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TMI BlogIndia-Chile DTAA - Agreement for the avoidance of double taxation and the 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 ..... provides that the provisions of the Agreement shall have effect in India in respect of income derived in any fiscal year beginning on or after the first day of April next following the date on which the Agreement enters into force; Now, therefore, in exercise of the powers conferred by sub-section (1) of section 90 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies that all the provisions of said Agreement and Protocol, as annexed hereto, shall be given effect to in the Union of India. ANNEXURE AGREEMENT BETWEEN THE REPUBLIC OF INDIA AND THE REPUBLIC OF CHILE FOR THE ELIMINATION OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION AND AVOIDANCE WITH RESPECT TO TAXES ON INCOME The Government of the Republic of India and the Government of the Republic of Chile, Desiring to further develop their economic relationship and to enhance their cooperation in tax matters, Intending to conclude an Agreement for the elimination of double taxation with respect to taxes on income without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance (including through treaty-shopping arrangements aimed at obtaining reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reign rights, other rights and jurisdiction, according to the Indian law and in accordance with international law; (b) the term "Chile" means the Republic of Chile and includes any area outside the territorial sea designated under the laws of the Republic of Chile and in accordance with international law as an area within which the Republic of Chile may exercise sovereign rights with regard to the seabed and subsoil and their natural resources; (c) the terms a "Contracting State" and "the other Contracting State" mean India or Chile, as the context requires; (d) the term "person" includes an individual, a company and any other body of persons; (e) the term "company" means any body corporate or any entity that is treated as a body corporate for tax purposes; (f) the term "enterprise" applies to the carrying on of any business; (g) the terms "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 State; (h) the term "international traffic" means an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oser (centre of vital interests); (b) if the State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either State, he shall be deemed to be a resident only of the State in which he has an habitual abode; (c) if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident only of the State of which he is a national; (d) if he is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement. 3. Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident only of the State of which it is a national. If the person is a national of both Contracting States or of neither of them the Contracting States shall by mutual agreement procedure endeavour to settle the question. In the absence of a mutual agreement by the competent authorities of the Contracting States, the person shall not be entitled to any relief or exemption from tax provided by the Agreement. ARTICLE 5 PERMANENT ESTABLISHM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness solely for the purpose of advertising, supplying information or carrying out scientific research for the enterprise; provided that such activity is of a preparatory or auxiliary character. 4.1 Paragraph 4 shall not apply to a fixed place of business that is used or maintained by an enterprise if the same enterprise or a closely related enterprise carries on business activities at the same place or at another place in the same Contracting State and a) that place or other place constitutes a permanent establishment for the enterprise or the closely related enterprise under the provisions of this Article, or b) the overall activity resulting from the combination of the activities carried on by the two enterprises at the same place, or by the same enterprise or closely related enterprises at the two places, is not of a preparatory or auxiliary character, provided that the business activities carried on by the two enterprises at the same place, or by the same enterprise or closely related enterprises at the two places, constitute complementary functions that are part of a cohesive business operation. 5. Notwithstanding the provisions of paragraphs 1 and 2 but subject to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his paragraph with respect to any such enterprise. 8. 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 carries on business in that other State (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment of the other. 9. For the purposes of this Article, a person or enterprise is closely related to an enterprise if, based on all the relevant facts and circumstances, one has control of the other or both are under the control of the same persons or enterprises. In any case, a person or enterprise shall be considered to be closely related to an enterprise if one possesses directly or indirectly more than 50 per cent of the beneficial interests in the other (or, in the case of a company, more than 50 per cent of the aggregate vote and value of the company's shares or of the beneficial equity interest in the company) or if another person or enterprise possesses directly or indirectly more than 50 per cent of the beneficial interest (or, in the case of a company, more than 50 per cent of the aggregate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... establishment . 3. In determining the profits of a permanent establishment, there shall be allowed as deductions expenses which are incurred for the purposes 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. 4. Insofar as it has been customary in a Contracting State to determine the profits to be attributed to a permanent establishment on the basis of an apportionment of the total profits of the enterprise to its various parts, nothing in paragraph 2 shall preclude that Contracting State from determining the profits to be taxed by such an apportionment as may be customary; the method of apportionment adopted shall, however, be such that the result shall be in accordance with the principles contained in this Article. 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 unles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly. 2. Where a Contracting State includes in the profits of an enterprise of that State - and taxes accordingly - profits on which an enterprise of the other Contracting State has been charged to tax in that other State and the profits so included are profits which would have accrued to the enterprise of the first-mentioned State if the conditions made between the two enterprises had been those which would have been made between independent enterprises, then that other State, if it agrees that the adjustment made by the first mentioned State is justified both in principle and as regards the amount, shall make an appropriate adjustment to the amount of the tax charged therein on those profits. In determining such adjustment, due regard shall be had to the other provisions of this Agreement 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cting State in which it arises and according to the laws of that State, but if the beneficial owner of the interest is a resident of the other Contracting State, the tax so charged shall not exceed 10 per cent of the gross amount of the interest. 