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TMI BlogAgreement between the Government of the Republic of India and the Government of the Kingdom of Sweden 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 ..... ons of the said Convention shall be given effect to in the Union of India. CONVENTION BETWEEN THE GOVERNMENT OF THE REPUBLIC OF INDIA AND THE GOVERNMENT OF THE KINGDOM OF SWEDEN 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 the Kingdom of Sweden, desiring to conclude a Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to taxes on income and on capital and with a view to promoting economic co-operation between the two countries, have agreed as follows : Article 1 Personal Scope This Convention shall apply to persons who are residents of one or both the Contracting States. Article 2 Taxes Covered 1. This Convention shall apply to taxes on income and on capital imposed on behalf of a Contracting State or of its political sub-divisions or local authorities, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidual, a company, a body of persons and any other entity which is treated as a taxable unit under the taxation laws in force in the respective Contracting States; (e) the term "company" means any body corporate or any entity which is treated as a body corporate for tax purposes; (f) 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; (g) the term "international traffic" means any transport by a ship or aircraft operated by an enterprise of a Contracting State, except when the ship or aircraft is operated solely between places in the other Contracting State; (h) 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 laws in force in a Contracting State; (i) the term competent authority means : (i) in India: the Central Government in the Ministry of Finance (Department of Revenue) or their authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not 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 of the State in which its place of effective management is situated. If the State in which its place of effective management is situated cannot be determined, then the competent authorities of the Contracting States shall settle the question by mutual agreement. Article 5 Permanent Establishment 1. For the purposes of this Convention, 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" include ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enterprise of the other Contracting State, that enterprise shall be deemed to have a permanent establishment in the first-mentioned Contracting State in respect of any activities which that person undertakes for the enterprise, if such a person : (a) has and habitually exercises in that State an authority to conclude contracts in the name of the enterprise, unless the activities of such person are limited to those mentioned in paragraph (5) which, if exercised through a fixed place of business, would not make this fixed place of business a permanent establishment under the provisions of that paragraph; or (b) has no such authority, 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 control, at that enterprise. 7. Notwithstanding the preceding provisions of this Article, an insurance enterprise of a Contracting State shall, except in regard to re-insuranc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness 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 the enterprise may be taxed in the other State but only so much of them as is attributable to that permanent establishment. 2. Subject to the provisions of paragraph (3), where an enterprise of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment the profits which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a permanent 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmercial or financial relations which differ from those which would be made between independent enterprises, then any profits which 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. Any case resulting in double taxation from the application of this Article may be resolved under the mutual agreement procedure. 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. Notwithstanding the provisions of paragraph (1), 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 beneficial owner of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed 10 per cent of the gross amount of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority of the other Contracting State; or (ii) in the case of India, the Reserve Bank of India, the Industrial Finance Corporation of India, the Industrial Development Bank of India, the Export-Import Bank of India, the National Housing Bank, the Small Industrial Development Bank of India and the Industrial Credit and Investment Corporation of India (ICICI); and in the case of Sweden, the Swedish International Development Authority (SIDA), SWEDECORP (Styrelsen for internationellt naringslivsbistand), Swedfund International AB or The Swedish Export Credits Guarantee Board (Exportkreditnamden); or (iii) any other institution as may be agreed from time to time between the competent authorities of the Contracting States. 4. The term "interest" as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtors profits, and in particular, income from Government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures. Penalty charges for late payment shall not be regarded as interest for the purpose o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hnical services. 3. (a) The term "royalties" as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience. (b) The term "fees for technical services" means payment of any kind in consideration for the rendering of any managerial, technical or consultancy services including the provisions of services by technical or other personnel but does not include payments for services mentioned in Articles 14 and 15 of this Convention. 4. The provisions of paragraphs (1) and (2) shall not apply if the beneficial owner of the royalties or fees for technical services, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties or fees for technical services 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 pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y a resident of a Contracting State from the alienation of ships or aircraft operated in international traffic or movable property pertaining to the operation of such ships or aircraft, shall be taxable only in that State. With respect to gains derived by the Swedish, Danish and Norwegian air transport consortium Scandinavian Airlines System (SAS), the provisions of this paragraph shall apply only to such portion of the gains as corresponds to the participation held in that consortium by SAS Sverige AB, the Swedish partner of Scandinavian Airlines System (SAS). 4. Gains from the alienation of shares of the capital stock of a company the property of which consists directly or indirectly principally of immovable property situated in a Contracting State may be taxed in that State. 