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TMI BlogConvention Between The Government of The Republic of India And The Government of The Kingdom of Sweden For The Avoidance of Double Taxation And The Prevention of Fiscal Evasion 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 ..... of 1957), the Central Government hereby directs that all the provisions of the said Convention shall be given effect to in the Union of India. ANNEXURE CONVENTION BETWEEN THE GOVERNMENT OF THE REPUBLIC OF INDIA AND THE GOVERNMENT OF THE KINGDOM OF SWEDEN FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND ON CAPITAL The Government of the Republic of India and the Government of the Kingdom of Sweden; Desiring to conclude a convention for the avoidance of double taxation and the prevention of fiscal evasion 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. ARTICLE 2 TAXES COVERED 1. The existing taxes to which the Convention shall apply are: (a) in India: (i) the income-tax and any surcharge thereon; (ii) the surtax; and (iii) the wealth-tax; (hereinafter referred to as " Indian tax "); (b) In Sweden: (i) the State income-tax, including the sailors' tax and the coupon tax; (ii) the tax on the undistributed profits of companies an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State; (ii) any legal person, partnership and association deriving its status as such from the laws in force in a Contracting State; (h) the term " competent authority " means: (i) in India, the Central Government in the Ministry of Finance (Department of Revenue) or their authorized representative. (ii) in Sweden, the Minister of Finance or his authorized representative; (i) the term " fiscal year " means (i) in the case of India, " previous year " as understood under the laws concerning taxes on income in force in India; and (ii) in the case of Sweden, the calendar year. 2. As regards the application of this Convention by a Contracting State any term not defined therein shall, unless the context otherwise requires, have the meaning which it has under the laws of that State concerning the taxes to which the Convention applies. ARTICLE 4 RESIDENT 1. For the purposes of this Convention, the term " resident of a Contracting State " means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature. 2. Where by reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... months but the charges payable for the project or supervisory activity exceed 10 per cent. of the sale price of the machinery and equipment. 4. Notwithstanding the preceding provisions of this Article, the term " permanent establishment " shall be deemed not to include: (a) the use of facilities solely for the purpose of storage or display of goods or merchandise belonging to the enterprise; (b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage or display; (c) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise; (d) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise or of collecting information, for the enterprise; (e) the maintenance of a fixed place of business solely for the purpose of advertising, for the supply of information or for scientific research, being activities solely of a preparatory or auxiliary character in the trade or business of the enterprise. 5. Notwithstanding the provisions of paragraphs 1 and 2, where a person-other than an agent of an i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted. The term shall in any case include buildings, property accessory to immovable property, livestock and equipment used in agriculture and forestry, rights to which the provisions of general law respecting landed property apply, usufruct of immovable property and rights to variable or fixed payments as consideration for the working of, or the rights to work, mineral deposits, sources and other natural resources; ships, boats and aircraft shall not be regarded as immovable property. 3. The provisions of paragraph 1 shall apply to income derived from the direct use, letting or use in any other form of immovable property. 4. The provisions of paragraph 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 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 on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... banking enterprise, by way of interest on monies lent to the head office of the enterprise or any of its other offices. Nothing contained in this paragraph shall be construed as obliging a Contracting State to allow in the case of an enterprise of the other Contracting State any deduction in respect of expenses which under the laws of the first-mentioned State would not be allowed to be deducted in the case of an enterprise of that State. 4. No profits shall be attributable to a permanent establishment by reason of the mere purchase by that permanent establishment of goods or merchandise for the enterprise. 5. In so far as it has been customary in a Contracting State to determine the profits to be attributed to a permanent establishment on the basis of an apportionment of the total profits of the enterprise to its various parts, nothing in paragraph 2, shall preclude that Contracting State from determining the profits to be taxed by such an apportionment as may be customary; the method of apportionment adopted shall, however, be such that the result shall be in accordance with the principles contained in this article. 6. For the purposes of the preceding paragraphs, the profits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or freight embarked in that other State; (b) the tax chargeable in that other State shall be reduced by fifty per cent. 3. For the purposes of paragraph 2, income derived by an enterprise of a Contracting State from the operation of ships in international traffic carried on in the other Contracting State shall mean income from the carriage of passengers, mail, livestock or goods shipped from that other State. 4. The provisions of paragraphs 1 and 2 shall also apply to profits from the participation in a pool, a joint business or an international operating agency. ARTICLE 10 ASSOCIATED ENTERPRISES 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 woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect 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. 6. As used in paragraph 2 of this article, the term " new contribution " means any share capital, other than bonus shares, issued after the date of entry into force of this Convention by a company which is a resident of a Contracting State, and beneficially owned by a resident of the other Contracting State. ARTICLE 12 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, provided that where the resident of the other Contracting State is the beneficial owner of the interest and it is paid in respect of a loan or debt first created after the date of entry into force of this Convention, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng State when the payer is that State itself, a political sub-division, a local authority or a resident of the State. Where, however, the person paying the interest, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment or fixed base, then such interest 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 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 Contracting State, due regard being had to the other provisions of this Convention. ARTICLE 13 ROYALTIES ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or technical services shall be deemed to arise in a Contracting State when the payer is that State itself, a political sub-division, a local authority or a resident of that State. Where, however, the person paying the royalties or fees for technical services, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the liability to pay the royalties or fees for technical services was incurred, and such royalties or fees for technical services 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 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State is for a period or periods exceeding in the aggregate 90 days in the fiscal year of that other State; in that case, only so much of the income as is derived from his activities performed in that other State may be taxed in that other State. 2. The term " professional services " includes especially independent scientific, literary, artistic, educational or teaching activities, as well as the independent activities of physicians, surgeons, lawyers, engineers, architects, dentists and accountants. ARTICLE 16 DEPENDENT PERSONAL SERVICES 1. Subject to the provisions of articles 17, 18, 19, 20, 21 and 22, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State. 