3. The term "interest" as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage, and in particular, income from government securities and income from bonds or debentures, including premiums attaching to such bonds or debentures, as well as income assimilated to income from money lent by the taxation law of the State in which the income arises. However, the term "interest" does not include income dealt with in Article 8 or in Article 10. 4. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the royalties, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties arise, 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 royalties are 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. Royalties shall be deemed to arise in a Contracting State when the payer is a resident of that State. Where, however, the person paying the royalties whether 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 liability to pay the royalties was incurred, and such royalties are borne by such permanent establishment or fixed base, then such royalties shall be deemed to arise in the Contracting 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether that person is a resident of a Contracting State or not, has in the first-mentioned Contracting State a permanent establishment or a fixed base in connection with which the obligation to pay the fees was incurred, and such fees are borne by the permanent establishment or fixed base. 6. For the purposes of this Article, fees for technical services shall be deemed not to arise in a Contracting State if the payer is a resident of that State and carries on business in the other Contracting State or a third State through a permanent establishment situated in that other State or the third State, or performs independent personal services through a fixed base situated in that other State or the third State and such fees are borne by that permanent establishment or fixed base. 7. Where, by reason of a special relationship between the payer and the beneficial owner of the fees for technical services or between both of them and some other person, the amount of the fees, having regard to the services 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 sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... independent character shall be taxable only in that Contracting State, except in the following circumstances when 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 State; or (b) if he is present in the other Contracting State for a period or periods amounting to or exceeding in the aggregate 183 days in any period of twelve months; 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. 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 20, salaries, wages and other remuneration derived by a resident of a Contracting State in respect of an emp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anding paragraph 1 of this Article where income accrues from the exercise of activities by entertainers or sportspersons in a Contracting State and the visit to that State is financed wholly or mainly from public funds of the other Contracting State, the first-mentioned State shall not tax the entertainers or sportspersons on income provided from such public funds paid from that other Contracting State. Article 18 PENSIONS Pensions arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in the first-mentioned State. Article 19 GOVERNMENT SERVICE 1. (a) Salaries, wages and other 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 salaries, wages and other 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re in accordance with any provision of the Agreement income derived by a resident of India is exempt from tax in India, India may nevertheless, in calculating the amount of tax on the remaining income of such resident, take into account the exempted income. 2. In Chile: (a) residents in Chile, deriving income which has, in accordance with the provisions of this Agreement, been subject to taxation in India, may credit the tax so paid against any Chilean tax payable in respect of the same income, subject to the applicable provisions of the law of Chile (which shall not affect the general principle of this Article). This paragraph shall apply to all income referred to in this Agreement; (b) where, in accordance with any provision of the Agreement, income derived by a resident of Chile is exempt from tax in Chile, Chile may nevertheless, in calculating the amount of tax on other income, take into account the exempted income. Article 23 NON-DISCRIMINATION 1. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the 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 a satisfactory solution, to resolve the case by a 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. Any agreement reached shall be implemented notwithstanding any time limits in the domestic law of the Contracting States. 3. The competent authorities of the Contracting States shall endeavour to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the Agreement. They may also consult together for the elimination of double taxation in cases not provided for in the Agreement. 4. The competent authorities of the Contracting States may communicate with each other directly, for the purpose of reaching an agreement in the sense of the preceding paragraphs. When it seems advisable in order to reach agreement t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. If information is requested by a Contracting State in accordance with this Article, the other Contracting State shall use its information gathering measures to obtain the requested information, even though that other State may not need such information for its own tax purposes. The obligation contained in the preceding sentence is subject to the limitations of paragraph 3 but in no case shall such limitations be construed to permit a Contracting State to decline to supply information solely because it has no domestic interest in such information. 