5. Gains from the alienation of any property other than that referred to in paragraphs (1), (2), (3) and (4), shall be taxable only in the Contracting State of which the alienator is a resident, provided that such resident is subject to tax thereon in that State. If the resident is not subject to tax thereon, then such gains may be taxed in the other Contracting State. 6. Notwithstanding the provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fiscal year concerned; 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 operated in international traffic by an enterprise of a Contracting State may be taxed in that State. Where a resident of Sweden derives remuneration in respect of an employment exercised aboard an aircraft operated in international traffic by the Swedish, Danish and Norwegian air transport consortium Scandinavian Airlines System (SAS), such remuneration shall be taxable only in Sweden. Article 16 Director's 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 of a company which is a resident of the other Contracting State may be taxed in that other State. Article 17 Artistes and Sportspersons (1) Notwithstanding the provisions of articles 14 and 15, income derived by a resi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by, a Contracting State or a political sub-division or a local authority thereof to an individual in respect of services rendered to that State or 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 State. (3) The provisions of articles 15, 16 and 18 shall apply to remuneration and to pensions in respect of services rendered in connection with a business carried on by a Contracting State or a political sub-division or a local authority thereof. Article 20 Students and apprentices (1) A student or business apprentice 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 shall, besides loans on preferential conditions provided by the Government or any other organisation or institution of the first-mentioned State and tax exempt grants and scholarships, be exempt from tax in the first-mentioned State on,-- (a) payments made to him by persons residing outside the first-mentioned S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 23 Capital (1) Capital represented by immovable property referred to in Article 6, 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 perfo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n shall allow--subject to the provisions of the laws of Sweden concerning credit for foreign tax (as it may be amended from time to time without changing the general principle hereof)- as a deduction from the tax on such income, an amount equal to the Indian tax paid in respect of such income. (b) Where a resident of Sweden derives income which, in accordance with the provisions of this Convention, shall be taxable only in India, Sweden may, when determining the graduated rate of Swedish tax, take into account the income which shall be taxable only in India. (c) Notwithstanding the provisions of sub-paragraph (a) of this paragraph, dividends paid by a company which is a resident of India to a company which is a resident of Sweden shall be exempt from Swedish tax according to the provisions of Swedish law governing the exemption of tax on dividends paid to Swedish companies by subsidiaries abroad. (d) For the purposes of sub-paragraph (a) of this paragraph, the term `Indian tax paid' shall be deemed to include the Indian tax which would have been paid but for any exemption or reduction of tax granted under incentive provisions contained in the Indian law designed to promot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cting 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 Contracting State, shall not be subject in the first-mentioned State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which other similar enterprises of the first-mentioned State are or may be subjected. (5) The provisions of this article shall, notwithstanding the provisions of article 2, apply to taxes of every kind and description. Article 26 Mutual Agreement Procedure (1) Where a person consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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) concerned with the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes covered by the Convention. 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; (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 (order public)." Article 28 Collection Assis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al year beginning on or after the first day of April following the calendar year in which this Convention enters into force; (b) in Sweden, (i) in respect of taxes on income, on income derived on or after the first day of January of the year next following that of the entry into force of the Convention; (ii) in respect of tax on net wealth, for tax which is assessed on or after the second calendar year following that in which the Convention enters into force. (4) The Convention of 7 June, 1988 between the Government of the Republic of India and the Government of the Kingdom of Sweden for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital with protocol shall terminate upon the coming into force of this convention and accompanying protocol. The provisions of the said 1988 Convention with protocol shall cease to have effect from the date on which the corresponding provisions of this Convention and accompanying protocol shall, for the first time, have effect according to the provisions of paragraph 2 of this article. Article 31 : Termination This convention shall remain in force until terminated by a Contracting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... establishment shall not be determined on the basis of the total amount received by the enterprise, but shall, be determined only on the basis of the remuneration which is attributable to the actual activity of the permanent establishment for such sales or business. Especially, in the case of contracts for the survey, supply, installation or construction of industrial, commercial or scientific equipment or premises, or of public works, when the enterprise has a permanent establishment, the profits of such permanent establishment shall not be determined on the basis of the total amount of the contract, but shall be determined only on the basis of that part of the contract which is effectively carried out by the permanent establishment in the Contracting State where the permanent establishment is situated. With reference to articles 10, 11 and 12 : In respect of articles 10 (Dividends), 11 (interest) and 12 (royalties and fees for technical services) if under any Convention, agreement or protocol between India and a third State which is a member of the OECD, India limits its taxation at source on dividends, interest, royalties, or fees for technical services to a rate lower or a sc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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