TMI BlogConvention between the Government of the Republic of India and the Government of the Portuguese Republic for the avoidance of double taxation u/s 90X X X X Extracts X X X X X X X X Extracts X X X X ..... the Union of India. ANNEXURE CONVENTION BETWEEN THE GOVERNMENT OF THE REPUBLIC OF INDIA AND THE GOVERNMENT OF THE PORTUGUESE REPUBLIC FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME THE GOVERNMENT OF THE REPUBLIC OF INDIA AND THE GOVERNMENT OF THE PORTUGUESE REPUBLIC DESIRING to conclude a Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, HAVE agreed as follows : CHAPTER I SCOPE OF THE CONVENTION Article 1 PERSONAL SCOPE This Convention shall apply to pet-sons 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 or administrative sub-divisions 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 amounts of wages or salaries paid by enterprises. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax purposes ; ( g ) 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 ; ( h ) 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 ; ( i ) the term competent authority means: ( i ) in Portugal : the Minister of Finance or the Director-General of Taxation (Director-General dos Impostos) or their authorised representative ; ( ii ) in India : the Central Government in the Ministry of Finance (Department of Revenue) or their authorised representative; ( j ) 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 ; ( k ) the term fiscal year means : ( i ) In the case of Portugal, the civil year as laid down in the IRS Code ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ; ( f ) a sales outlet ; and ( g ) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources, including an installation or structure used for the exploration or exploitation of natural resources only if so used for a period of more than 120 days in a fiscal year. 3. A building site, construction, installation or assembly project or supervisory activities in connection therewith, constitutes a permanent establishment only if it lasts more than nine months. 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther Contracting State, if it collects premiums in the territory of that other State or insures risks situated therein through a person other than an agent of an independent status to whom paragraph 6 applies. 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. 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 equipment used in agriculture and forestry, rights to which the provisions of general law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are incurred for the purposes 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, subject to the provisions of the domestic laws of the Contracting State in which the permanent establishment is situated. 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 enterprise. 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 SHIPPING AND AIR TRANSPORT 1. Profits from the operation of ships or aircraft in international traffic shall be taxable only in the Contracting State of which the enterprise is a resident. 2. The provisions of paragraph 1 shall also ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere a Contracting State includes in the profits of in enterprise of that State-and taxes accordingly-profits on which an enterprise of the other Contracting State has been charged to tax in that other State and the profits so included are profits which would have accrued to the enterprise of the first mentioned State if the conditions made between the two enterprises had been those which would have been made between enterprises, then that other State shall make an appropriate adjustment to the amount of the tax charged therein on 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 : ( a ) Where the dividends are paid by a company which is a resident of Portugal to a residen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impose any tax on the dividends paid by the company, except in so far as such dividends are paid to a resident of that other State or in so far as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other State, nor subject the company's undistributed profits to a tax on the company's undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State. Article 11 INTEREST 1. Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. 2. However, such interest may also be taxed in the Contracting State in which it arises, and according to the laws of that State, but if the beneficial owner of the interest is a resident of the other Contracting State, the tax so charged shall not exceed 10 per cent. of the gross amount of the interest. The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of this limitation. 3. Notwithstanding the provisions of paragraph 2, interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest having regard to the debt-claim for which it is paid exceeds the amount which would have been agreed upon by the payer and the beneficial owner 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. Article 12 ROYALTIES AND FEES FOR INCLUDED SERVICES 1. Royalties and fees for included services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. 2. However, such royalties or fees for included services may also be taxed in the Contracting State in which they arise and according to the laws of that State, but if the beneficial owner of the royalties and fees for included services is a resident of the other Contracting State, the tax so charged shall not exceed 10 per cent. of the gross amount. The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of this limitation. 3. The term royalties as used in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... beneficial owner of the royalties and fees for included services, being a resident of a Contracting State, carries on business in the other Contracting State, in which the royalties and fees for included 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 and fees for included 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. 