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TMI BlogDouble Taxation Agreement - Agreement for Avoidance of Double Taxation and Prevention of Fiscal Evasion with Foreign Countries - Nepal.X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of paragraph 3 of article 30 of the Agreement. NOW, THEREFORE, in exercise of the powers conferred by sub-section (1) of section 90 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby 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, 2013. [Notification No. 20/2012/F. No. 503/03/2005-FTD-II] K. RAMALINGAM, Jt. Secy. AGREEMENT BETWEEN THE GOVERNMENT OF THE REPUBLIC OF INDIA AND THE GOVERNMENT OF NEPAL 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 Nepal, desiring to conclude an Agreement 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 Agreement shall apply to persons who are residents of one or both of the Contracting States. ARTICLE 2 TAXES COVERED 1. This Agreement shall apply to taxes on income imposed on behalf of a Cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the other Contracting State; (g) the term "competent authority" means: (i) in India: The Finance Minister, Government of India, or his authorized representative; (ii) in Nepal: The Minister of Finance or his authorized representative; (h) the term "national" means: (i) any individual possessing the nationality of a Contracting State; and (ii) any legal person, partnership or association deriving its status as such from the laws in force in a Contracting State; (i) the terms "Contracting State" and "the other Contracting State" mean the Republic of India or Nepal as the context requires: (j) the term "tax" means" Indian tax or Nepalese 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 Agreement applies or which represents a penalty or fine imposed relating to those taxes; (k) The term "fiscal year" means: (i) in the case of India: the financial year beginning on the 1st day of April; (ii) in the case of Nepal: financial year beginning in mid-July(corresponding to 1st day of Shrawan month of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 (i) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources. 3. The term permanent establishment also encompasses: (a) A building site or construction, installation or assembly project or supervisory activities in connection therewith but only if such site, project or activities last more than 183 days. (b) The furnishing of services, including consultancy services, by an enterprise through employees or other personnel engaged by the enterprise for such purpose, but only if activities of that natu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the enterprise itself. 6. Notwithstanding the preceding provisions of this Article, an insurance enterprise of a Contracting State shall, except in regard to re-insurance, 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 of a contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that other 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, when the activities of such an agent are 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 oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 State 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 State. 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, know-how 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 establishment. Likewise, no account shall be taken, in the determination of the profits of a permanent establishment, for amounts charged (otherwise than toward reimbursement of actual expenses), by the permanent establishment to the head office of the enterprise or an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Contracting State participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting State, or (b) the same persons participate directly or indirectly in the management control or capital of an enterprise of a Contracting State and an enterprise of the other Contracting State, and in either case conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly. 2. Where, a Contracting State includes in ..... 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. 5. 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 insofar as such dividends are paid to a resident of that other State 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Contracting State, due regard being had to the other provisions of this Agreement. ARTICLE 12 ROYALTIES 1. Royalties 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 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 is a resident of the other Contracting State, the tax so charged shall not exceed 15 per cent of the gross amount of the royalties. 3. The term "royalties" as used in this article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films, or fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the other provisions of this Agreement. ARTICLE 13 CAPITAL GAINS 1. Gains derived by a resident of a Contracting State from the alienation of immovable property referred to in Article 6 and situated in the other Contracting State may be taxed in that other State. 2. Gains from the alienation of movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting 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 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 the Contracting State of which the alienator is a resident. 4. Gains from the alienation of shares of the capital stock of a company the property of which consists directly or indirectly pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any twelve month period commencing or ending in the fiscal year concerned. (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, 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olitical sub-division or a local authority thereof. ARTICLE 20 PROFESSORS, TEACHERS AND RESAERCH SCHOLARS 1. A professor, teacher or research scholar who is or was a resident of the Contracting State immediately before visiting the other Contracting State for the purpose of teaching or engaging in research, or both, at a university, college or other similar approved institution in that other Contracting State shall be exempt from tax in that other State on any remuneration for such teaching or research for a period not exceeding two years from the date of his first arrival in that other State. 2. This Article shall apply to income from research only if such research is undertaken by the individual in the public interest and not primarily for the benefit of some private person or persons. 