5. In no case shall the provisions of paragraph 3 be construed to permit a Contracting State to decline to supply information solely because the information is held by a bank, other financial institution, nominee or person acting in an agency or a fiduciary capacity or because it relates to ownership interests in a person. Article 26 ASSISTANCE IN THE COLLECTION OF TAXES The Contracting States may lend assistance to each other in the collection of revenue claims. This assistance is not restricted by Articles 1 and 2. The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r (iv) making or managing investments, unless these activities are carried on by a bank or financial institutions agreed upon by the competent authorities of the Contracting States, insurance enterprise or registered securities dealer in the ordinary course of its business as such. b) If a resident of a Contracting State derives an item of income from a business activity conducted by that resident in the other Contracting State, or derives an item of income arising in the other State from a connected person, the conditions described in subparagraph a) shall be considered to be satisfied with respect to such item only if the business activity carried on by the resident in the first-mentioned State to which the item is related is substantial in relation to the same or complementary business activity carried on by the resident or such connected person in the other Contracting State. Whether a business activity is substantial for the purposes of this paragraph shall be determined based on all the facts and circumstances. c) For purposes of applying this paragraph, activities conducted by connected persons with respect to a resident of a Contracting State shall be deemed to be con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Article: a) the term "recognised stock exchange" means: (i) any stock exchange established and regulated as such under the laws of either Contracting State; and (ii) any other stock exchange agreed upon by the competent authorities of the Contracting States; b) with respect to entities that are not companies, the term "shares" means interests that are comparable to shares; c) the term "principal class of shares" means the class or classes of shares of a company or entity which represents the majority of the aggregate vote and value of the company or entity; d) two persons shall be "connected persons" if one owns, directly or indirectly, at least 50 per cent of the beneficial interest in the other (or, in the case of a company, at least 50 per cent of the aggregate vote and value of the company's shares) or another person owns, directly or indirectly, at least 50 per cent of the beneficial interest (or, in the case of a company, at least 50 per cent of the aggregate vote and value of the company's shares) in each person. In any case, a person shall be connected to another if, based on all the relevant facts and circumstances, one has control of the other or bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that includes the manufacture, production or sale of goods, "gross income" means such gross receipts reduced by the cost of goods sold, and where a person is engaged in a business of providing non-financial services, "gross income" means such gross receipts reduced by the direct costs of generating such receipts, provided that: (i) except when relevant for determining benefits under Article 10 of this Agreement, gross income shall not include the portion of any dividends that are effectively exempt from tax in the person's Contracting State of residence, whether through deductions or otherwise; and (ii) except with respect to the portion of any dividend that is taxable, a tested group's gross income shall not take into account transactions between companies within the tested group. 7. The competent authorities of the Contracting States may by mutual agreement settle the mode of application of paragraphs 1 to 6 of this Article. 8. Where an enterprise of a Contracting State derives income from the other Contracting State and the income from the other Contracting State is attributable to a permanent establishment which that enterprise has in a third jurisdiction, the tax benefi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e brought before the Council for Trade in Services, as provided by that paragraph, only with the consent of both Contracting States. Any doubt as to the interpretation of this paragraph shall be resolved under paragraph 3 of Article 24 or, failing agreement under that procedure, pursuant to any other procedure agreed to by both Contracting States. 3. Nothing in this Agreement shall affect the application of the provisions of the Chilean legislation DL 600 (Foreign Investment Statute) and Law N°20.848, as they are in force at the time of signature of this Agreement and as they may be amended from time to time without changing the general principle thereof. Article 30 ENTRY INTO FORCE 1. Each of the Contracting States shall notify the other through the diplomatic channels of the completion of the procedures required by law for the bringing into force of this Agreement. This Agreement shall enter into force on the date of the later of these notifications. 2. The provisions of this Agreement shall have effect: (a) in India, in respect of income derived in any fiscal year beginning on or after the first day of April next following the date on which the Agreement enters into f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Chile has in India at a rate of tax (including branch profits tax) which is higher than that imposed on the profits of a similar company of India; (b) shall affect the additional income-tax on distributed profits of an Indian resident company for any amount declared, distributed or paid by way of dividends; (ii) In the case of Chile: Nothing in this Agreement - (a) shall affect the taxation in Chile of a resident in India in respect of profits attributable to a permanent establishment situated in Chile, under both the First Category Tax and the Additional Tax but only as long as the First Category Tax is creditable in computing the Additional Tax; (b) shall limit the application of the Additional Tax in respect of dividend payments or profit distribution payable in Chile provided that the First Category Tax is fully creditable in computing the amount of Additional tax. (iii) If, after the date on which the Agreement enters into force, either Contracting State introduces a tax on capital under its domestic law, the Contracting States will enter into negotiations with a view to concluding a Protocol to amend the Agreement by extending its scope to include any tax on capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Article 8 For the purpose of paragraph 1 of Article 8, property includes goods, livestock and mail. 8. Ad. Article 9 In the case of Chile and notwithstanding any provisions of this Agreement, Chile, in any case, shall not be obliged to make or accept an appropriate adjustment in the circumstances referred to in paragraph 2 of Article 9 after the expiry of the time limits provided for in its domestic tax laws regarding tax refunds, or after five years, whichever is the higher, from the end of the year in which the profits which would be subject to such change would have accrued to an enterprise of India. IN WITNESS WHEREOF the signatories, duly authorised to that effect, have signed this Protocol. DONE in duplicate at Santiago, Republic of Chile, this 9th March 2020, in the English, Hindi and Spanish languages, all texts being equally authentic. In case of divergence of interpretation, the English text shall prevail. FOR THE GOVERNMENT OF THE REPUBLIC OF INDIA Sd/- Ms. Anita Nayar Ambassador of India to Republic of Chile FOR THE GOVERNMENT OF THE REPUBLIC OF CHILE Sd/- Mr. Ignacio Briones Minister of Finance, Republic of Chile [F. No.500/62/2017-FT&TR-V (Pt-III)] RA ..... X X X X Extracts X X X X X X X X Extracts X X X X
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