DTAA BETWEEN INDIA & BHUTAN
Agreement For Avoidance Of Double Taxation With Bhutan
Notification
No. 42/2014 [F.NO.503/4/2004-FTD-II], Dated 5-9-2014
An
Agreement between the Government of the Republic of India and the Royal
Government of Bhutan for the avoidance of double taxation and the prevention of
fiscal evasion with respect to taxes on income was signed in India on the 4th
day of March, 2013 (hereinafter referred to as the Agreement);
And
whereas, the said Agreement entered into force on the 17th day of July, 2014,
being the date of the later of the notifications of the completion of the
procedures required by the respective laws for entry into force of the
Agreement, in accordance with paragraph 2 of ARTICLE 29 of the Agreement;
And
whereas, sub-paragraph (a) of paragraph 3 of ARTICLE 29 of the said Agreement
provides that the provisions of the Agreement shall have effect in India in
respect of income derived in any fiscal year beginning on or after the first
day of April following the calendar year in which the 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.
ANNEXURE
Agreement
Between The Government Of The Republic Of India And The Royal Government Of
Bhutan 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 Royal Government of Bhutan,
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 co-operation 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
Contracting State or of its political sub-divisions or local authorities,
irrespective of the manner in which they are levied.
2.
There shall be regarded as taxes on income all taxes imposed on total income,
or on elements of income, including taxes on gains from the alienation of
movable or immovable property and taxes on the total amounts of wages or
salaries paid by enterprises.
3.
The existing taxes to which the Agreement shall apply are in particular:
(a)
in India, the income tax, including any surcharge thereon;
(hereinafter
referred to as "Indian tax");
(b)
in Bhutan, the income tax, including any surcharge thereon;
(hereinafter
referred to as" Bhutanese tax").
4.
The Agreement shall apply also to any identical or substantially similar taxes
that are imposed after the date of signature of the Agreement in addition to,
or in place of, the existing taxes. The competent authorities of the
Contracting States shall notify each other of any significant changes that have
been made in their respective taxation laws.
ARTICLE 3
GENERAL
DEFINITIONS
1.
For the purposes of this Agreement, unless the context otherwise requires:
(a)
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;
(b)
the term "Bhutan" means the territory of Bhutan and includes the
airspace above it and any other area over which Bhutan has sovereign rights and
jurisdiction, according to the Bhutanese law and in accordance with
international laws;
(c)
the terms "Contracting State" and "the other Contracting
State" mean the Republic of India or the Kingdom of Bhutan as the context
requires;
(d)
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;
(e)
the term "company" means any body corporate or any entity that is
treated as a company or 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 that has its place of effective management
in a Contracting State, except when the ship or aircraft is operated solely
between places in the other Contracting State;
(i)
the term "competent authority" means:
(i)
in India: the Finance Minister, Government of India, or his authorized
representative;
(ii)
in Bhutan : the Finance Minister, Royal Government of Bhutan, or his authorized
representative;
(j)
the term "national" means:
(i)
any individual possessing the nationality of a Contracting State;
(ii)
any legal person, partnership or association deriving its status as such from
the laws in force in a Contracting State;
(k)
the term "tax" means Indian or Bhutanese 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;
(l)
the term "fiscal year" in relation to India means the financial year
beginning on the 1st day of April and ending on the 31st day of March, and the
term "income year" in relation to Bhutan means the calendar year
starting on the 1st day of January and ending on the 31st day of December;
2.
As regards the application of the Agreement at any time by a Contracting State
any term not defined therein shall, unless the context otherwise requires, have
the meaning that it has at that time under the law of that State for the
purposes of the taxes to which the Agreement applies and any meaning under the
applicable tax laws of that State prevailing over a meaning given to the term
under other laws of that State.
ARTICLE
4
RESIDENT
1.
For the purposes of this Agreement, 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 and also includes that State and any
political sub-division or local authority thereof. This term, however, does not
include any person who is liable to tax in that State in respect only of income
from sources in that State.
2.
