TMI BlogAgreement for Avoidance of double taxation and prevention of fiscal evasion with foreign countries - Republic of IndonesiaX X X X Extracts X X X X X X X X Extracts X X X X ..... in any fiscal year beginning on or after the first day of April next following the calendar year in which the said Agreement enters into force; 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 said Agreement, as annexed hereto, shall be given effect to in the Union of India. [F.No.503/4/2005-FTD-II] RAJAT BANSAL, Jt. Secy. AGREEMENT BETWEEN THE GOVERNMENT OF THE REPUBLIC OF INDIA AND THE GOVERNMENT OF THE REPUBLIC OF INDONESIA 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 Republic of Indonesia, 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: CHAPTER I SCOPE OF THE AGREEMENT Article 1 PERSONS COVERED This Agreement shall apply to persons who are r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e taxation laws in force in the respective Contracting States; (e) the term company means any body corporate or any entity that is treated as a body corporate for tax purposes; (f) the term enterprise applies to the carrying on of any business; (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 national means: (1) any individual possessing the nationality of a Contracting State; and (2) any legal person, partnership or association deriving its status as such from the laws in force in a Contracting State; (j) the term competent authority means: (1) in the case of the Republic of India, the Finance Minister or his authorised representative; (2) in the case of the Republic of Indonesia, the Minister of Finance or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 only of the State in which its place of effective management is situated. If the State in which its place of effective management is situated cannot be determined, then the competent authorities of the Contracting States shall endeavour to 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 warehouse in relation to a person providing storage facilities for others; (g) premises as sales outlet; (h) farm 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ude 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 almost wholly for 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 othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 allowed as deductions expenses which are incurred for the purposes of the business 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 reimbursemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of the enterprise is situated. 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 harbor, in the Contracting State of which the operator of the ship is a resident. 3. The term operation of ships or aircraft means business of transportation by sea or by air of passengers, mail, livestock or goods carried on by the owners, lessees or charterers of ships or aircraft, including the sale of tickets for such transportation on behalf of other enterprises, the incidental lease of ships or aircraft and any other activity directly connected with such transportation. 4. Notwithstanding the provisions of paragraphs 1 and 2, profits from sources within a Contracting State derived by an enterprise of the other Contracting State from the operation of ships in international traffic may be taxed in the first-mentioned State, but the tax imposed in that Contracting State shall be reduced by an amount equal to 50 per cent thereof. 5. Profits derived by a transportation enterprise which is a resident of a Contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acting States shall if necessary consult each other. 3. The provision of paragraph 2 shall not apply where judicial, administrative or other legal proceedings have resulted in a final ruling that by actions giving rise to an adjustment of profits under paragraph 1, one of the enterprises concerned is liable to penalty with respect to fraud, gross negligence or wilful default. 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 % (ten 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Bank; (ii) in the case of the Republic of Indonesia: (1) Bank Indonesia (the Central Bank of Indonesia); (2) Pusat Investasi Pemerintah (the Centre for Government Investment); and (3) Lembaga Pembiayaan Ekspor Indonesia (the Indonesia Eximbank); or (c) a statutory body or any institution wholly owned by the Government of the Contracting States, as may be agreed from time to time between the competent authorities of the Contracting States; 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 business in the other Contracting State, in which the interest arises, through a permanent establishment si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or tapes used for radio or television 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 permanent establishment or fixed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 Contracting State in which the place of effective management of the enterprise is situated. 4. Gains derived by a resident of a Contracting State from the alienation of shares deriving more than 50 per cent of their value directly or indirectly from immovable property situated in the other Contracting State may be taxed in that other State. 5. Gains from the alienation of shares other than those mentioned in paragraph 4 in a company which is a resident of a Contracting State may be taxed in that State. 6. Gains from the alienation of any property other than that referred to in paragraphs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 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 SPORTS PERSONS 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 sportsperson himself but to another person, that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of services rendered in connection with a business carried on by a Contracting State or a political subdivision or a local authority body thereof. Article 20 PROFESSORS, TEACHERS AND RESEARCH SCHOLARS 1. A professor, teacher or research scholars who is or was a resident of one of the Contracting States immediately before visiting the other Contracting State for the purpose of teaching or engaging in research, or both, at a university, college, school, museum or other 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 not apply to income from research if such research is undertaken primarily for the private benefit of a specific 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 Contracting State in the fiscal year of income in which he visits the other Contracting State or in the immediately preceding fiscal year of income. 4. For the purposes of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ELIMINATION OF DOUBLE TAXATION 1. Where a resident of a Contracting State derives income which, in accordance with the provisions of this Agreement, may be taxed in the other Contracting State, the first-mentioned State shall allow as deduction from the tax on the income of that resident an amount equal to the income tax paid in that other State. Such deduction shall not, however, exceed the part of the income tax as computed before the deduction is given, which is attributable as the case may be, to the income which may be taxed in that other State. 2. Where in accordance with any provision of the Agreement, income derived by a resident of a Contracting State is exempt from tax in that State, that State may nevertheless, in calculating the amount of tax on the remaining income of such resident, take into account the exempted income. CHAPTER V SPECIAL PROVISIONS Article 24 LIMITATION OF BENEFITS 1. The provisions of this Agreement shall in no case prevent a Contracting State from the application of the provisions of its domestic law and measures concerning tax avoidance or evasion, whether or not described as such. 2. A resident of a Contracting Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the subject of this Agreement. Article 26 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 25, 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 reached shall be implemented notwithstanding any time-limits in the domestic law of the Contracting States. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of the administration of that or of the other Contracting State; (c) to supply information which 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 the 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. Artic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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, a 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 ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter the first day of January next following the date on which this Agreement enters into force. 4. The Agreement between the Government of the Republic of India and the Government of the Republic of Indonesia for the Avoidance of Double Taxation and Prevention of fiscal evasion with respect to taxes on income signed at Jakarta on the 7th August, 1987 shall cease to have effect when the provisions of this Agreement become effective in accordance with the provisions of paragraph 3 of this Article. Article 31 TERMINATION This Agreement shall remain in force indefinitely until terminated by one of the Contracting States. Either Contracting State may terminate the Agreement, through diplomatic channels, by giving notice of termination at least six months before the end of any calendar year beginning after the expiration of five years from the date of entry into force of the Agreement. In such event, the Agreement shall cease to have effect: (a) In India, in respect of income derived in any fiscal year on or after the first day of April next following the calendar year in which the notice is given. (b) In Indonesia; (i) in respect of taxes withheld at source: fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g shall prevent a Contracting State from charging the profits of a permanent establishment of an enterprise of the other Contracting State at a rate of tax which is higher than that imposed on the profits of a similar company of the first-mentioned State and it shall neither be construed as discriminatory with respect to Article 25 (Non-discrimination) nor as being in conflict with the provisions of paragraph 3 of Article 7 (Business Profits). 4. For purposes of Article 7 where a company which is a resident of a Contracting State has a permanent establishment in the other Contracting State, the profits attributable to the permanent establishment may be subjected to an additional tax or branch profits tax in that other State in accordance with its law, but such tax so charged shall not exceed a rate of 15%(fifteen per cent). 5. It is understood that in the event of conflict in application between the provisions of this Agreement and the provisions of production sharing contracts relating to the exploitation and production of oil and natural gas in a Contracting State entered into by the Government or any person authorized by it, the latter shall prevail. 6. In respect of pa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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