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TMI BlogAgreement between the Government of the Republic of India and the Government of the Federal Republic of Germany 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 ..... fect to in the Union of India. ANNEXURE Agreement between the republic of India and the Federal Republic of Germany for the avoidance of double taxation with respect to taxes on income and capital Whereas the Government of the Federal Republic of Germany and the Government of the Republic of India desire to conclude an Agreement for the avoidance of double taxation with respect to taxes on income and capital and for promoting their mutual economic relations ; Now, therefore, it is hereby agreed as follows : 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 a Contracting-State, of a land or a political sub-division or local authority thereof, irrespective of the procedure 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, and the pay roll tax. 3. The existing taxes to which this Agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the law 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, boats and aircraft shall not be regarded as immovable property ; (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 national means, (i) in respect of the Federal Republic of Germany any German within the meaning of Article 116, paragraph (1), of the Basic Law for the Federal Republic of Germany and any legal person, partnership and association deriving its status as such from the law in force in the Federal Republic of Germany ; (ii) in respect of the Republic of India any nationa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 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 of the State in which its place of effective management is situated. Article 5 Permanent establishment 1. For the purposes of this Agreement, the term permanent establishment means a fixed place of business through which the business of an enterprise is wholly or partly carried on. 2. 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, including an installation or structure used for the exploration or exploitation ; (g) a warehouse or sales outlet ; (h) a farm, plantation or other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but habitually maintains in the first-mentioned State a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the enterprise ; or (c) habitually secures orders in the first-mentioned State, wholly or almost wholly for the enterprise itself or for the enterprise and other enterprises controlling, controlled by, or subject to the same common control, as that enterprise. 6. An enterprise shall not be deemed to have a permanent establishment in a Contracting State merely because it carries on business in that 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 and in their commercial and financial relations to the enterprise no conditions are agreed or imposed which differ from those usually agreed between independent persons. 7. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ans of either apportioning the total profits of the enterprise to that permanent establishment or estimating on any other reasonable basis; the method of apportionment or estimation 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 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 Shipping and air transport 1. Profits from the operation of ships or aircraft in international traffic shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated. 2. If the place of effective management of a shipping enterpris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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 case, the provisions of Article 7 or Article 14, 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 insofar as such dividends are paid to a resident of that other State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base sit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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 land or 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 such interest is borne by such permanent establishment or fixed base, then such interest shall be deemed to arise in the State in which the permanent establishment or fixed base is situated. 7. 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 interest, having regard to the debt-claim for which it is 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 such case, the excess part of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate when the payer is that State itself, a land or a political sub-division, a local authority or a resident of that State. Where, however, the person paying the royalties or fees for technical services, 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 liability to pay the royalties or fees for technical services was incurred, and such royalties or fees for technical services are borne by such permanent establishment or fixed base, then such royalties or fees for technical services shall be deemed to arise in the State in which 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 case, the excess part of the payments shall remain taxable according to the laws of each Contracting-State, due regard being had to the other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s well as the independent activities of physicians, surgeons, lawyers, engineers, architects, dentists and accountants. Article 15 Dependent personal services 1. Subject to the provisions of Articles 16, 18, 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 in the other Contracting State only if the employment is exercised there. 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 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 of this Article, remuneration derived in respect of an employment exercised aboard a ship or aircraft operated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of rendering the services. 2. (a) Any pension paid by a Contracting State, a Land, a political sub-division or a local authority thereof to an individual in respect of services rendered to that State, Land, sub-division 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 15, 16 and 18 shall apply to remuneration and pensions in respect of services rendered in connection with a business carried on by a Contracting State, a Land, a political sub-division or a local authority thereof. 4. The provisions of paragraph 1 shall likewise apply in respect of remuneration paid, under a development assistance programme of a Contracting State, a Land, a political sub-division or a local authority thereof, out of funds exclusively supplied by that State, Land, political sub-division or local authority, to a specialist or volunteer seconded to the other Contracting State with the consent of that other State. Article 20 Teachers, students and trainees 1. An individual who visits a Contracting State at the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Article 7 or Article 14, as the case may be, shall apply. 