TMI BlogDOUBLE TAXATION AGREEMENT - ADOPTION BY CENTRAL GOVERNMENT OF AGREEMENT BETWEEN SPECIFIED ASSOCIATIONS FOR DOUBLE TAXATION RELIEF - SPECIFIED TERRITORY AND SPECIFIED ASSOCIATION - TAIPEI.X X X X Extracts X X X X X X X X Extracts X X X X ..... ntry into force of the agreement, in accordance with the provisions specified in article 29 of the agreement. Whereas sub-section (1) of section 90A of the Income-tax Act, 1961 empowers the Central Government to make such provisions as may be necessary for adopting and implementing the agreement made between any specified association in India and any specified territory outside India. Now, therefore, in exercise of the powers conferred by sub-section (1) of section 90A of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby adopts the agreement between India-Taipei Association in Taipei and Taipei Economic and Cultural Center in New Delhi for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and notifies that all the provisions of the said agreement annexed hereto shall be given effect to in the Union of India with effect from the 1st day of April, 2012. AGREEMENT BETWEEN INDIA-TAIPEI ASSOCIATION IN TAIPEI AND TAIPEI ECONOMIC AND CULTURAL CENTER IN NEW DELHI FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME India-Taipei Association in Taipe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se" applies to the carrying on of any business; ( e ) the terms "enterprise of a territory" and "enterprise of the other territory" mean respectively an enterprise carried on by a resident of a territory and an enterprise carried on by a resident of the other territory; ( f ) the term "international traffic" means any transport by a ship or aircraft operated by an enterprise of a territory, except when the ship or aircraft is operated solely between places in the other territory; ( g ) the term "competent authority" means: ( i ) in the case of the territory in which the taxation law administered by the Ministry of Finance of India is applied, the Finance Minister of India or his authorized representative; ( ii ) in the case of the territory in which the taxation law administered by the Ministry of Finance in Taipei is applied, the Finance Minister or his authorized representative; ( h ) the term "tax" means the tax referred to in paragraph 3( a ) and 3( b ) of Article 2 as the case may be, but shall not include any amount which is payable in respect of any default or omission in relation to the taxes to which this Agreement applies or which represents a pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or in neither of them, the competent authorities of the territories shall settle the question by mutual agreement. 4. Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both territories, then it shall be deemed to be a resident only of the territory in which its place of effective management is situated. If the territory in which its place of effective management is situated cannot be determined, then the competent authorities of the territories shall settle the question by mutual agreement. Article 5 : PERMANENT ESTABLISHMENT - 1. For the purposes of this Agreement, 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; ( g ) a warehouse in relation to 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry 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 ) habitually secures orders in the first-mentioned territory, wholly or almost wholly for the enterprise itself. 6. Notwithstanding the preceding provisions of this Article, an insurance enterprise of a territory shall, except in regard to re-insurance, be deemed to have a permanent establishment in the other territory if it collects premiums in that other territory 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 territory merely because it carries on business in that territory 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, when the activities of such an agent are devoted wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 allowed as deductions expenses which are incurred for the purposes of the permanent establishment, including executive and general administrative expenses so incurred, whether in the territory in which the permanent establishment is situated or elsewhere, in accordance with the provisions of and subject to the limitations of the tax laws of that territory. However, no such deduction shall be allowed in respect of amounts, if any, paid (otherwise than towards reimbursement of actual expenses) by the permanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of patents, or other rights, or by way, of commission or other charges for specific services performed or for management, or, except in the case of banking enterprises, by way of interest on moneys lent to the permanent es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dise, unless the containers are used solely within the other territory; where such rental or such use, maintenance or rental, as the case may be, is incidental to the operation of ships or aircrafts in international traffic. 3. For the purposes of this Article interest on investments directly connected with the operation of ships or aircraft in international traffic shall be regarded as profits derived from the operation of such ships or aircraft if they are integral to the carrying on of such business, and the provisions of Article 11 shall not apply in relation to such interest. 