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Protocol - Protocol - NetherlandsExtract Protocol At the moment of signing the Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital, this day concluded between the Kingdom of the Netherlands and the Republic of India, the undersigned have agreed that the following provisions shall form an integral part of the Convention. I. Ad Article 7 1. In respect of paragraphs 1 and 2 of Article 7, where an enterprise of one of the States sells goods or merchandise or carries on business in the other State through a permanent establishment situated therein, the profits of that permanent 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 State where the permanent establishment is situated. The profits related to that part of the contract which is carried out by the head office of the enterprise shall be taxable only in the State of which the enterprise is a resident. 2. It is understood that with respect to paragraph 2 of Article 7, no profits shall be attributed to a permanent establishment by reason of the facilitation of the conclusion of foreign trade or loan agreements or mere signing thereof. 3. Where the law of the State in which a permanent establishment is situated imposes in accordance with the provisions of sub-paragraph (a) of paragraph 3 of Article 7 a restriction on the amount of the executive and general administrative expenses which may be allowed as a deduction in determining the profits of such permanent establishment, it is understood that in determining the profits of such permanent establishment the deduction in respect of such executive and general administrative expenses in no case shall be less than what is allowable under the Indian Income-tax Act as on the date of signature of this Convention. II. Ad Article 8A It is understood that in case the percentage as is specified in section 44B of the Indian Income-tax Act as on the date of signature of this Convention for the purpose of determining the amount of shipping profits is reduced by any change in the Indian law, the percentage as is mentioned in sub-paragraph (b) of paragraph 2 of Article 8A will be reduced in the same proportion. III. Ad Article 9 It is understood that the fact that associated enterprises have concluded arrangements, such as cost-sharing arrangements or general services agreements, for or based on the allocation of executive, general administrative, technical and commercial expenses, research and development expenses and other similar expenses, is not in itself a condition as meant in paragraph 1 of Article 9. IV. Ad Articles 10, 11 and 12 1. Where tax has been levied at source in excess of the amount of tax chargeable under the provisions of Article 10, 11 or 12, applications for the refund of the excess amount of tax have to be lodged with the competent authority of the State having levied the tax, within a period of three years after the expiration of the calendar year in which the tax has been levied. 2. If after the signature of this convention under any Convention or Agreement between India and a third State which is a member of the OECD India should limit its taxation at source on dividends, interests, royalties, fees for technical services or payments for the use of equipment to a rate lower or a scope more restricted than the rate or scope provided for in this Convention on the said items of income, then as from the date on which the relevant Indian Convention or Agreement enters into force the same rate or scope as provided for in that Convention or Agreement on the said items of income shall also apply under this Convention. V. Ad Article 12 It is understood that in case India applies a levy, not being a levy covered by Article 2, such as the Research and Development Cess, on payments meant in Article 12, and if after the signature of this Convention under any Convention or Agreement between India and a third State which is a member of the OECD India should give relief from such levy, directly, by reducing the rate or the scope of the levy, either in full or in part, or, indirectly, by reducing the rate of the scope of the Indian tax allowed under the Convention or Agreement in question on payments as meant in article 12 of this Convention with the levy, either in full or in part, then, as from the date on which the relevant Indian Convention or Agreement enters into force, such relief as provided for in that Convention or agreement shall also apply under this Convention. VI. Ad Article 16 It is understood that bestuurder or commissaris of a Netherlands company means persons, who are nominated as such by the general meeting of shareholders or by any other competent body of such company and are charged with the general management of the company and the supervision thereof, respectively. VII. Ad Article 23 It is understood that for the computation of the reduction mentioned in paragraph 2 of Article 23, the items of capital referred to in paragraph 1 of Article 22 shall be taken into account for the value thereof reduced by the value of the debts secured by mortgage on the capital and the items of capital referred to in paragraph 2 of Article 22 shall be taken into account for the value thereof reduced by the value of the debts pertaining to the permanent establishment or fixed base. In witness whereof the undersigned, duly authorised thereto, have signed this Protocol. Done at New Delhi this thirtieth day of July, 1988, in duplicate, in the Hindi, Netherlands and English languages, the three texts being equally authentic. In case of divergence between the Netherlands and Hindi texts, the English text shall be the operative one. Judicial Analysis n Where duration of assessees activities under sub-contract did not exceed period of six months, no permanent establishment could be said to have come into existence so as to make assessees business income taxable in IndiaBKI/HAM VOF. C/o Arthur Anderson Co. v. Addl. CIT [2001] 70 TTJ (Delhi - Trib.) 480. n Where applicants had completed their contract work in India in a period of less than 183 days, they could not be said to have a permanent establishment in India though a fully equipped diving support vessel brought within Indian territorial waters and functioning within defined area to enable applicants to carry on their business within that territory could be considered fixed place of business in the territory and permanent establishment in India within meaning of article 7 of DTAAAdvance Rulings Petition No. 24 of 1996, In re [1999] 104 Taxman 377/237 ITR 798 (AAR - N. Delhi). n Where the assessee-companies were incorporated in United Kingdom and the country in which their effective management was situated was also United Kingdom and the assessee-companies transferred their shareholdings in Indian companies to a newly formed company in Netherlands in consideration of shares of the new company, capital gains arising to assessee-companies would be taxable in India and could not be treated as exempt under Indo-UK DTAA or Indo-Dutch DTAADy. CIT v. General Electric Co. Plc. [2001] 71 TTJ 973/119 Taxman 13 (Cal. - Trib.). 1 [VIII Ad Article 26 1. The provisions of Article 26 shall also apply accordingly to information that is relevant for carrying out the income-related regulations under the laws of the States by the tax authorities of the State concerned with the implementation, administration or enforcement of these income-related regulations. 2. Notwithstanding the second sentence of paragraph 2 of Article 26 , any information received under paragraph 1 of Article 26 by a State may, without further conditions, also be used by that State for the carrying-out of the income-related regulations as meant in paragraph 1." Article 3 1. The Governments of the States shall notify each other through diplomatic channels that all legal requirements and procedures for giving effect to this Amending Protocol have been satisfied. 2. The Amending Protocol, which shall form an integral part of the Convention, shall enter into force on the date of the later of the notifications referred to in paragraph 1 and its provisions shall have effect forthwith. In witness whereof the undersigned, duly authorized thereto by their respective Governments, have signed this Amending Protocol. Done in duplicate at the Hague on this 10th day of May 2012 in the Hindi, Netherlands and English languages, the three texts being equally authentic. In case of divergence between the Hindi and Netherlands texts, the English text shall be the operative one. ] ---------------------- Notes:- 1. Inserted vide Notification No. 2/2013, dated 14-01-2013 ,
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