TMI BlogConvention between the Republic of India and the Republic of Finland for the avoidance of Double Taxation with respect to taxes on income and on capitalX X X X Extracts X X X X X X X X Extracts X X X X ..... ention shall be given effect to in the Union of India. ANNEXURE CONVENTION BETWEEN THE REPUBLIC OF INDIA AND THE REPUBLIC OF FINLAND FOR THE AVOIDANCE OF DOUBLE TAXATION WITH RESPECT TO TAXES ON INCOME AND ON CAPITAL. The Government of the Republic of India and the Government of the Republic of Finland, Desiring to conclude a new Convention for the avoidance of double taxation 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. TAXES COVERED 1. The taxes which are the subject of the present Convention are: (a) in Finland: (i) the state income and capital tax; (ii) the communal tax; (iii) the church tax; (iv) the sailors' tax; and (v) the tax withheld at source from non-residents' income; (hereinafter referred to as " Finnish tax "); (b) in India: (i) the income-tax including any surcharge thereon; (ii) the surtax; and (iii) the wealth-tax; (hereinafter referred to as " Indian tax "). 2. The Convention shall apply also to any identical or substantially similar taxes which ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be a resident of the State with which his personal and economic relations are closer (centre of vital interests); (b) if the State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either State, he shall be deemed to be a resident of the State in which he has an habitual abode; (c) if has he an habitual abode in both States or in neither 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. 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: ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enterprise, unless the activities of such person are limited to those mentioned in paragraph 4 which, if exercised through a fixed place of business, would not make this fixed place of business a permanent establishment under the provisions of that paragraph; or (b) has no such authority, but habitually maintains in the first-mentioned State a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the enterprise. 6. Notwithstanding the preceding provisions of this article, an insurance enterprise of a contracting State shall, except in regard to reinsurance, be deemed to have a permanent establishment in the other 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 7 applies. 7. An enterprise shall not be deemed to have a permanent establishment in a contracting State merely because it carries on business in that State through a broker, general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business. However, whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rries on business in the other contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to (a) that permanent establishment; (b) sales in that other State of goods or merchandise of the same or similar kind as those sold through that permanent establishment; or (c) other business activities carried on in that other State of the same or similar kind as those effected through that permanent establishment. 2. Subject to the provisions of paragraph 3, where an enterprise of a contracting State carries on business in the other contracting State through a permanent establishment situated therein, there shall in each contracting State be attributed to that permanent establishment the profits which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a permanent establishment. 3. In determining the profits of a permanent establishment, there shall be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son to the contrary. 7. 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 by an enterprise of a contracting State from the operation of aircraft in international traffic shall be taxable only in that State. 2. Paragraph 1 shall likewise apply in respect of participations in pools of any kind by enterprises engaged in air transport. 3. For the purposes of this article: (a) interest on funds connected with the operation of aircraft in international traffic shall be regarded as income from the operation of such aircraft; and (b) the term " operation of aircraft " shall include transportation by air of persons, live-stock, goods or mail, carried on by the owners or lessees or charterers of aircraft, including the sale of tickets for such transportation on behalf of other enterprises, the incidental lease of aircraft on a charter basis and any other activity directly connected with such transportation. Article 9 SHIPPING 1. Income of an enterprise of a contracting S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares by the laws of the State of which the company making the distribution is a resident. 5. The provisions of paragraphs 1 and 2 shall not apply if the recipient of the dividends, being a resident of a contracting State, carries on business in the other contracting State of which the company paying the dividends is a resident, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is 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. 6. Where a company which is a resident of a contracting State derives profits or income from the other contracting State, that other state may not 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 undistribute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er and the recipient or between both of them and some other person, the amount of the 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 recipient in the absence of such relationship, the provisions of this article shall apply only to the last mentioned amount. In such a 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 13 ROYALTIES AND FEES FOR TECHNICAL SERVICES 1. Royalties and fees for technical 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 and fees for technical services may also be taxed in the contracting State in which they arise and according to the laws of that State: provided that where the royalties or fees for technical services are paid to a resident of the other contracting State who is the beneficial owner thereof and they are paid in respect of a right or property which is first granted, or under a contract which is signed, after th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to make the payments was incurred, and such payments are borne by such permanent establishment or fixed base, then such royalties or fees for technical services shall be deemed to arise in the State in which the permanent establishment or fixed base is situated. 