Where by reason of the provisions of paragraph 1 an individual is a resident of
both Contracting States, then his status shall be determined as follows:
(a)
he shall be deemed to be a resident only of the Contracting State in which he
has a permanent home available to him; if he has a permanent home available to
him in both Contracting 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 Contracting State in which he has his centre of vital interests cannot
be determined, or if he does not have 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 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.
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A monastery
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.
(a) A building site or construction, installation or assembly project or
supervisory activities in connection therewith constitutes a permanent
establishment only if such site, project or activities last more than 4 months;
(b)
The furnishing of services, including consultancy services, by an enterprise
through employees or other personnel engaged by the enterprise for such purpose
constitutes a permanent establishment, but only where activities of that nature
continue within the country for a period or periods aggregating more than 120
days within any 12 month period.
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 carrying
on, for the enterprise, any other activity of a preparatory or auxiliary
character;
(f)
the maintenance of fixed place of business solely for the purpose of
advertising, for the supply of information, for scientific research or for
similar activities which have a preparatory or auxiliary character for the
enterprise,
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, or
(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 reinsurance, be
deemed to have a permanent establishment in the other Contracting State if it
collects premiums in the territory of that other Contracting 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 shall not be deemed to have a permanent establishment in a
Contracting State merely because it carries on business in that 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 other State (whether through a permanent
establishment or otherwise), shall not of itself constitute either company a
permanent establishment of the other.
ARTICLE
6
INCOME
FROM IMMOVABLE PROPERTY
1.
Income derived by a resident of a Contracting State from immovable property
situated in the other Contracting State may be taxed in that other State.
2.
The term "immovable property" shall have the meaning which it has
under the law of the Contracting State in which the property in question is
situated. The term shall in any case include 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 right to work, mineral deposits, sources and other
natural resources; ships, boats, aircraft and road transport vehicles 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 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.
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Bhutan Tshechu ground in Tashichho Dzong
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 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. Where the correct amount of profits attributable to a permanent
establishment cannot be readily determined or the determination thereof
presents exceptional difficulties, the profits attributable to the permanent
establishment may be estimated on a reasonable basis. The estimate adopted
shall, however, be such that the result shall be in accordance with the
principles contained in this Article.
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 Contracting 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 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 a banking enterprise, by way of interest on moneys
lent to the head office of the enterprise or any of its other offices.
4.
Insofar 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.
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 derived by an enterprise of a Contracting State from the operation of
ships or aircraft in international traffic shall be taxable only in the
Contracting State in which the place of effective management 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
operator of the ship is a resident.
3.
Profits derived by a transportation enterprise in a Contracting State in which
the place of effective management of the enterprise is situated, from the use,
maintenance, or rental of containers (including trailers and other equipment
for the transport of containers) used for the transport of goods or merchandise
in international traffic which is supplementary "or incidental to
operation of its ship or aircraft in international traffic shall be taxable
only in that Contracting State unless the containers are used solely within the
other Contracting State.
4.
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.
5.
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)
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 the profits of an enterprise of the State
and taxes accordingly profits on which an enterprise of the other Contracting
State has been charged to tax in that other State and the profits so included
are profits which would have accrued to the enterprise of the first-mentioned
State if the conditions made between the two enterprises had been those which
would have been made between independent enterprises, then that other State shall
make an appropriate adjustment to the amount of the tax charged therein on
those profits. In determining such adjustment, 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 1 and 2 shall not apply if the beneficial owner of
the dividends, being a resident of a Contracting State, carries on business in
the other Contracting State of which the company paying the dividends is a
resident, through a permanent establishment situated therein, and the holding
in respect of which the dividends are paid is effectively connected with such
permanent establishment. In such case the provisions of ARTICLE 7 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 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.
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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
arisen, 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 so
charged shall not exceed 10 per cent of the gross amount of the Interest.
3.
Notwithstanding the provisions of paragraph 2, interest arising in a
Contracting State shall be exempt from tax in that State, provided that it is
derived and beneficially owned by:
(a)
the Government, a political sub-division or a local authority of the other
Contracting State; or
(b)
(i) in the case of India, the Reserve Bank of India, and the Export-Import Bank
of India; and
(ii)
in the case of Bhutan, the Royal Monetary Authority and Bhutan Development Bank
Limited; or
(c)
any other institution as may be agreed upon from time to time between the
competent authorities of the Contracting States through exchange of letters.
