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TMI BlogAgreement between the Government of the Republic of India and the Government of the Republic of Italy 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 ..... OUBLE TAXATION AND THE PREVENTION Ob FISCAL EVASION WITH RESPECT TO TAXES ON INCOME The Government of the Republic of India and the Government of the Republic of Italy. Desiring to conclude an Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to lanes on Income. Have agreed as follows CHAPTER--1 SCOPE OF THE CONVENTION 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 The taxes to which the Convention shall apply are :- (a) in the case of India :- 1. the income-tax including any surcharge thereon; and 2. the surtax; (hereinafter referred to as "Indian tax"); (b) in the case of Italy : 1. the personal income-tax; 2. the corporate income-tax; and 3. the local income-tax; even if they are collected by withholding taxes at the source; (hereinafter referred to as "Italian Tax"). 2. The Convention shall also apply to any identical or substantially similar taxes which are imposed by either Contracting State after the date of signature of the present Convention in addition to or in place of, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 61); (i) the term "international traffic" means any transport by a ship or aircraft operated by an enterprise which has its place of effective management in a Contracting State, except when the ship or aircraft is operated solely between places in the other Contracting State; (j) the term "national" means any individual possessing the nationality of a Contracting State and any legal person, partnership or association deriving its status from the law in force in the Contracting State; (k) the term "competent authority" means in the case of India, the Central Government in the Ministry of Finance (Deptt. of Revenue) or their authorised representative, and in the case of Italy, the Ministry of Finance; 2. In the application of the provisions of this Convention by one of the Contracting States, any term not defined herein shall, unless the context otherwise requires, have the meaning which it has under the laws in force in that State relating to the taxes which are the subject of this Convention. ARTICLE 4 FISCAL DOMICILE 1. For the purposes of this Convention, the term "resident of a Contracting State" means any person who is a residen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct 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 six months, or where such project or supervisory activity, being incidental to the sale of machinery or equipment, continues for a period not exceeding six months and the charges payable for the project or supervisory activity exceed 10 per cent of the sale price of the machinery and equipment : PROVIDED that for the purpose of this paragraph an enterprise shall be deemed to have a permanent establishment in a Contracting State and to carry on business through that permanent establishment if it provides services or facilities in connection with or supplies plant and machinery on hire used or to be used in, the prospecting for, or extraction or production of mineral oils in the State. 3. Notwithstanding the preceding provisions of this Article, the term "permanent establishment" shall be deemed not to include :- (a) the use of facilities solely for the purpose of storage or display of goods or merchandise belonging to the enterprise; (b) the maintenance of a stock of goods or me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wholly or almost wholly on behalf of that enterprise itself or on behalf of that enterprise and other enterprise controlling, controlled by, or subject to the same common control, as that enterprise, he will not be considered an agent of an independent status within the meaning of this paragraph. 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. CHAPTER III TAXATION OF INCOME 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 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 is situated. The term "shall in any case" include property accessory to immovable property, livestock and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hment, there shall be allowed as deduction expenses which are incurred for the purposes of the business 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. 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 purpose of export to the enterprise of which it is the permanent establishment. 5. 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. 6. Where profits include items of income which are dealt with separately in other Articles of this Convention, then the provisions of those Articles shall not be affected by the provisions of this Article. ARTICLE 8 AIR TRANSPORT 1. Income derived from the operation of aircraft in international traffic by an enterprise of one of the Contracting States shall not be taxed in the other Contracting State. 2. The provisions of paragraph 1 shall al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial 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. ARTICLE 11 DIVIDENDS 1. Dividends paid by a company which is 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 :- (a) 15% of the gross amount of the dividends if the beneficial owner is a company which owns at least 10 per cent of the shares of the company paying the dividends; (b) 25% of the gross amount of the dividends in all other cases. This paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid. 3. The provisions of paragraph 2(a) would apply in respect of divi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all be exempt from tax in that State, if :- (a) the payer of the interest is the Government of that Contracting State or a local authority thereof, or (b) the interest is paid to any agency or instrumentality (including a financial institution) which may be agreed upon in this behalf of the two Contracting States. 4. The term "interest" as used in this Article means income from Government securities, bonds or debentures, whether or not secured by mortgage and whether or not carrying a right to participate in profits, and debt-claims of every kind as well as all other income assimilated to income from money lent by the taxation law of the State in which the income arises. 5. The provisions of paragraphs 1 and 2 not apply if the recipient 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 a cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncerning industrial, commercial or scientific experience. 4. The term "fees for technical services" as used in this Article means payments of any amount to any person other than payments to an employee of the person making payments, in consideration for the services of a managerial, technical or consultancy nature, including the provisions of services of technical or other personnel. 5. 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, property or contract in respect of which the royalties or fees for the technical services are paid is effectively connected with such permanent establishment or fixed base. In such a case the royalties or fees for technical services shall be taxable in that other Contracting State according to its own law. 6. Royalties and fees for technical services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 shares other than those mentioned in paragraph 4 in a company which is a resident of a Contracting State may be taxed in that State. 