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TMI BlogAgreement between the Government of the Republic of India and the Government of the State of Israel 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 ..... ect to in the Union of India. ANNEXURE CONVENTION BETWEEN THE REPUBLIC OF INDIA AND THE STATE OF ISRAEL FOR THE AVOIDANCE OF DOUBLE TAXATION AND FOR 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 State of Israel, 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, 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. This Convention shall apply to taxes on income imposed on behalf of a contracting State or of its political sub-divisions or local authorities and to taxes on capital imposed on behalf of a 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, taxes on the total amounts of wages or salarie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntracting 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 terms `international traffic' means any transport by a ship or aircraft operated by an enterprise which is a resident of a contracting State, except when the ship or aircraft is operated solely between places in the other contracting State; (h) the term `competent authority' means : (i) in India : the Central Government in the Ministry of Finance (Department of Revenue) or their authorised representative; (ii) in Israel : the Minister of Finance or his authorised representative; (i) the term "national" means : (i) any individual possessing the nationality of a contracting State; (ii) any legal person, partnership or association deriving its status as such from the laws in force in a contracting State; (j) the term "fiscal year" means : (i) in the case of India, the twelve-month period beginning on the 1st of April; (ii) in the case of Israel, the twelve-month period beginning on the 1st of Januar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either 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. 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" includes especially : (a) a place of management; (b) a branch; (c) an office; (d) a factory; (e) a workshop; and (f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources. 3. A buildi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir commercial and financial relations with 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 either company a permanent establishment of the other. ARTICLE 6 INCOME FROM IMMOVABLE PROPERTY 1. Income derived by a resident of a contracting State from immovable property (including income from agriculture or forestry) situated in the other contracting State may also be taxed in that other State. 2. The term "immovable property" shall have the meaning which it has under the law of the contracting State in which the property in question in 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 varia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Convention, 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 and aircraft in international traffic shall be taxable only in the contracting State of which the enterprise is a resident. 2. The term "profits" shall include income derived by the enterprise from the rental of ships and aircraft operated in international traffic. Such term shall also include income derived by the enterprise from the use, maintenance or rental of containers operated in international traffic (including trailers, barges and related equipment for the transport of such containers) if such income is inci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termining such adjustment, due regard shall be had to the other provisions of this Convention 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 a resident of the other contracting State may be taxed in that other State. 2. However, 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 recipient is the beneficial owner of the dividends 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 means income from shares, "jouissance" shares of "jouissance" rights, mining shares, founders' shares or other rights, not being debt-claims, participating in profits, as well as income from other corporate rights which is subjected to the same taxation treatment as income from shares by the laws of the Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Bank of Israel, or (iii) other governmental agencies or lending institutions as may be specified and agreed in an exchange of notes 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 debtor's 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 of this article. 5. The provisions of paragraphs 1, 2 and 3 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent 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 in effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 15, as the case may be, shall apply. 5. Royalties 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 royalties, 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 was incurred, and such royalties are borne by such permanent establishment of fixed base, then such royalties shall be deemed to arise in the 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 other person, the amount of the royalties, having regard to the use, right or information for which they ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility to pay the fees for technical services was incurred, and such fees for technical services are borne by such permanent establishment or fixed base, then such fees for technical services shall be deemed to arise in the State in which the permanent establishment or fixed base is situated. 6. 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 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 provisions of this Convention. 7. The provisions of paragraphs 1 to 6 of this article shall not apply to payments relating to services mentioned hereinbelow : (i) Services that are ancillary and subsidiary, and inextricably and essentially linked, to a sale of property; (ii) Services that are ancillary and subsidiary to the rental of ships, aircraft, containers or other equipment used in connection with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that 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 his stay in the other State is for a period or periods exceeding in the aggregate 183 days in any twelve-month period commencing on ending in the fiscal year concerned; 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, surgeons, lawyers, engineers, architects, dentists and accounts. ARTICLE 16 DEPENDENT PERSONAL SERVICES 1. Subject to the provisions of Articles 17, 19, 20 and 21, salaries, wages and other similar remuneration derived by a resident of a contracting State in respect of an employment shall be taxable only in that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the first-mentioned contracting State, if the activities in the other contracting State are supported wholly or substantially from the public funds of the first-mentioned contracting State, including any of its political sub-divisions or local authorities. 