TMI BlogDouble Taxation Agreement - Agreement for Avoidance of Double Taxation and Prevention of Fiscal Evasion with FinlandX X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of the said Agreement shall have effect in India in respect of the taxes withheld at source, for amounts paid or credited on or after 1st April of the calendar year next following the year in which the Agreement enters into force; and in respect of taxes on income, for any fiscal year beginning on or after 1st April of the calendar year next following the year in which the Agreement enters into force; Now, therefore, in exercise of the powers conferred by section 90 of the Income-tax Act, 1961 (43 of 1961) , the Central Government hereby directs that all the provisions of the said Agreement and the Protocol, as set out in the Annexure hereto, shall be given effect to in the Union of India with effect from 1st day of April, 2011. Annexure AGREEMENT between The Republic of India And The Republic of Finland for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income The Government of the Republic of Finland and the Government of the Republic of India, Desiring to conclude an Agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e superjacent waters may be exercised; b) the term "India" means the territory of India and includes the territorial sea and airspace above it, as well as any other maritime zone in which India has sovereign rights, other rights and jurisdiction, according to the Indian law and in accordance with international law, including the U.N. Convention on the Law of the Sea; c) the term "person" includes an individual, a company, a body of persons and any other entity which is treated as a taxable unit under the taxation laws in force in the respective Contracting States; d) the term "company" means any body corporate or any entity that is treated as a body corporate for tax purposes; e) the term "a Contracting State" and "the other Contracting State" mean the Republic of Finland and the Republic of India as the context requires; f) 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; g) the term "national", in relation to a Contracting State, means: (i) any individual possessing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident only 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 vita! 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 only of the State in which he has an habitual abode; c) if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident only 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 endeavour to settle the question by mutual agreement. 3. Where by reason of the provisions of paragraph 1 of this Article, a person other than an individual is a resident of both Contracting States, the competent authorities of the Contracting States shall determine by mutual agreement the State of which the person shall be deemed to be a resident for the purposes of this Agreement having regard to the person's place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary character. 5. Notwithstanding the provisions of paragraphs 1 and 2, where a person - other than an agent of an independent status to whom paragraph 7 applies - is acting in a Contracting State on behalf of an enterprise of the other Contracting State, that enterprise shall be deemed to have a permanent establishment in the first-mentioned Contracting State in respect of any activities which that person undertakes for the enterprise, if such a person: a) has and habitually exercises in that State an authority to conclude contracts in the name of the 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; c) habitually secures orders in the first-mentioned State, wholly or almos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rporate rights in a company entitles the owner of such shares or corporate rights to the enjoyment of immovable property held by the company, the income from the direct use, letting, or use in any other form of such right to enjoyment may be taxed in the Contracting State in which the immovable property is situated. 5. The provisions of paragraphs 1 and 3 shall also apply to the income from immovable property of an enterprise and to income from immovable property used for the performance of independent personal services. Article 7 Business profits 1. The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries 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 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 St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 establishment of goods or merchandise for the enterprise. 6. 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. 7. Where profits include items of income which are dealt with separately in other Articles of this Agreement, then the provisions of those Articles shall not be affected by the provisions of this Article. Article 8 Shipping and air transport 1. Profits of an enterprise of a Contracting State from the operation of ships or aircraft in international traffic shall be taxable only in that State. 2. If the place of effective management of a shipping enterprise is aboard a ship, then it shall be deemed to be situated in the Contracting State in which the home harbor of the ship is situated, or, if there is no such home harbour, in the Contracting State of which the operator of the ship is a resident. 3. Profits of an enterprise of a Cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent, due regard shall be had to the other provisions of this Agreement 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 beneficial owner of the dividends is a resident of the other Contracting State, 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 being debt-claims, participating in profits, as well as income from other corporate rights which is subjected to the same taxation treatment as income from shares by the laws of the State of which the company making the distribution is a resident. 4. The provisions of paragraphs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority or a statutory body thereof; (ii) the Reserve Bank of India, the Export-Import Bank of India or the National Housing Bank, which are wholly or mainly owned by the Government of India or any other institution, as may be agreed from time to time between the competent authorities of the Contracting States; c) interest arising in a Contracting State on a loan guaranteed by any of the bodies mentioned or referred to in sub-paragraph (a) or sub-paragraph (b) and paid to a resident of the other Contracting State shall be taxable only in that other State. 4. The term "interest" as used in this Article means income from debt-claims of 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 busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... including cinematograph films, and films or tapes for television or radio broadcasting, any patent, trade-mark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience, b) The term "fees for technical services" as used in this Article means payments of any kind, other than those mentioned in Articles 14 and 15 of this Agreement 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State or of movable property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, including such gains from the alienation of such a permanent establishment (alone or with the whole enterprise) or of such fixed base, may be taxed in that other State. 3. Gains derived by an enterprise of a Contracting State from the alienation of ships or aircraft operated in international traffic or movable property pertaining to the operation of such ships or aircraft, shall be taxable only in that State. 4. Gains derived by an enterprise of a Contracting State from the alienation of containers (including trailers, barges and related equipment for the transport of containers) used for the transport of goods or merchandise shall be taxable only in that State, except where such containers are used for the transport of goods or merchandise solely between places within the other Contracting State. 5. Gains from the alienation of shares other than those mentioned in paragraph 1 in a company which is a resident of a Contracting State may be taxed in that State. 