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 deposits, 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 situated therein, and the debt claim in respect of which the
interest is paid is effectively connected with such permanent establishment. In
such case the provisions of ARTICLE 7 shall apply.
6.
Interest shall be deemed to arise in a Contracting State when the payer is a
resident of that 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 in connection with which the indebtedness on which the
interest is paid was incurred, and such interest is borne by such permanent
establishment, then such interest shall be deemed to arise in the State in
which the permanent establishment 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 Agreement.
ARTICLE
12
ROYALTIES
AND FEES FOR TECHNICAL OR PROFESSIONAL SERVICES
1.
Royalties or fees for technical or professional services 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 or fees for technical or professional services 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 or fees for
technical or professional services is a resident of the other Contracting State
the tax so charged shall not exceed 10 per cent of the gross amount of the
royalties or fees for technical or professional services.
3.
(a) 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 films or tapes used 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 or professional services" as used in
this ARTICLE means payments of any kind, other than those mentioned in Articles
14 of this Agreement as consideration for—
(i)
managerial or technical or consultancy services, including the provision of
services of technical or other personnel; or
(ii)
professional services including independent scientific, literary, artistic,
educational or teaching activities as well as the independent activities of
physicians, lawyers, engineers, architects, surgeons, dentists and accountants.
4.
The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of
the royalties or fees for technical or professional services being a resident
of a Contracting State, carries on business in the other Contracting State in
which the royalties or fees for technical or professional services arise,
through a permanent establishment situated therein and the right or property in
respect of which the royalties or fees for technical or professional services are
paid is effectively connected with such permanent establishment. In such case
the provisions of ARTICLE 7 read with ARTICLE 5 of the Agreement shall apply.
5.
(a) Royalties and fees for technical or professional 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 or professional
services, whether he is a resident of a Contracting State or not, has in a
Contracting State a permanent establishment in connection with which the
liability to pay the royalties or fees for technical or professional services
was incurred, and such royalties or fees for technical or professional services
are borne by such permanent establishment, then such royalties or fees for
technical or professional services shall be deemed to arise in the Contracting
State in which the permanent establishment is situated.
(b)
Where under sub-paragraph (a) royalties or fees for technical or professional
services do not arise in one of the Contracting States, and the royalties
relate to the use of, or the right to use, the right or property, or the fees
for technical or professional services relate to services performed, in one of
the Contracting States, the royalties or fees for technical or professional
services shall be deemed to arise in that Contracting State.
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 or professional 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 Contracting State, due
regard being had 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 including such gains from the
alienation of such a permanent establishment (alone or with the whole
enterprise), 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 in which the place of
effective management of the enterprise is situated.
4.
Gains from the alienation of shares of the capital stock of a company the
property of which consists directly or indirectly principally of immovable
property situated in a Contracting State may be taxed in that 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 1, 2, 3, 4 and 5, shall be taxable only in the Contracting State of
which the alienator is a resident.
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ARTICLE 14
DEPENDENT
PERSONAL SERVICES
1.
Subject to the provisions of Articles 15, 17, 18, 19 and 20, 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)
the recipient is present in the other State for a period or periods not
exceeding in the aggregate 183 days in any twelve month period commencing or
ending in the fiscal year or income year, as the case may be, concerned, and
(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
15
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
16
ARTISTES
AND SPORTSPERSONS
1.
Notwithstanding the provisions of ARTICLE 14, 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 income may, notwithstanding
the provisions of Articles 7 and 14, be taxed in the Contracting State in which
the activities of the entertainer or sportsperson are exercised.
3.
The provisions of paragraphs 1 and 2, shall not apply to income from activities
performed in a Contracting State by entertainers or sportspersons if the
activities are substantially supported by public funds of one or both of the
Contracting States or of political sub-divisions or local authorities thereof.
In such a case, the income shall be taxable only in the Contracting State of
which the entertainer or sportsperson is a resident.
ARTICLE
17
PENSIONS
1.
