TMI BlogPrevention of Fiscal Evasion with respect to Taxes on IncomeX X X X Extracts X X X X X X X X Extracts X X X X ..... E TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME The Government of the Republic of India and Government of the Republic of Armenia, desiring to conclude a Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and with a view to promoting economic cooperation between the two countries, have agreed as follows; Article 1 PERSONS COVERED 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 subdivisions or local authorities, irrespective of the manner in which they are levied. 2. There shall be regarded as taxes on income all taxes imposed on total income, or on elements of income, including taxes on gains from the alienation of movable or immovable property and taxes on the total amounts of wages or salaries paid by enterprises. 3. The existing taxes to which the Convention shall apply are in particular: a) in India, the income tax, including any surcharge thereon; (hereinaf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "national", in relation to a Contracting State means: (i) any individual possessing the nationality or citizenship of that Contracting State; and (ii) any legal person, partnership or association deriving its status as such from the laws in force in that Contracting State; k) the term "tax" means Indian tax or Armenian tax, as the context requires, but shall not include any amount which is payable in respect of any default or omission in relation to the taxes to which this Convention applies or which represents a penalty or fine imposed relating to those taxes: 1) the term "fiscal year" means: (i) in the case of India: the financial year beginning on the 1 st day of April; (ii) in the case of Armenia: calendar year. 2. As regards the application of the Convention at any time by a Contracting State, any term not defined therein shall, unless the context otherwise requires, have the meaning that it has at that time under the law of that State for the purposes of the taxes to which the Convention applies, any meaning under the applicable tax laws of that State prevailing over a meaning given to the term under other laws of that State. Article 4 RESIDENT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a person providing storage facilities for others; h) a farm, plantation or other place where agricultural, forestry, plantation or related activities are carried on; and i) a mine. an oil or gas well, a quarry or any other place of exploration or extraction of natural resources. 3. A building site or construction, installation or assembly project or supervisory activities in connection therewith constitutes a permanent establishment only if such site, project or activities last more than 270 days. 4. 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 merchandise belonging to the enterprise solely for the purpose of storage or display; c) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise; d) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise or of collecting information, for the enterpris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... devoted wholly or almost wholly on behalf of that enterprise, he will not be considered an agent of an independent status within the meaning of this paragraph. 8. 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 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise, by way of Interest on moneys lent to the permanent establishment. Likewise, no account shall be taken, in determining the profits of a permanent establishment, for amounts charged (otherwise than towards reimbursement of actual expenses) by the permanent establishment to the enterprise, by way of royalties, fees or other similar payments in return for the use of patents or other rights, or by way of commission for services performed or for management, or, except in the case of a banking enterprise by way of interest on moneys lent to the enterprise, 4. Insofar as it has been customary in a Contracting State to determine the profits to be attributed to a permanent establishment on the basis of an apportionment of the total profits of the enterprise to its various parts, nothing in paragraph 2 shall preclude that Contracting State from determining the profits to be taxed by such an apportionment as may be customary; the method of apportionment 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prise of the first-mentioned State if the conditions made between the two enterprises had been those which would have been made between independent enterprises, then that other State shall make an appropriate adjustment to the amount of the tax charged therein oh those profits. In determining 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 or other rights, not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c) any other institution as may be agreed upon from time to time between the competent authorities of the Contracting States through exchange of letters. 4. The term "interest" as used in this Article means income from debt-claims or 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 and 2 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 such case the provisions of Article 7 or Article 14, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hnical services" as used in this Article means payments of any kind, other than those mentioned in Article 14 and Article 15 of this Convention as consideration for managerial or technical or consultancy services, including the provision of services of technical or other personnel. 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 property in respect of which the royalties or fees for technical services 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. Royalties or fees for technical services shall be deemed to arise in a Contracting State when the payer is a resident of that State, Where, however, the person paying the royalties or fees for technical services, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 14 INDEPENDENT PERSONAL SERVICES 1. Income derived by an individual who is a resident of a Contracting State from the performance of professional services or other independent activities of a similar character shall be taxable only in 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 Contracting State is for a period or periods amounting to or exceeding in the aggregate 183 days in any, period of 12-months; in that case, only so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at other State. 2. Where income in respect of personal activities exercised by an entertainer or a sportsperson in his capacity as such accrues not to the entertainer or sportsperson himself but to another person, that income may, notwithstanding the provisions of articles 7, 14 and IS, be taxed in the Contracting State in which the activities of the entertainer or sportsperson are exercised. 3. Notwithstanding the provisions of paragraphs 1 and 2, income derived by a resident of a Contracting State from his personal activities as an entertainer or as a sportsperson' shall be taxable only in that State if the activities are exercised in the other Contracting State within the framework of a cultural or sports exchange programs approved by both Contracting States. Article 18 PENSIONS Subject to the provisions of paragraph 2 of Article 19, pensions and other simitar remuneration paid to a resident of a Contracting State in consideration of past employment shall be taxable only in that State, Article 19 GOVERNMENT SERVICE 1. a) Salaries, wages and other similar remuneration, other than a pension, paid by a Contracting State or a political subdivision or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y before visiting the other Contracting State and who is present in that other Contracting State solely for the purpose of his education or training, shall besides grants, loans and scholarships be exempt from tax in that other State on payments made to him for the purpose of his maintenance, education or training, provided that such payments arise from sources outside that State. 