7. Where, by reason of a special relationship between the payer and the recipient or between both of them and some other person, the amount of the royalties or fees for technical services exceeds, for whatever reason, 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 law of each contracting State, due regard being had to the other provisions of this convention. Article 14 CAPITAL GAINS 1. Gains derived by a resident of a contracting State from the alienation of immovable property referred to in paragraph 2 of article 6 and situated in the other contracting State may be taxed in that other State. 2. Gains derived by a resident of a contracting State from the alienation of shares or other corporate rights may be taxed in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent exercised in the other contracting State shall be taxable only in the first mentioned State if: (a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in the calendar year concerned, and (b) the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State, and (c) the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State. 3. Notwithstanding the preceding provisions of this article, remuneration derived in respect of an employment exercised aboard a ship or aircraft operated in international traffic, may be taxed in the contracting State in which the place of effective management of the enterprise is situated. Article 17 DIRECTORS' FEES Directors' fees and other similar payments derived by a resident of a contracting State in his capacity as a member of the board of directors or any other similar organ of a company which is a resident of the other contracting State may be taxed in that other State. Article 18 ARTISTES AND ATHLETES 1. Notwithstanding the provisions of articles 15 and 16, income derived by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate. 3. The provisions of articles 16, 17 and 19 shall apply to remuneration and pensions in respect of services rendered in connection with a business carried on by a contracting State or a statutory body or a local authority thereof. Article 21 STUDENTS AND APPRENTICES 1. Payments which a student of business, technical, agricultural or forestry apprentice who is or was immediately before visiting a contracting State a resident of the other contracting State and who is present in the first mentioned State solely for the purpose of his education or training receives for the purpose of his maintenance, education or training shall not be taxed in that State, provided that such payments arise from sources outside that State. 2. A student at a university or other institution for higher education in a contracting State, or a business, technical, agricultural or forestry apprentice who is or was immediately before visiting the other contracting State a resident of the first mentioned State and who is present in the other contracting State for a period or periods not exceeding in the aggregate 183 days in the calendar year concerned, shall not be taxed in that other State in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... minated as follows: (a) Where a resident of Finland derives income or owns capital which, in accordance with the provisions of this convention, may be taxed in India, Finland shall, subject to the provisions of sub-paragraph (b), allow: (i) as a deduction from the tax on income of that person, as amount equal to the tax on income paid in India, (ii) as a deduction from the tax on capital of that person, an amount equal to the tax on capital paid in India. Such deduction in either case shall not, however, exceed that part of the tax on income or on capital, as computed before the deduction is given, which is attributable, as the case may be, to the income of the capital which may be taxed in India. (b) Dividends paid by a company which is a resident of India to a company which is a resident of Finland shall be exempt from Finnish tax to the extent that the dividends would have been exempt from tax under Finnish taxation law if both companies had been residents of Finland. (c) Notwithstanding any other provision of this convention, an individual who is a resident of India and under Finnish taxation law with respect to the Finnish taxes referred to in article 2 also is reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be subjected to tax may be taken into account in calculating the rate of tax to be imposed. 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 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 State than the taxation levied on enterprises of that other State carrying on the same activities in the same circumstances or under the same conditions. This provision shall not be construed as preventing a contracting State from charging the profits of a permanent establishment which an enterprise of the other contracting State has in the first mentioned State at a rate of tax which is higher than that imposed on the profits of a similar enterprise of the first mentioned contracting State, nor as being in conflict with the provisions of paragraph 3 of article 7. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n article 10. They may also consult together for the elimination of double taxation in cases not provided for in the convention. 4. In the event the competent authorities reach an agreement referred to in paragraphs 2 and 3, taxes shall be imposed on such income, and refund or credit of taxes shall be allowed by the contracting States in accordance with such agreement. It shall be implemented notwithstanding any time limits in the domestic law of the contracting States. 5. The competent authorities of the contracting States may communicate with each other directly for the purpose of reaching an agreement in 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 (including 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year next following the year in which the convention enters into force; (b) in India, in respect of taxes for assessment years beginning on or after 1st April of the calendar year next following the year in which the convention enters into force. 3. The Agreement between Finland and India for the avoidance of double taxation of income, signed at New Delhi on 23rd June, 1961, as amended by exchange of notes on 16th August, 1979, shall cease to have effect at the time that the provisions of this convention shall be effective in accordance with the provisions of paragraph 2. Article 30 TERMINATION This convention shall remain in force until terminated by a contracting State. Either contracting State may terminate the convention, through diplomatic channels, by giving notice of termination at least six months before the end of any calendar year following after the period of five years from the date on which the convention enters into force. In such event, the convention shall cease to have effect: (a) in Finland: (i) in respect of taxes withheld at source, to income derived on or after 1st January in the calendar year next following the year in which the notice is gi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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