Subject to the provisions of paragraph 2 of ARTICLE 18, pensions and other
similar remuneration paid to a resident of a Contracting State in consideration
of past employment shall be taxable only in that State.
2.
However, such pension and other similar remuneration may also be taxed in the
other Contracting State if the payment is made by a resident of that other
State or a permanent establishment situated therein.
3.
Notwithstanding the provisions of paragraphs 1 and 2 of this Article, pensions
paid and other payments made under a public scheme which is part of the social
security system of a Contracting State or a political sub-division or a local
authority thereof shall be taxable only in that State.
ARTICLE
18
GOVERNMENT
SERVICE
1.
(a) Salaries, wages and other similar remuneration, other than a pension, paid
by a Contracting State or a political sub-division or a local authority thereof
to an individual in respect of services rendered to that State or sub-division
or authority shall be taxable only in that State.
(b)
However, such salaries, wages and other similar remuneration shall be taxable
only in the other Contracting State if the services are rendered in that State
and the individual is a resident of that State who:
(i)
is a national of that State; or
(ii)
did not become a resident of that State solely for the purpose of rendering the
services.
2.
(a) Any pension paid by, or out of funds created by, a Contracting State or a
political sub-division or a local authority thereof to an individual in respect
of services rendered to that State or sub-division 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 14, 15, 16 and 17 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 or a local authority thereof.
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Gigantic Buddha Dordenma Statue
ARTICLE
19
PROFESSORS,
TEACHERS AND RESEARCH 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 one year 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 or income year, as the case may be, in which he visits the other
Contracting State or in the immediately preceding fiscal or income year. For
the purposes of paragraph 1, "approved institution" means an
institution which has been approved in this regard by the competent authority
of the concerned Contracting State.
ARTICLE
20
STUDENTS
1.
A student who is or was a resident of one of the Contracting States immediately
before visiting the other Contracting State and who is present in that other
Contracting State solely for the purpose of his education or training, shall
besides grants and scholarships be exempt from tax in that other State on:
(a)
payments made to him by persons residing outside that other State for the
purposes of his maintenance, education or training; and
(b)
remuneration which he derives from an employment which he exercises in the
other Contracting State if the employment is directly related to his studies,
2.
The benefits of this ARTICLE shall extend only for such period of time as may
be reasonable or customarily required to complete the education or training
undertaken, but in no event shall any individual have the benefits of this
Article, for more than six consecutive years from the date of his first arrival
for the purpose of his education or training in that other Contracting State.
ARTICLE
21
OTHER
INCOME
1.
Items of income of a resident of a Contracting State, wherever arising, not
dealt with in the foregoing Articles of this Agreement shall be taxable only in
that State.
2.
The provisions of paragraph 1 shall not apply to income, other than income from
immovable property as defined in paragraph 2 of ARTICLE 6, if the recipient of
such income, being a resident of a Contracting State, carries on business in
the other Contracting State through a permanent establishment situated therein
and the right or property in respect of which the income is paid is effectively
connected with such permanent establishment. In such case the provisions of
ARTICLE 7 shall apply.
3.
Notwithstanding the provisions of paragraphs 1 and 2, items of income of a
resident of a contracting state not dealt within the foregoing Articles of this
Agreement and arising in the other Contracting State may also be taxed in that
other state.
ARTICLE
22
METHODS
FOR ELIMINATION OF DOUBLE TAXATION
1.
The laws in either of the contracting states shall 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 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 Bhutan, India shall allow as a
deduction from the tax on the income of that resident, an amount equal to the
tax paid in Bhutan. 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 Bhutan.
(b)
Where in accordance with any provision of the Agreement income derived by a
resident of India is exempt from tax in India, India may nevertheless, in
calculating the amount of tax on the remaining income of such resident, take
into account the exempted income.
(ii)
In Bhutan:
(a)
Where a resident of Bhutan derives income which, in accordance with the
provisions of this Agreement, may be taxed in India, Bhutan shall allow as a
deduction from the tax on the income of that resident, an amount equal to the
tax paid in India. 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 India.
(b)
Where in accordance with any provision of the Agreement, income derived by a
resident of Bhutan is exempt from tax in Bhutan, Bhutan may nevertheless, in
calculating the amount of tax on the remaining income of such resident, take
into account the exempted income.