3. Notwithstanding the provisions of paragraph 1, if a resident of a Contracting State derives income from sources within the other Contracting State in the form of lotteries, crossword puzzles, races including horse races, card games and other games of any sort or gambling or betting of any form or nature whatsoever, such income may be taxed in the other Contracting State. Article 22 Capital 1. Capital represented by immovable property, owned by a resident of a Contracting State and situated in the other Contracting State, may be taxed in that other State. 2. Capital represented by 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 by 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, may be taxed in that other Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount of tax actually paid. (d) The provisions of sub-paragraph (c) shall apply for the first 12 fiscal years for which this Agreement is effective. (e) Notwithstanding the provisions of sub-paragraph (a) items of income dealt with in Articles 7 and 10 and gains derived from the alienation of the business property of a permanent establishment as well as the items of capital underlying such income shall be exempted from German tax only if the resident of the Federal Republic of Germany can prove that the receipts of the permanent establishment or company are derived exclusively or almost exclusively from active operations. In the case of items of income dealt with the Article 10 and the items of capital underlying such income the exemption shall apply even if the dividends are derived from holdings in other companies being residents of the Republic of India which carry on active operations and in which the company which last made a distribution has a holding of more than 25 per cent. Active operations are the following; producing or selling goods or merchandise, giving technical advice or rendering engineering services, or doing banking or insurance business, within the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of paragraph 3 of Article 7 of this Agreement. Further, this provision shall not be construed as obliging Contracting State to grant to residents of the other Contracting State any personal allowances, reliefs and reductions for taxation purposes which it grants only to its own residents. 3. Except where the provisions of Article 9, paragraph 7 of Article 11, or paragraph 7 of Article 12, apply, interest, royalties and other disbursements paid by an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable profits of such enterprise, be deductible under the same conditions as if they had been paid to a resident of the first-mentioned State. Similarly, any debts of an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable capital of such enterprise, be deductible under the same conditions as if they had been contracted to a resident of the first-mentioned State. 4. 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 Contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) involved in the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes covered by this Agreement. Such persons or authorities shall use the information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions. 2. 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 and administrative practice of that or of the other Contracting State ; (b) to supply information which is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State ; and (c) to supply information 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 (ordre public). Article 27 Diplomatic and Con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e other Contracting State, through diplomatic channels, written notice of termination and, in such event, this Agreement shall cease to have effect : (a) in the Federal Republic of Germany : (i) in the case of taxes withheld at source on dividends, interest, royalties and fees for technical services, in respect of amounts paid on or after the first day of January of the calendar year next following that in which notice of termination is given ; (ii) in the case of other taxes, in respect of taxes levied for periods beginning on or after the first day of January of the calendar year next following that in which notice of termination is given, (b) in the Republic of India : (i) in respect of income arising in any fiscal year beginning on or after the first day of April following the calendar year in which the notice of termination is given ; (ii) in respect of capital which is held on the last day of any fiscal year beginning on or after the first day of April 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 Agreement. Done at Bonn on June 19th, 1995 in two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax Act as on the date of entry into force of this Agreement. (e) No deduction shall be allowed in respect of amounts paid or 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 : (i) royalties, fees or other similar payments in return for the use of patents or other rights ; (ii) commission for specific services performed or for management ; and (iii) interest on moneys lent to the permanent establishment except in case of a banking institution. With reference to Article 8 2. For the purposes of Article 8, income from the operation of ships includes income derived from the use, maintenance or rental of containers (including trailers and related equipment for the transport of containers) in connection with the transport of goods or merchandise in international traffic. With reference to Article 10 3. For the purpose of taxation in the Federal Republic of Germany, the term dividends includes income derived by a sleeping partner (stiller Gesellschafter) from his participation as such and distributions on certificates of an investment fund or investm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxed or be subject only to inappropriately reduced taxation in the Republic of India and would (but for the application of this paragraph) remain exempt from tax in the Federal Republic of Germany ; or (bb) if the Federal Republic of Germany has, after due consultation and subject to the limitations of its internal law, notified the Republic of India through diplomatic channels of other items of income to which it intends to apply this paragraph in order to prevent the exemption of income from taxation in both Contracting States or other arrangements for the improper use of the Agreement. In the case of a notification under sub-paragraph (bb), the Republic of India may, subject to notification through diplomatic channels, characterise such income under the Agreement consistently with the characterisation of that income by the Federal Republic of Germany. A notification made under this paragraph shall have effect only from the first day of the calendar year following the year in which it was transmitted and any legal prerequisites under the domestic law of the notifying State for giving it effect have been fulfilled. With reference to Article 26 7. (a) It is also understood tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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