2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if: (a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting State in which these activities are performed if the visit of the entertainer or the athlete is within the framework of cultural exchange between the Contracting States, or is directly or indirectly supported, wholly or substantially, from the public funds of the other Contracting State, including a political sub-division or local authority of that other State. ARTICLE 19 PENSIONS, SOCIAL SECURITY PAYMENTS AND ANNUITIES 1. Subject to the provisions of paragraph 2 of article 20, pensions and other similar remuneration in consideration of past employment, annuities and payments under the social security legislation arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in the first-mentioned State. 2. The term " annuity " means a stated sum payable periodically at stated times during life or during a specified or ascertainable period of time under an obligation to make the payments in return for adequate and full consideration in money or money's worth. ARTICLE 20 GOVERNMENT SERVICE 1. (a) Remuneration, other than a pension, paid by a Contracting State or a political sub-division or a local authority thereof to an i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h period of time as may be reasonably or customarily required to complete the education, research or training undertaken but shall in no event exceed a period of five consecutive years. ARTICLE 22 TEACHING AND RESEARCH 1. An individual who is a resident of a Contracting State or was a resident of that State immediately before visiting the other Contracting State and who, at the invitation of the Government of that other State or of a university or other educational institution situated in that other State and approved by the appropriate educational authority of that State, visits that other State for the primary purpose of teaching or engaging in research, or both, at such university or other educational institution shall be exempt from tax by that other State on his income from personal services for teaching or research at such university or other educational institution for a period less than one year from the date of his arrival in that State. 2. The exemption granted under paragraph 1 shall not apply to income from research if such research is undertaken not in the public interest but primarily for the private benefit of a specific person or specific persons. ARTICLE 23 O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income or owns capital which, in accordance with the provisions of this Convention, may be taxed in Sweden, India shall allow as a deduction from the tax on the income of that resident an amount equal to the income-tax paid in Sweden, whether directly or by deduction; and as a deduction from the tax on the capital of that resident an amount equal to the capital tax paid in Sweden. Such deduction in either case shall not, however, exceed that part of the income-tax or capital tax (as computed before the deduction is given) which is attributable, as the case may be, to the income or the capital which may be taxed in Sweden. Further, where such resident is a company by which surtax is payable in India, the deduction in respect of income-tax paid in Sweden shall be allowed in the first instance from income-tax payable by the company in India and as to the balance, if any, from surtax payable by it in India. (b) Where a resident of India derives income which, in accordance with the provisions of this Convention, shall be taxable only in Sweden, India may include this income in the tax base but shall allow as a deduction from the income-tax that part of the income-tax which is attributa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-paragraph (a) of this paragraph, where a resident of Sweden derives income which, in accordance with the provisions of article 7, paragraph (2) of article 14 or paragraph (1)(a) of article 15 may be taxed in India, Sweden shall exempt such income from tax provided that the principal part of the income arises from independent personal services or business activities, other than the management of securities and other similar property. This exemption shall not apply unless the income has been subjected to the normal tax prevailing in India at the time of signature of this Convention or a tax comparable thereto. (f) Notwithstanding the provisions of sub-paragraph (a) of this paragraph, dividends paid by a company which is a resident of India to a company which a resident of Sweden shall be exempt from Swedish tax to the extent that the dividends would have been exempt under Swedish law if both companies had been Swedish companies. This exemption shall not apply unless- (i) the profits out of which the dividends are paid have been subjected to the normal corporate tax prevailing in India at the time of signature of this Convention or an income-tax comparable thereto, or (ii) th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rued as obliging a Contracting State to grant to individuals not resident in that State any personal allowances, reliefs and reductions for taxation purposes which are by law available only to individuals who are so resident. 4. Enterprises of a Contracting State the capital of which is wholly or partly 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 any 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. In this article, the term " taxation " means taxes which are the subject of this Convention. 6. Except where the provisions of article 10, paragraph 7 of article 12, or paragraph 7 of article 13, apply, interests, royalties and fees for technical services, and other disbursements paid by an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable profits of such enterprise, be deductible under the same conditions as if they ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Convention or of the domestic laws of the Contracting States concerning taxes covered by the Convention, in so far as the taxation thereunder is not contrary to the Convention, in particular for the prevention of fraud or evasion of such taxes. The exchange of information is not restricted by article 1. Any information received by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State. However, if the information is originally regarded as secret in the transmitting State, it shall be disclosed only to persons or authorities (including courts and administrative bodies) involved in the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes which are the subject of the Convention. Such persons or authorities shall use the information only for such purposes but may disclose the information in public court proceedings or in judicial decisions. The competent authorities shall, through consultation, develop appropriate conditions, methods and techniques concerning the matters in respect of which such exchange of information shall be made, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar year beginning after the expiration of a period of five years from the date of its entry into force, give to the other Contracting State, through diplomatic channels, written notice of termination. In such event, the Convention shall cease to have effect: (a) In Sweden: in respect of income derived on or after 1st January next following the calendar year in which the notice of termination is given and in respect of capital which is held at the expiry of the calendar year next following that in which the notice of termination is given or any subsequent year; (b) In India: in respect of income arising in any fiscal year beginning on or after 1st April next following the calendar year in which the notice of termination is given and in respect of capital which is held at the expiry of any fiscal year beginning on or after 1st April next following the calendar year in which the notice of termination is given. IN WITNESS WHEREOF, the undersigned, being duly authorised thereto, have signed this Convention. Done at Stockholm this seventh day of June 1988 in duplicate in the English language. For the Government of the Republic of India, Sd/- B. M. Oza, Ambassador of India. ..... 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