3.
The tax payable by an enterprise (being a permanent establishment) in Bhutan
mentioned in paragraphs 1 and 2 of this ARTICLE shall be deemed to include the
tax which would have been payable but for the following tax incentives in
education and health sectors granted under the Fiscal Incentives, 2010 issued
by Ministry of Finance, Royal Government of Bhutan (vide Notification Ref No. DRC/TAX-A&L/HOL/2010/3656
dated 2nd April, 2010) which are designed to promote economic development in
Bhutan:
(i)
Education sector: An educational or vocational institute established outside
Thimphu and Phuentsholing cities (with a minimum enrolment capacity of 200
students);
(ii)
Health sector: A high end private health service centre or hospital (with a
minimum project cost of Rs/Nu 200 million).
4.
Notwithstanding the provisions of paragraph 3, Bhutanese tax shall not be
deemed to have been paid under that paragraph of this ARTICLE in respect of:
(i)
income by way of dividends, interest, capital gains or from activities not
directly connected with the running of educational or vocational institute or
health service centre or hospital, as the case may be; or
(ii)
income derived from any arrangement, entered into by an Indian resident,
covered by the provisions of ARTICLE 27(Limitation of Benefits) of the
Agreement.
5.
The provisions of paragraph 3 shall apply for the first seven years from the
date of entry into force of this Agreement. This period may be extended by
mutual agreement between the competent authorities.
ARTICLE
23
NON-DISCRIMINATION
1.
Nationals of a Contracting State shall not be subjected in the other
Contracting State to any taxation or any requirement connected therewith, which
is other or more burdensome than the taxation and connected requirements to
which nationals of that other State in the same circumstances, in particular
with respect to residence, are or may be subjected. This provision shall,
notwithstanding the provisions of ARTICLE 1, also apply to persons who are not
residents of one or both of the Contracting States.
2.
The taxation on a permanent establishment which an enterprise of a Contracting
State has in the other Contracting State shall not be less favorably levied in
that other State than the taxation levied on enterprises of that other State
carrying on the same activities. This provision shall not be construed as
obliging a Contracting State to grant to residents of the other Contracting
State 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 Contracting
State from charging the profits of a permanent establishment which a company of
the other Contracting State has in the first mentioned State at a rate of tax
which is higher than that imposed on the profits of a similar company of the
first mentioned Contracting State, 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 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
had been paid to a resident of the first-mentioned State. Similarly, any debts
of an enterprise of a Contracting State to a resident of the other Contracting
State shalt, for the purpose of determining the taxable capital of such
enterprise, be deductible under the same conditions as if they had been
contracted to a resident of the first-mentioned State.
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 Agreement.
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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 reached shall be implemented
notwithstanding any time limits in the domestic law of the Contracting States.
3.
The competent authorities of the Contracting States shall endeavour to resolve
by mutual Agreement any difficulties or doubts arising as to the interpretation
or application of the Agreement. They may also consult together for the
elimination of double taxation in cases not provided for in the Agreement.
4.
The competent authorities of the Contracting States may communicate with each
other directly, including through a joint commission consisting of themselves
or their representatives for the purpose of reaching an Agreement in the sense
of the preceding paragraphs. When it seems advisable in order to reach
Agreement to have an oral exchange of opinions, such exchange may take place
through a Commission consisting of representatives of the competent authorities
of the Contracting States.
ARTICLE
25
EXCHANGE
OF INFORMATION
1.
The competent authorities of the Contracting States 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 Contracting States, or of
their political 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 Contracting State shall be
treated as secret in the same manner as information obtained under the domestic
laws of that State 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 may disclose the information in public court
proceedings or in judicial decisions. Notwithstanding the foregoing,
information received by contracting states 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.
The competent authorities shall, through consultation, develop appropriate
conditions, methods and techniques concerning the matters in respect of which
such exchanges of information shall be made, including, where appropriate,
exchanges of information regarding tax avoidance.
4.
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 or certified copies of the document
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 trade, business, industrial,
commercial or professional secret or trade process, or information the
disclosure of which would be contrary to public policy (ordre public).