3. For the purposes of this Article, an individual shall be deemed to be a resident of a Contracting State if he is resident in that State in the fiscal year in which he visits the other Contracting State or in the immediately preceding fiscal year. 4. For the purpose of paragraph 1 "approved institution" means an institution which has been approved in this regard by the competent a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll continue to govern the taxation of income in the respective Contracting States except where provisions to the contrary are made in this Agreement. Where income is subject to tax in both Contracting States, relief from double taxation shall be given in accordance with the following paragraphs of this Article. 2. Double Taxation shall be eliminated as follows: (i) In India: (a) Where a resident of India derives income which, in accordance with the provisions of this Agreement, may be taxed in Nepal, India shall allow as a deduction from the tax on the income of that resident, an amount equal to the tax paid in Nepal. 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 Nepal. (b) Where in accordance with any provision of the Agreement income derived by a resident of India is exempt from tax in India may nevertheless, in calculating the amount of tax on the remaining income of such resident, take into account the exempted income. (ii) in Nepal: (a) Where a resident of Nepal derives income which, in accordance with the provisions of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of determining the taxable profits of such enterprise, be deductible under the same conditions as if they had been paid to a resident of the first-mentioned State. 4. Enterprises of a Contracting State, the capital of which is wholly or party owned or controlled, directly or indirectly, by one or more residents of the other Contracting State, shall not be subjected in the first-mentioned State to an taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which other similar enterprises of the first-mentioned State are or may be subjected. 5. The provisions of this Article shall apply to taxes covered by this Agreement. ARTICLE 25 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 24, to that of the Contracting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding 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 may disclose the information in public court proceedings or in judicial decisions. Notwithstanding the foregoing, information received by a Contracting State may be used for other purposes when such information may be used for such other purposes under the laws of both States and the competent authority of the supplying State authorizes such use. 3. In no case shall the provisions of paragraphs 1 and 2 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 supply information including documents and certified copies thereof which is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State; (c) To supply information which would disclose any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its own taxes as if the revenue claim were a revenue claim of that other State. 4. When a revenue claim of a Contracting State is a claim in respect of which that State may, under its law, take measures of conservancy with a view to ensure its collection, that revenue claim shall, at the request of the competent authority of that State, be accepted for purposes of taking measures of conservancy by the competent authority of the other Contracting State. That other State shall take measures of conservancy in respect of that revenue claim in accordance with the provisions of its laws as if the revenue claim were a revenue claim of that other State even if, at the time when such measures are applied, the revenue claim is not enforceable in the first-mentioned State or is owed by a person who has a right to prevent its collection. 5. Notwithstanding the provisions of paragraphs 3 and 4, a revenue claim accepted by a Contracting State for purposes of paragraph 3 or 4 shall not, in that State, be subject to the time-limits or accorded any priority applicable to a revenue claim under the laws of that State by reason of its nature as such. In addition, a revenue; claim accepted by a Contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manner as if it was the main purpose or one of the main purposes to take the benefits of this Agreement. The case of legal entities not having bona fide business activities shall be covered by the provisions of this Article. ARTICLE 29 MEMBERS OF DIPLOMATIC MISSIONS AND CONSULAR POSTS Nothing in this Agreement 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 Agreement; 2. This Agreement shall enter into force on the date of the notifications referred to in paragraph 1 of this Article. 3.. The provisions of this Agreement 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 Agreement enters into force; and (b) In Nepal in respect of income derived in any fiscal year beginning on or after the mid-July (correspo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing provisions which shall be an integral part of the Agreement: 1. It is understood that if the domestic law of a Contracting States is more beneficial to resident of the other Contracting State than the provision of this Agreement, then the provisions of the domestic law of the first mentioned State shall apply to the extent they are more beneficial to such a resident. 2. With reference to Article 12: In respect to Article. 12 (Royalties) if under any Agreement Convention or Protocol between Nepal and a third State, Nepal limits its taxation at source on royalties to a rate lower or a scope more restricted than the rate or scope provided for in this Agreement on Royalties, then as from the date on which the relevant Nepal Agreement or Convention or protocol enters into force, the same rate of scope as provided for in that Agreement or Convention or Protocol on Royalties shall also apply under this Agreement. IN WITNESS WHEREOF the undersigned, duly authorized thereto have signed this Agreement. DONE in duplicate; at Kathmandu on this 27th day of November, 2011, each in the Hindi, Nepali and English languages, all texts being equally authentic. In case of divergence of in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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