6. Gains from the alienation of any property other than that referred to in paragraphs 1, 2, 3, 4 and 5 shall be taxable only in the Contracting State of which the alienator is a resident. ARTICLE 15 INDEPENDENT PERSONAL SERVICES 1. Income derived by a resident of a Contracting State in respect of professional services or other independent activities of a similar character may be taxed in that State. Such income may also be taxed in the other Contracting State if such services are performed in that other State and if : (a) he is present in that other State for a period or periods aggregating 183 days in the relevant fiscal year, or (b) he has a fixed base regularly available to him in that other State for the purpose of performing his activities but only so much of the income as is attributable to that fixed base. 2. The term "profe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that income may, notwithstanding the provisions of articles 7, 15 and 16, be taxed in the Contracting State in which the activities of the entertainer or athlete are exercised. 3. Notwithstanding the provisions of paragraph 1, income derived by an entertainer or an athlete who is a resident of a Contracting State from personal activities as such exercised in the other Contracting State, shall be taxable only 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-division 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 an athlete in his capacity as such in a Contracting State accrues not to the entertainer or athlete 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 that other State, including any of its political sub-divisions or local authorities. ARTICL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) as a student at a university, college or other recognised educational institution in that other Contracting State, or (b) as a business apprentice, or (c) for the purpose of study, research or training, as a recipient of a grant, allowance or award, from a governmental, religious, charitable, scientific or educational organisation, shall be exempt from tax in that other Contracting State :- (i) on his remuneration and all remittances from abroad for the purposes of maintenance, education or training; (ii) on the grant, allowance or award; and (iii) in respect of remuneration for an employment in that other Contracting State for such period of time as may be necessarily required for the completion of study, research or training, as the case may be. 2. An individual who is a resident of a Contracting State and who visits the other Contracting State for a period not exceeding one year as employee of, or under contract with, an enterprise of the first-mentioned Contracting State or an organisation referred to in paragraph 1 for the primary purpose of acquiring technical, professional or business experience from a person other than such enterprise or organisation shall b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accordance with the Italian law. (b) For the purposes of paragraphs 3 and 4 of this Article, where tax on business profits, dividends, interests, royalties or fees for technical services arising in a Contracting State is exempted or reduced in accordance with the taxation laws of that State, such tax which has been exempted or reduced shall be deemed to have been paid. 5. Income which in accordance with the provisions of this Convention is not to be subjected to tax in a Contracting State may be taken into account for calculating the rate of tax to be imposed in that Contracting State on other income. CHAPTER V SPECIAL PROVISIONS ARTICLE 25 NON-DISCRIMINATION 1. The 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 which nationals of that other State in the same circumstances and under the same conditions 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 St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sense of the preceding paragraphs. When it seems advisable in order to reach agreement to have an oral exchange of opinions, such exchange may take place through a Commission consisting of representatives of the competent authorities of the Contracting States. ARTICLE 27 EXCHANGE OF INFORMATION 1. The competent authorities of the Contracting States shall exchange such information as is necessary for carrying out the provisions of this Convention or of the domestic laws of the Contracting States concerning taxes covered by this Convention insofar as the taxation thereunder is not contrary to the Convention as well to prevent fraud or evasion of such taxes. The exchange of information is not restricted by Article 1. Any information received by a Contracting State shall be treated as secret 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 Convention. Such persons or authorities shall us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come assessable in any taxable period commencing on or after the first day of January of the calendar year next following the calendar year in which the Convention enters into force. 3. The existing Agreement between the Government of India and the Government of Italy for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income signed at Rome on 12th January, 1981, shall cease to have effect at the time when the provisions of this Convention shall be effective in accordance with the provisions of paragraph 2. ARTICLE 31 TERMINATION This Convention shall remain in force indefinitely, but either of the Contracting States may on or before 30th June, in any calendar year beginning after the expiration a period of five years from the date of its entry into force give to the other Contracting State, through diplomatic channels, written notice of termination. In such event the Convention shall cease to have effect :- (a) in India, in respect of income assessable for any taxable period ("previous year") commencing on or after the 1st day of April in the calendar year next following that in which such notice is given; (b) in It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erning Government service and, consequently, by paragraphs 1 and 2 of the aforesaid Article. Other public bodies or institutions may also be included in the preceding list by mutual agreement between the competent authorities of the Contracting States; (d) that, with reference to Article 24, paragraph 4(b), tax exempted or reduced means, in the case of India, any amount which would have been payable, in respect of a taxable year as Indian tax but for a deduction allowed in computing the taxable income or an exemption or reduction of tax granted for that year under : (i) Sections 10(4), 10(4A), 10(4B), 10(15)(iv), 10A, 32AB, 80HH, 80HHC, 80-I and 80-U of the Income Tax Act, 1961 (43 of 1961), so far as they were in force on and have not been modified since the date of signature of this Convention or have been modified only in minor respects so as not to affect their general character; (ii) any other provision which may subsequently be made granting an exemption or reduction from tax which is agreed by the competent authorities of the Contracting States to be of a substantially similar character, if it has not been modified only in minor respects so as not to affect its genera ..... 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