4. Notwithstanding the provisions of paragraph 2 and Articles 7, 15 and 16, where income in respect of personal activities exercised by an entertainer or a sportsperson in his capacity as such in a contracting State accrues not to the entertainer or sportsperson himself but to another person, that income shall be taxable only in the other contracting State, if that other person is supported wholly or substantially from the public funds of the first-mentioned contracting State, including any of its political sub-divisions or local authorities. ARTICLE 19 PENSIONS Subject to the provisions of paragraph 2 of Article 20, pensions and other similar remuneration paid to a resident of a contracting State in consideration of past employment shall be taxable only in that State. ARTICLE 20 GOVERNMENT SERVICE 1.(a) Remuneration, other than a pension, paid by a contracting State or a political sub-division or a local authority ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apprentice receives as remuneration from employment in the first-mentioned State, in an amount not exceeding a sum equivalent to 3,000 US dollars in the currency of the first mentioned State during any fiscal year shall be exempt from tax in the first-mentioned State. The benefit of this paragraph shall extend only for such period of time as may be reasonable or customarily required to complete the education or training undertaken, but in no event shall any individual have the benefits of this paragraph for more than three consecutive years from the date of his first arrival in the first-mentioned Contracting State. ARTICLE 22 OTHER INCOME 1. Items of income of a resident of a contracting State, wherever arising not dealt with in the foregoing articles of this Convention 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 serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt equal to the income-tax paid in Israel, whether directly or by deduction. (b) as a deduction from the tax on the capital of that resident, an amount equal to the capital tax paid in Israel. Such deduction in either case shall not, however, exceed that part of the income-tax or capital tax, as computed before the deduction is given, which is attributable, as the case may be, to the income or the capital which may be taxed in Israel. 3. Notwithstanding the provisions of paragraphs 1 and 2 of this Article, where, a resident of a Contracting State derives income by way of dividends on shares of companies resident in the other Contracting State, the first-mentioned Contracting State shall allow credit of 15 per cent of the gross amount of such dividend from the tax payable. 4. Notwithstanding the provisions of paragraphs 1 and 2 of this Article, where a resident of a Contracting State derives income by way of interest from any source in the other Contracting State, the first-mentioned Contracting State shall allow a credit of 10 per cent of the gross amount of such interest from the tax payable. 5. Where in accordance with any provision of the Convention income derived or capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall not be subjected in the first-mentioned State of 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. ARTICLE 26 MUTUAL AGREEMENT PROCEDURE 1. Where a person considers that the actions of one or both of the contracting States result or will result for him in taxation not in accordance with the provisions of this Convention, he may, irrespective of the remedies provided by the domestic law of those States, present his case to the competent authority of the contracting State of which he is a resident or, if his case comes under paragraph 1 of Article 25, to that of the contracting State of which he 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 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 a satisfactory solution, to resolve the case by mutual agreement with the competent authority of the other c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 (ordre public). ARTICLE 28 DIPLOMATIC AGENTS AND CONSULAR OFFICERS Nothing in this Convention shall affect the fiscal privileges of diplomatic agents or consular officers under the general rules of international law or under the provisions of special agreements. ARTICLE 29 ENTRY INTO FORCE 1. Each Contracting State shall notify the other contracting State in writing, through diplomatic channels, upon the completion of their respective legal procedures to bring this Convention into force. 2. The Convention shall enter into force on the date of the latter of such notifications and its provisions shall have effect : (a) in the Republic of India : (i) in respect of taxes withheld at source on dividends, interest, royalties and fees for technical services, as defined in Articles 10, 11, 12 and 13, respectively, for amounts paid or credited on or after the first day of the month next following that in which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being equally authentic. In the case of any divergence in interpretation, the English text shall prevail. For the Government of The Republic of India For the Government of The State of Israel MANMOHAN SINGH MINISTER OF FINANCE A. SHOCHAT MINISTER OF FINANCE PROTOCOL At the signing today of the Convention between the Republic of India and the State of Israel for the Avoidance of Double Taxation and for the Prevention of Fiscal Evasion with respect to taxes on income and on capital, the undersigned have agreed upon the following provisions, which shall form an integral part of the Convention. 1. Nothing in the provisions of paragraph 3 of Article 7 shall be interpreted as precluding a contracting State from determining executive and administrative expenses of a head office incurred outside that contracting State according to the provisions of internal laws as they exist at the time of the signing of this Convention. However, should future changes in the domestic law of a contracting State further restrict the deduction of such expenses in any manner, then the two contracting States shall consult each other for purposes of amending this paragraph. 2. The competent authori ..... X X X X Extracts X X X X X X X X Extracts X X X X
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