7. Royalties and fees for included services shall be deemed to arise in a Contracting State where the payer is that State itself, a political or administrative sub-division thereof, a local authority or a resident of that State. Where, however, the person paying the royalties and fees for included services, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or fixed base in connection with which the obligation to pay the royalties and fees for included services was incurred, and such royalties and fe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2, 3 and 4 shall be taxable only in the Contracting State of which the alienator is a resident. Article 14 INDEPENDENT PERSONAL SERVICES 1. Income derived by a resident of a Contracting State in respect of professional services or other activities of an independent 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 State is for a period or periods exceeding in the aggregate 183 days in any twelve months period commencing or ending in the fiscal year concerned ; in that case, only so much of the income as is derived from his activities performed in the 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, lawyer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of articles 7, 14 and 15 be taxed in the Contracting State in which the activities of the entertainer or sportsman are exercised. 3. However, such income shall not be taxed in the State mentioned in paragraph 1 if the said activities are exercised during a visit to that State by a resident of the other Contracting State and when such visit is wholly or substantially financed by that other State, a political or administrative sub-division or a local authority thereof. Article 18 PENSIONS Subject to the provisions of paragraph 2 of article 19, 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 19 GOVERNMENT SERVICE 1. ( a ) Salaries, wages and other similar remuneration, other than pension, paid by a Contracting State or a political or administrative 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 salaries, wages and other similar remuneration shall be taxable only in the other Contracting State if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is education or training receives, for the purpose of his maintenance, education or training, shall not be taxed in that State, provided that such payments : ( a ) arise from sources outside that State ; ( b ) are remuneration from employment in that other State in an amount not exceeding US $ 3000 per annum during a period not exceeding two years from the day of his first arrival in that other Contracting State, provided that such employment is directly related to his studies. 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 services from a fixed base situated therein, and the right or property in respect of which the income is paid is effectively connec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services and business profits which would have been payable as laid down in this Convention but for the legal provisions concerning tax reduction or exemption of the Contracting States for the encouragement of genuine investment or economic development. The provisions of this paragraph shall apply for the first seven years during which this Convention is applicable. This period may be extended by mutual agreement between the competent authorities. CHAPTER V SPECIAL PROVISIONS 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 levi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 laws 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 this 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, including through a joint commission consisting of themselves or their representatives, for the purpose of reaching an agreement in the sense of the preceding paragraphs. Article 26 EXCHANGE OF INFORMATION 1. The competent authorities of the Contracting States shall exchange such information, including authenticated copies of the documents, as is necessary for carrying out the provisions of this Convention or of the domestic laws of the Contracting States concerning taxes covered by the Convention in so far as the taxation thereunder is not contrary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legal procedures necessary in each Contracting State for the entry into force of this Convention have been exchanged. 2. This Convention shall apply : ( a ) in Portugal : ( i ) in respect of taxes withheld at source, the fact giving rise to them appearing on or after the first day of January in the year next following the year in which his Convention enters into force ; ( ii ) In respect of other taxes as to income arising in the fiscal year beginning on or after the first day of January in the year next following the year in which this Convention enters into force ; ( b ) in India : in respect of income arising in any fiscal year beginning on or after the first day of April next following the calendar year in which this Convention enters into force. Article 30 TERMINATION This Convention shall remain in force indefinitely but either of the Contracting States may, on or before the thirtieth day of June in any calendar year from the fifth year following that in which the notifications have been given, terminate the Convention through diplomatic channels. In such event, the Convention shall cease to have effect : ( a ) in Portugal : ( i ) in respect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icle 7 For the purposes of paragraph 3, it is agreed that the provisions of the domestic tax laws referred to therein relate, in the case of India, to section 44C of the Income-tax Act, 1961. It is further agreed that in no event the conditions and limits referred to in section 44C shall be less favourable than those in force on the date of the signing of this Convention. Ad Article 13 For the purposes of paragraphs 1 and 4, it is agreed that the Contracting State of which the person deriving the capital gains is a resident is also entitled to tax such capital gains. Ad Article 23 It is understood that the term economic development used in paragraph 5 of article 23 would mean industrial development or development of infrastructural facilities. Ad Article 24 1. The provisions of article 24 do not preclude the application of any provision of the tax law of the Contracting State dealing with thin capitalisation problems. 2. The provisions of article 24 shall be construed in the sense that in so far as the deductibility of the incurred disbursements is concerned, each Contracting State may apply its own procedures regarding the burden of proof. 3. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
