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TMI BlogAgreement between the Government of the Republic of India and the Government of Canada for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxesX X X X Extracts X X X X X X X X Extracts X X X X ..... REEMENT BETWEEN THE GOVERNMENT OF THE REPUBLIC 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 AND ON CAPITAL The Government of the Republic 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 and on capital, have agreed as follows : 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 and on capital imposed on behalf of each Contracting-State, irrespective of the manner in which they are levied. 2. There shall be regarded as taxes on income and on capital all taxes imposed on total income, on total capital, or on elements of income or of capital, including taxes on gains from the alienation of movable or immovable property. 3. The existing taxes to which the Agreement shall apply are in particular : (a) in the case of Canada : the taxes imposed under the Income-tax Act of Canada, (hereinafter refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 tax means Canadian tax or Indian tax, as the context requires, but shall not include any amount payable in respect of any default or omission in relation to the said taxes or which represent a penalty imposed relating to those taxes; (j) the term international traffic means any voyage of a ship or aircraft operated by an enterprise 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. 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 Residence 1. For the purposes of this Agreement, the term resident of a Contracting-State means any person who, under the laws of that State, is liable to tax therein by reason of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore than 120 days in any twelve-month period; (k) a building site or construction, installation or assembly project or supervisory activities in connection therewith, where such site, project or activities (together with other such sites, projects or activities, if any) continue for a period of more than 120 days in any twelve-month period; (l) the furnishing of services other than included services as defined in Article 12, within a Contracting State by an enterprise through employees or other personnel, and only if : (i) activities of that nature continue within that State for a period or periods aggregating to more than 90 days within any twelve-month period; or (ii) the services are performed within that State for a related enterprise (within the meaning of paragraph 1 of Article 9). 3. Notwithstanding the preceding provisions of this Article, the term permanent establishment shall be deemed not to include any one or more of the following : (a) the use of facilities solely for the purpose of storage, display, or occasional 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ph. 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 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. III. Taxation of Income Article 6 Income from immovable property 1. Income from immovable property (including income from agriculture or forestry) may be taxed in the Contracting-State in which such property is situated. 2. For the purposes 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 no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion laws of that State. However, no such deduction shall be allowed in respect of amounts, if any, paid (otherwise than as a 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 in the case of a banking enterprise, by way of 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 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 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 off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enance, 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. 5. The provisions of paragraphs 1 and 4 shall also apply to profits from participation in a pool, a joint business, or an international operating agency. 6. For the purposes of this Article, interest on funds connected with the operation of ships or aircraft in international traffic shall be regarded as profits derived from the operation of such ships or aircraft, and the provisions of Article 11 shall not apply in relation to such interest. 7. The provisions of this Article shall not apply to a drilling rig or any vessel the principal function of which is the performance of activities other than the transportation of goods or passengers. Article 9 Associated enterprises 1. Where (a) an enterprise of a Contracting State participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting-State, or (b) the same persons participate directly or indirectly in the management, control or capital of an enterpr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) 25 per cent of the gross amount of the dividends in all other cases. 3. 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. 4. 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. 5. 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 case, the provisions of Article 7 or Article 14, as the case may be, shall apply. 6. Where a company which is a resident of a Contracting State derives profits or income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttaching to such securities, bonds or debentures, as well as income assimilated to income from money lent by the taxation laws 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. 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 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is received under paragraph 3(b) of this Article, 10 per cent of the gross amount of the royalties or fees for included services. 3. The term royalties as used in this Article means : (a) payment of any kind received as a consideration for the use of, or the right to use, any copyright of a literary, artistic, or scientific work including cinematograph films or work on film tape or other means of reproduction for use in connection with radio or television broadcasting, any patent, trademark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience, including gains derived from the alienation of any such right or property which are contingent on the productivity, use, or disposition thereof; and (b) payments of any kind received as consideration for the use of, or the right to use, any industrial, commercial, or scientific equipment, other than payments derived by an enterprise described in paragraph 1 of Article 8 from activities described in paragraph 3(c) or 4 of Article 8. 4. For the purposes of this Article, fees for included services means payments of any kind to any person in consideration for the renderi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igation to pay the royalties or the fees for included services was incurred, and such royalties or fees for included services are borne by that permanent establishment or fixed base, then such royalties or fees for included services shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated. 8. 