4. The provisions of paragraph 1 shall also apply to profits from the participation in a pool, a joint business or an international operating agency. Article 9 : ASSOCIATED ENTERPRISES - 1. Where ( a ) an enterprise of a territory participates directly or indirectly in the management, control or capital of an enterprise of the other territory, or ( b ) the same persons participate directly or indirectly in the management, control or capital of an enterprise of a territory and an enterprise of the other territory, and in either case conditions are made or imposed between the two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rms in that other territory 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 14, as the case may be, shall apply. 5. Where a company which is a resident of a territory derives profits or income from the other territory, that other territory may not impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a resident of that other territory or insofar 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 territory, 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 territory. Article 11 : INTEREST - 1. Interest arising in a territory and paid to a resident of the other territory may be taxed in that other territory. 2. However, such interest may also be taxed in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... territory in which the permanent establishment or fixed base is situated. 7. Where, by reason of a special relationship between the payer and the beneficial owner 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 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 territory, due regard being had to the other provisions of this Agreement. Article 12 : ROYALTIES AND FEES FOR TECHNICAL SERVICES - Royalties or fees for technical services arising in a territory and paid to a resident of the other territory may be taxed in that other territory. 2. However, such royalties or fees for technical services may also be taxed in the territory in which they arise, and according to the laws of that territory, but if the beneficial owner of the royalties or fees for technical services is a resident of the other territory, the tax so charged shall not exceed 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in one of the territories, and the royalties relate to the use of, or the right to use, the right or property, or the fees for technical services relate to services performed, in one of the territories, the royalties or fees for technical services shall be deemed to arise in that territory. 6. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the royalties or fees for technical services, having regard to the use, right or information for which they are 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 territory, due regard being had to the other provisions of this Agreement. Article 13 : CAPITAL GAINS - 1. Gains derived by a resident of a territory from the alienation of immovable property referred to in Article 6 and situated in the other territory may be taxed in that other territory. 2. Gains from the alienation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eaching activities as well as the independent activities of physicians, lawyers, engineers, architects, surgeons, dentists and accountants. Article 15 : DEPENDENT PERSONAL SERVICES - 1. Subject to the provisions of Articles 16, 18, 19, 20 and 21, salaries, wages and other similar remuneration derived by a resident of a territory in respect of an employment shall be taxable only in that territory unless the employment is exercised in the other territory. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other territory. 2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a territory in respect of an employment exercised in the other territory shall be taxable only in the first-mentioned territory if: ( a ) the recipient is present in the other territory for a period or periods not exceeding in the aggregate 183 days in any twelve-month period commencing or ending in the fiscal year concerned, and ( b ) the remuneration is paid by, or on behalf of, an employer who is not a resident of the other territory, and ( c ) the remuneration is not borne by a permanent establishment or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther territory if the services are rendered in that territory and the individual is a resident of that territory who: ( i ) is a national of that territory; or ( ii ) did not become a resident of that territory solely for the purpose of rendering the services. 2. ( a ) Any pension paid by, or out of funds created by, a territory or a sub-division or a local authority thereof to an individual in respect of services rendered to that territory or sub-division or authority shall be taxable only in that territory. ( b ) However, such pension shall be taxable only in the other territory if the individual is a resident of, and a national of, that other territory. 