6. Gains from the alien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot 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 by an enterprise of a Contracting State, may be taxed in that State. Article 16 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 17 Artistes and sportspersons 1. Notwithstanding the provisions of Articles 14 and 15, income derived by a resident of a Contracting State as an entertainer, such as a theatre, motion picture, radio or television artiste, or a musician, or as a sportsperson, from his personal activities as such exercised in the other Contracting State, may be taxed in that 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 sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rendering the services. 2. a) Any pension paid by, or out of funds created by, a Contracting State or a political sub-division, a statutory body or a local authority thereof to an individual in respect of services rendered to that State or sub-division, body or authority shall be taxable only in that State. b) However, such pension shall be taxable only in the other Contracting State if the individual is a resident of, and a national of, that State. 3. The provisions of Articles 15, 16, 17 and 18 shall apply to salaries, wages and other similar remuneration, and to pensions, in respect of services rendered in connection with a business carried on by a Contracting State or a political sub-division, a statutory body or a local authority thereof. Article 20 Students and trainees 1. Payments which a student, or an apprentice or business, technical, agricultural or forestry trainee, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in accordance with the Agreement, as computed by reference to the same income by reference to which the Finnish tax is computed. b) Dividends paid by a company being a resident of India to a company which is a resident of Finland and which controls directly at least 10 per cent of the voting power in the company paying the dividends shall be exempt from Finnish tax. 2. In India double taxation shall be eliminated as follows: Where a resident of India derives income which, in accordance with the provisions of this Agreement, may be taxed in Finland, India shall allow as a deduction from the tax on the income of that resident, an amount equal to the tax paid in Finland. Such deduction shall not, however, exceed that portion of the tax as computed before the deduction is given, which is attributable, as the case may be, to the income which may be taxed in Finland. 3. Where in accordance with any provision of the Agreement income derived by a resident of a Contracting State is exempt from tax in that Contracting State, that State may nevertheless, in calculating the amount of tax on the remaining income of such person, take into account the exempted income. Article 23 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubjected. 5. The provisions of this Article shall, notwithstanding the provisions of Article 2, apply to taxes of every kind and description. Article 24 Mutual agreement procedure 1. Where a person considers that the actions of one or both of the Contracting States result or will result for him in taxation not in accordance with the provisions of this Agreement, he may, irrespective of the remedies provided by the domestic law of those States, present his case to the competent authority of the Contracting State of which he is a resident or, if his case comes under paragraph 1 of Article 23, 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 Agreement. 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 other Contracting State, with a view to the avoidance of taxation which is not in accordance with the Agreement. Any agreement r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich would disclose any trade, business, industrial, commercial or professional secret or trade process, or information, the disclosure of which would be contrary to public policy (ordre public). 4. If information is requested by a Contracting State in accordance with this Article, the other Contracting State shall use its information gathering measures to obtain the requested information, even though that other State may not need such information for its own tax purposes. The obligation contained in the preceding sentence is subject to the limitations of paragraph 3 but in no case shall such limitations be construed to permit a Contracting State to decline to supply information solely because it has no domestic interest in such information. 5. In no case shall the provisions of paragraph 3 be construed to permit a Contracting State to decline to supply information solely because the information is held by a bank, other financial institution, nominee or person acting in an agency or a fiduciary capacity or because it relates to ownership interests in a person. Article 26 Assistance in the collection of taxes 1. The Contracting States shall lend assistance to each othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim accepted by a Contracting State for the purposes of paragraph 3 or 4 shall not, in that State, have any priority applicable to that revenue claim under the laws of the other Contracting State. 6. Proceedings with respect to the existence, validity or the amount of a revenue claim of a Contracting State shall only be brought before the courts or administrative bodies of that State. Nothing in this Article shall be construed as creating or providing any right to such proceedings before any court or administrative body of the other Contracting State. 7. Where, at any time after a request has been made by a Contracting State under paragraph 3 or 4 and before the other Contracting State has collected and remitted the relevant revenue claim to the first-mentioned State, the relevant revenue claim ceases to be: a) in the case of a request under paragraph 3, as revenue claim of the first-mentioned State that 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, or b) in the case of a request under paragraph 4, a revenue claim of the first-mentioned State in respect of which that Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Agreement. 2. The Agreement shall enter into force thirty days after the date of the later of the notifications referred to in paragraph 1 and its provisions shall have effect: a) in Finland: (i) in respect of taxes withheld at source, on income derived on or after 1st January in the calendar year next following the year in which the Agreement enters into force; (ii) in respect of other taxes on income for taxes chargeable for any tax year beginning on or after 1st January in the calendar year next following the year in which the Agreement enters into force; b) in India: (i) in respect of taxes withheld at source, for amounts paid or credited on or after 1st April of the calendar year next following that in which the Agreement enters into force; (ii) in respect of taxes on income, for any fiscal year beginning on or after 1st April of the calendar year next following that in which the Agreement enters into force. 3. The Agreement between the Republic of Finland and the Republic of India for the avoidance of double ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evention of fiscal evasion with respect to taxes on income At the moment of signing of the Agreement between the Republic of Finland and the Republic of India for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, the undersigned have agreed that the following provisions shall form an integral part of the Agreement: I. ad Articles 5 and 6 Under Finnish taxation law income from agriculture or forestry is treated as income from immovable property. Accordingly, income from agriculture or forestry carried on in Finland shall, in the case of Finland, for the purposes of the Agreement be treated as income from immovable property referred to in Article 6 of the Agreement. II. ad Articles 10,11 and 12 It is agreed that if after coming into force of this Agreement, any agreement or convention between India and a Member State of the Organisation for Economic Cooperation and Development provides that India shall exempt from tax dividends, interest, royalties or fees for technical services (either generally or in respect of specific categories of dividends, interest, royalties or fees for technical services) arising in India, or li ..... X X X X Extracts X X X X X X X X Extracts X X X X
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