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 or fees for included services, having regard to the use, right, information or 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 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 Agreement. Article 13 Capital gains 1. Gains from the alienation of ships or aircraft operated in international traffic by an enterprise of a Contracting State and movable property pertaining to the oper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Contracting State for a period or periods not exceeding in the aggregate 183 days in the relevant fiscal year; (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 by an enterprise of a Contracting State, may be based in that State. Article 16 Directors fees Directors fees and other similar payments derived by a resident of a Contracting State in his capacity as a member of the board of directors or a similar capacity 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 7, 14 and 15, income derived by a resident of a Contracting State as an entertainer, such as a theatre, motion picture, radio or television artiste or a musician, or an athlete, from his personal activities as such exercised in the other Contracting S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r business trainee who is, or was immediately before visiting a Contracting State, a resident of the other Contracting State and who is present in the first-mentioned 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 the first-mentioned State, provided that such payments are made to him from sources outside that State. Article 21 Other income 1. Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Agreement 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 case, the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns capital which, in accordance with the provisions of the Agreement may be taxed in India, Canada shall allow as a deduction from the tax on capital of that resident an amount equal to the capital tax paid in India. Such deduction shall not, however, exceed that part of the capital tax (as computed before the deduction is given) which is attributable to the capital which may be taxed in India. (d) Where in accordance with any provision of the Agreement, income derived or capital owned by a resident of Canada is exempt from tax in Canada, Canada may nevertheless, in calculating the amount of tax on the remaining income or capital of such resident, take into account the exempted income or capital. 3. In the case of India, double taxation shall be avoided as follows : (a) The amount of Canadian tax paid, under the laws of Canada and in accordance with the provisions of the Agreement, whether directly or by deduction, by a resident of India, in respect of income from sources within Canada which has been subjected to tax both in India and Canada shall be allowed as a credit against the Indian tax payable in respect of such income but in an amount not exceeding that proportion of Indian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 nationals of that other State in the same circumstances are or may be subjected. 2. The taxation on a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favourably levied in that other State than the taxation levied on enterprises of that other State carrying on the same activities. 3. Nothing in this Article shall 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. 4. (a) Nothing in this Agreement shall be construed as preventing Canada from imposing on the earnings of a company, which is a resident of India, attributable to a permanent establishment in Canada, a tax in addition to the tax which would be chargeable on the earnings of a company which is a national of Canada, provided that any additional tax so imposed shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it to be justified and if it is not itself able to arrive at a satisfactory 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. 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. 4. The competent authorities of the Contracting States may consult together for the elimination of double taxation in cases not provided for in the Agreement. Article 26 Exchange of information 1. The competent authorities of the Contracting States shall exchange such information as is necessary for the carrying out of this Agreement or of the domestic laws of the Contracting States (including the provisions thereof dealing with the prevention of fiscal evasion or fraud) concerning taxes covered by the Agreement insofar as the taxation thereunder is not contrary to the Agreement. The exchange of information is not restricted by Article 1. Any information received by a Contracting State shall be treated as secret in the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, credit or other allowance now or hereafter accorded by the laws of a Contracting State in the determination of the tax imposed by that State. 2. The competent authorities of the Contracting States may communicate with each other directly for the purpose of applying the Agreement. 3. With respect to paragraph 3 of Article XXII of the General Agreement on Trade in Services, the Contracting States agree that, notwithstanding that paragraph, any dispute between them as to whether a measure relating to a tax to which any provision of this Agreement applies falls within the scope of this Agreement may be brought before the Council for Trade in Services, as provided by that paragraph, only with the consent of both Contracting States. VII. Final Provisions Article 29 Entry into force 1. The Governments of the Contracting States shall notify each other that the constitutional requirements for the entry into force of this Agreement have been complied with. 2. The Agreement shall enter into force upon the date of the later of the notifications referred to in paragraph 1 and its provisions shall have effect : (a) in Canada : (i) in respect of tax withheld at the source on amounts paid or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... New Delhi this 11th day of January, 1996 in the English, French and Hindi languages, each version being equally authentic. Sd/- Sd/- For the Government of the Republic of India For the Government of Canada MANMOHAN SINGH ROY MACLAREN Minister of Finance Minister for International Trade Protocol At the signing of the Agreement between the Government of the Republic 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 and on Capital, the undersigned have agreed upon the following provisions which shall be an integral part of the Agreement : 1. It is understood that the term fiscal year in relation to Indian tax, means previous year as defined in the Income-tax Act, 1961. 2. It is understood that the provisions of paragraph 1 of Article 6, also apply to income, other than capital gains, derived from the alienation of immovable property. 3. It is understood that where an enterprise of a Contracting State has a permanent establishment in the other Contracting State in accordance with the provisions of paragraph 2(j), 2(k), or 2(l) of Article 5, and the time period referred to in that paragraph ex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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