2. In respect of grants, scholarships and remuneration from employment not covered by paragraph 1, a student or business apprentice referred to in paragraph 1 shall, in addition, be entitled during such education or training to the same exemptions, reliefs or reductions in respect of taxes available to residents of the Contracting State which he is visiting. 3. The benefits of this Article shall extend only for such period of time as may be reasonable or customarily required to complete the education or training undertaken, Article 23 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of. the income tax, as computed before the deduction is given, which is attributable, as the case may be, to the income which may be taxed in India. b) Where in accordance with any provision of the Convention income derived by a resident of Armenia is exempt from tax in Armenia, Armenia may nevertheless, in calculating the amount of tax on the remaining income of such resident take into account the exempted income. ARTICLE 24 NON-DISCRIMINATION 1. 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, in particular with respect to residence, are or may be subjected. This provision shall, notwithstanding the provisions of Article 1, also apply to persons who are not residents of one or both of the Contracting States. 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 State than the taxation levied on enterprises o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing State of which he is a resident or, if his case comes under paragraph 1 of Article 24, to that of the Contracting State of which he is 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 Contracting State, with a view to the avoidance of taxation which is not in accordance with the Convention, Any Agreement reached shall be implemented notwithstanding any time limits in the domestic law of the Contracting States. 3. The competent authorities of the Contracting States shall endeavour to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the Convention. They may also consult together for the elimination of double taxation in cases not provided for in the Convention. 4. The competent authorities of the Contracting States may communicate with each other directly for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petent authorities of the Contracting States may by mutual agreement settle the mode of application of this Article. 2. The term "revenue claim" as used in this Article means an amount owed in respect of taxes of every kind and description imposed on behalf of the Contracting States, or of their political subdivisions or local authorities, insofar as the taxation thereunder is not contrary to this Convention or any other instrument to which the Contracting States are parties, as well as interest, administrative penalties and costs of collection or conservancy related to such amount. 3. When a revenue claim of a Contracting State is enforceable under the laws of that State and is owed by a person who, at that time, cannot, under the laws of that State, prevent its collection, that revenue claim shall, at the request of the competent authority of that State, be accepter for purposes of collection by the competent authorities of the other Contracting State. That revenue claim shall be collected by that other State in accordance with the provisions of its laws applicable to the enforcement and collection of its own taxes as if the revenue claim were a revenue claim of that other St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompetent authority of the first-mentioned State shall promptly notify the competent authority of the other State of that fact and, at the option of the other State, the first-mentioned State shall either suspend or withdraw its request. 8- In no case shall the provisions of this Article 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 carry out measures which would be contrary to public policy (ordre public); c) to provide assistance if the other Contracting State has not pursued all reasonable measures of collection or conservancy, as the case may be, available under its laws or administrative practice; d) to provide assistance in those cases where the administrative burden for that State is clearly disproportionate to the benefit to be derived by the other Contracting State. ARTICLE 28 LIMITATION OF BENEFITS 1. Except as otherwise provided in this Article, a resident of a Contracting State who derives income from the other Contracting State shall be entitled to all the benefits of this Conv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o an item of income, derived from the other State, regardless of whether the resident is a qualified person, if the resident is actively carrying on business in the first-mentioned State (other than the business of making or managing investments for the residents own account, unless these activities are banking, insurance or securities activities carried on by a bank, insurance company or registered securities dealer), the income derived from the other Contracting State is derived in connection with, or is incidental to, that business and that resident satisfies the other conditions of this Convention for the obtaining of such benefits. b) If the resident or any of its associated enterprises carries on a business activity in the other Contracting State which gives rise to an item of income, subparagraph a) shall apply to such item only if the business activity in the first-mentioned State is substantial in relation to business carried on in the other State. Whether a business activity is substantial for purposes of this paragraph will be determined based on all the facts and circumstances, c) In determining whether a person is actively carrying on business in a Contracting St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities agree to recognise for the purposes of this article. Article 29 MEMBERS OF DIPLOMATIC MISSIONS AND CONSULAR POSTS Nothing in this Convention shall affect the fiscal privileges of members of diplomatic missions or consular posts under the general rules of international law or under the provisions of special agreements. Article 30 ENTRY INTO FORCE 1. The Contracting States shall notify each other in writing, through diplomatic channels, of the completion of the procedures required by the respective laws for the entry into force of this Convention, 2. This Convention shall enter into force on the date of the later of the notifications referred to in paragraph 1 of this Article. 3. The provisions of this Convention shall have effect: a) In India: in respect of income derived in any fiscal year beginning on or after the first day of April next following the calendar year in which the Convention enters into force; and b) in Armenia: (i) in respect of taxes withheld at source - on income derived on or after the first day of January in the calendar year next following the year in which the Convention enters into force; ii) in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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