or an international operating agency engaged in the operation of ships. 4. For the purposes of this article, the gross amount payable in respect of operation of ships in a Contracting State shall mean the aggregate of the following amounts, namely:-- (a) the gross amount payable on account of carriage of passengers, livestock, mail or goods shipped at a port or ports in that Contracting State; (b) interest arising in that Contracting State on funds connected with the operation of ships in international traffic; and (c) the gross amount payable in that State on account of the use, maintenance or rental of cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te rights which is subjected to the same taxation treatment as income from shares by the laws of the State of which the company making the distribution is a resident. In this context, the profits distributed by Romanian Joint Companies to the capital subscribers are assimilated to dividends. 4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner 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 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 cases, the provisions of article 7 or article 16, 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 so fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l not be regarded as interest for the purpose of this article. 5. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises, through a permanent establishment situated therein, or performs in that other State independent personal 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 cases, the provisions of article 7 or article 16, as the case may be, shall apply. 6. Interest shall be deemed to arise in a Contracting State when the payer is that Contracting State itself, a political sub-division, an administrative territorial unit, 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 such interest is borne by such permanent establishment or fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to arise in the Contracting State in which the permanent establishment is situated. 6. Where by reason of a special relationship between the payer and the recipient or between both of them and some other person, the amount of the commission, having regard to the transaction for which it is paid, exceeds the amount which would have been agreed upon by the payer and the recipient in the absence of such relationship, the provisions of this article shall apply only to the last-mentioned amount. In such cases, the excess part of the payment shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Convention. Article 14 ROYALTIES AND FEES FOR TECHNICAL SERVICES 1. Royalties and fees for technical services 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 royalties and 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 royalties, or fees for technical services, the tax so charged shall not exceed 22.5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich the permanent establishment or fixed base is situated. 7. Where, by reason of special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of royalties or fees for technical services paid exceeds the amount which would have been paid in the absence of such relationship, the provisions of this article shall apply only to the last-mentioned amount. In such cases, 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 15 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 that 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 se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loyment 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. 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 the relevant " previous year " or " calendar 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 derived in respect of an employment exercised aboard a ship or aircraft operating in international traffic by an enterprise of a Contracting State may be taxed in that State. Article 18 DIRECTORS' FEES AND REMUNERATION OF TOP LEVEL MANAGERIAL OFFICIALS 1. Directors' fees and other similar payments d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y a Contracting State, a political sub-division, an administrative territorial unit or a local authority thereof to an individual in respect of services rendered to that State, sub-division, unit 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 other 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. (a) Any pension paid by, or out of funds created by a Contracting State, a political sub-division, an administrative territorial unit or a local authority thereof to an individual in respect of services rendered to that State, sub-division, unit or authority shall be taxable only in that State. (b) However, such pension shall be taxable only in the other Contracting State if the individual is a resident of, and a national of that other State. 3. The provisions of articles 17, 18 and 19 shall apply to remuneration and pensions in respect of services rendered in connection with a business carried on by a Contracting State, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. For the purposes of paragraph 1, the term " recognised university, college or school " means a university, college or school which has been recognised in this regard by the competent authority of the concerned Contracting State. Article 23 PROFESSORS, TEACHERS AND RESEARCH SCHOLARS 1. A professor or teacher who is or was a resident of one of the Contracting State immediately before visiting the other Contracting State for the purpose of teaching or engaging in research, or both, at a university, college, school or other approved 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 not apply to income from research if such research is undertaken primarily for the private benefit of a specific person or persons. 3. For the purposes of this article and article 22, an individual shall be deemed to be a resident of a Contracting State, if he is resident in that Contracting State in the " previous year " or the " calendar year ", as the case may be, in which he visits the other Contractin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as to the balance, if any, against surtax payable by it in India. 3. The amount of Indian tax payable under the laws of India and in accordance with the provisions of this Convention, whether directly or by deduction, by a resident of Romania, in respect of profits or income arising in India, which has been subjected to tax both in India and in Romania, shall be allowed as a credit against Romanian tax payable in respect of such profits or income provided that such credit shall not exceed Romanian tax (as computed before allowing any such credit) which is appropriate to the profits or income arising in India. For the purposes of this paragraph, profits paid by the Romanian State enterprises to the State budget shall be deemed to be Romanian tax. 4. For the purposes of the credit referred to in paragraph 3, the term " Indian tax payable " shall be deemed to include any amount which would have been payable as Indian tax for any assessment year but for an exemption or reduction of tax granted for that year or any part thereof by the special incentive measures under the provisions of the Income-tax Act, 1961 (43 of 1961), which are designed to promote economic development, or whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Convention, he may, notwithstanding the remedies provided by the national laws of those States present his case to the competent authority of the Contracting State of which he is a resident. This case must be presented within three years of the date of receipt of notice of the action which gives rise to taxation not in accordance with the Convention. 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 avoidance of taxation not in accordance with the Convention. Any agreement reached shall be implemented notwithstanding any time limits in the national laws of the Contracting State. 3. The Competent authorities of the Contracting State shall endeavour to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the Convention. They may also consult together for the elimination of double taxation in cases not provided for in the Convention. 4. The Competent authorities of the Contracting State may communicate w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmal 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 29 ASSISTANCE IN COLLECTION 1. The Contracting State undertake to lend assistance and support to each other, in the collection of the taxes to which this Convention relates, in the cases where the taxes are definitely due according to the laws of the State making the request. 2. In the case of a request for enforcement of collection, tax claims of either of the Contracting State which have been finally determined will be accepted for enforcement by the other Contracting State to which the request is made and collected in that State in accordance with the laws applicable to the enforcement and collection of its taxes. 3. In the case of Indian tax, the request will be sent by the Central Board of Direct Taxes, Department of Revenue to the Mininstry of Finance of the Socialist Republic of Romania and will be accompanied by such certificate as is required by the laws of India to es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the 25th September, 1968, shall cease to have effect upon the entry into force of this Convention. Article 32 TERMINATION This Convention shall remain in force indefinitely but either of the Contracting State may, on or before the thirtieth day of June in any calendar year beginning after the expiration of a period of five years from the date of its entry into force, give the other Contracting State through diplomatic channels, written notice of termination and, in such event, this Convention shall cease to have effect: (a) in India, in respect of income arising in any previous year beginning on or after the first day of April next following the calendar year in which the notice is given; (b) in Romania, in respect of income arising in any calendar year beginning on or after the 1st day of January next following the calendar year in which the notice of termination is given. In witness whereof the undersigned, being duly authorised thereto, have signed the present Convention. Done in duplicate at New Delhi, this 10th day of March one thousand nine hundred and eightyseven in the Hindi, Romanian and English languages, all the texts being equally authentic. In case of diverg ..... X X X X Extracts X X X X X X X X Extracts X X X X
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