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 territory or a sub-division or a local authority thereof. Article 20 : PROFESSORS, TEACHERS AND RESEARCH SCHOLARS - 1. A professor, teacher or research scholar who is or was a resident of the territory immediately before visiting the other territory for the purpose of teaching or engaging in research, or b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply. 3. Notwithstanding the provisions of paragraph 1, if a resident of a territory derives income from sources within the other territory in form of lotteries, crossword puzzles, races including horse races, card games and other games of any sort or gambling or betting of any nature whatsoever, such income may be taxed in the other territory. Article 23 : METHODS FOR ELIMINATION OF DOUBLE TAXATION - Double taxation shall be eliminated as follows: 1. In the territory referred to in paragraph 3( a ) of Article 2: ( a ) Where a resident of the territory referred to in paragraph 3( a ) of Article 2 derives income which, in accordance with the provisions of this Agreement, may be taxed in the territory referred to in paragraph 3( b ) of Article 2, the territory referred to in paragraph 3( a ) of Article 2 shall allow as a deduction from the tax on the income of that resident, an amount equal to the tax paid in the territory referred to in paragraph 3( b ) of Article 2. Such deduction shall not, however, exceed that part of the tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y shall not be less favorably levied in that other territory than the taxation levied on enterprises of that other territory carrying on the same activities. This provision shall not be construed as obliging a territory to grant to residents of the other territory any personal allowances, reliefs and reductions for taxation purposes on account of civil status or family responsibilities which it grants to its own residents. This provision shall not be construed as preventing a territory from charging the profits of a permanent establishment which a company of the other territory has in the first-mentioned territory at a rate of tax which is higher than that imposed on the profits of a similar company of the first mentioned territory, nor as being in conflict with the provisions of paragraph 3 of Article 7. 3. Except where the provisions of paragraph 1 of Article 9, paragraph 7 of Article 11, or paragraph 6 of Article 12, apply, interest, royalties and other disbursements paid by an enterprise of a territory to a resident of the other territory shall, for the purpose of determining the taxable profits of such enterprise, be deductible under the same conditions as if they had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... competent authorities of the territories. Article 26 : EXCHANGE OF INFORMATION - 1. The competent authorities of the territories shall exchange such information (including documents or certified copies of the documents) as is foreseeably relevant for carrying out the provisions of this Agreement or to the administration or enforcement of the domestic laws concerning taxes of every kind and description imposed on behalf of the territories, or of their sub-divisions or local authorities, insofar as the taxation thereunder is not contrary to the Agreement. The exchange of information is not restricted by Articles 1 and 2. 2. Any information received under paragraph 1 by a territory shall be treated as secret in the same manner as information obtained under the domestic laws of that territory and shall be disclosed only to persons or authorities (including courts and administrative bodies) concerned with the assessment or collection of, the enforcement or prosecution in respect of, the determination of appeals in relation to the taxes referred to in paragraph 1, or the oversight of the above. Such persons or authorities shall use the information only for such purposes. They ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cle be construed so as to impose on a territory the obligation: ( a ) to carry out administrative measures at variance with the laws and administrative practice of that or of the other territory; ( b ) to carry out measures which would be contrary to public policy (ordre public); ( c ) to provide assistance if the other territory 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 territory is clearly disproportionate to the benefit to be derived by the other territory. Article 28 : LIMITATION OF BENEFITS - 1. Notwithstanding the provisions of any other Article of this Agreement, a resident of a territory shall not be entitled to the benefits of this Agreement if the primary purpose or one of the primary purposes of such resident or a person connected with such resident was to obtain the benefits of this Agreement. 2. The cases of legal entities not having bona fide business activities shall be; covered by the provisions of this Article. Article 29 : ENTRY INTO FORCE - 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income, have agreed upon the following provisions which shall be an integral part of the Agreement: 1. It is understood that if the domestic law of a territory is more beneficial to a resident of the other territory than the provisions of this Agreement, then the provisions of the domestic law of the first-mentioned territory shall apply to the extent they are more beneficial to such a resident. 2. With respect to Article 2, in the territory referred to in paragraph 3( b ) of Article 2, it is understood that nothing in the Agreement will affect the imposition of the Land Value Increment Tax under Land Tax Act. 3. In respect of sub-paragraphs ( a ) and ( b ) of paragraph 4 of Article 5 on 'Permanent Establishment', it is understood that if the Agreement for the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to taxes on income between the Republic of India and the People's Republic of China is revised and the revised Agreement between the Republic of India and the People's Republic of China omits the words 'or delivery' from these two sub ..... 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