5.
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 4 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.
6.
In no case shall the provisions of paragraph 4 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 other in the collection of
revenue claims. This assistance is not restricted by Articles 1 and 2. The
competent authorities of the Contracting States may by mutual Agreement settle
the mode of application of this Article.
2.
The term "revenue claim" as used in this ARTICLE means an amount owed
in respect of taxes of every kind and description imposed on behalf of the
Contracting States, or of their political sub-divisions or local authorities,
insofar as the taxation thereunder is not contrary to this Agreement or any
other instrument to which the Contracting States are parties, as well as
interest, administrative penalties and costs of collection or conservancy
related to such amount.
3.
When a revenue claim of a Contracting State 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, that revenue claim shall, at the request of
the competent authority of that State, be accepted for purposes of collection
by the competent authority of the other Contracting State. That revenue claim
shall be collected by that other State in accordance with the provisions of its
laws applicable to the enforcement and collection of 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 of this ARTICLE 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 Contracting State
for the purposes of paragraph 3 or 4 of this ARTICLE 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 case of a request under paragraph 4, a revenue claim of the
first-mentioned State in respect of which that State may, under its laws, take
measures of conservancy with a view to ensure its collection, the competent
authority of the first-mentioned State shall promptly notify the competent
authority of the other State of that fact and, at the option of the other
State, the first-mentioned State shall either suspend or withdraw its request.
8.
In no case shall the provisions of this ARTICLE 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 carry out measures which would be contrary to public policy (ordre public);
(c)
to provide assistance if the other Contracting State has not pursued all
reasonable measures of collection or conservancy, as the case may be, available
under its laws or administrative practice;
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ARTICLE
27
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 State shall not be entitled to the benefits of this
Agreement if its affairs were arranged in such a manner as if it was the main
purpose or one of the main purposes to take the benefits of this Agreement.
3.
The case of legal entities not having bona-fide business activities shall be
covered by the provisions of this Article.
ARTICLE
28
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
29
ENTRY
INTO FORCE
1.
Each of the Contracting States shall notify to the other in writing, through
diplomatic channels, the completion of the procedures required by its law for
the entry into force of this Agreement.
2.
This Agreement shall enter into force on the date of the later of the
notifications referred to in paragraph 1 of this Article.
3.
The provisions of this Agreement shall thereupon 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 Bhutan, in respect of income arising for any year of income beginning or
after the first day of January next following the calendar year in which the
Agreement enters into force.
ARTICLE
30
TERMINATION
This
Agreement shall remain in force indefinitely until terminated by a Contracting
State. 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; and
(b)
In Bhutan, in respect of income derived in any income year on or after the
first day of January next following the calendar year in which the notice is
given.
In
witness whereof the undersigned, duly authorized thereto, have signed this
Agreement.
Executed
in New Delhi, 4th March, 2013, each in the English, Hindi and Dzongkha
languages, all texts being equally authentic. In case of divergence of
interpretation, the English text shall prevail.
PROTOCOL
At
the moment of signing of the Agreement this day concluded between the
Government of the Republic of India and the Royal Government of Bhutan for the
Avoidance of Double Taxation and the Prevention Fiscal Evasion with respect to
Taxes on Income, the undersigned have agreed upon the following provisions
which shall be an integral part of the Agreement:
"It
is understood that if the domestic law of a Contracting State is more
beneficial to a resident of the other Contracting State than the provisions 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."
In
witness whereof the undersigned, duly authorized thereto, have signed this
Protocol.
Executed
in New Delhi, 4th March, 2013, each in the English, Hindi and Dzongkha
languages, all texts being equally authentic. In case of divergence of
interpretation, the English text shall prevail.
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| The National Library of Bhutan, Thimphu.
Agreement
Among The Governments Of Saarc Member States For Avoidance Of Double Taxation
And Mutual Administrative Assistance In Tax Matters
Notification
no. 3/2011 [SO 34(E)]-FTD-II [F.NO. 500/96/97-FTD-II], Dated 10-1-2011
Whereas
the annexed Agreement among the Governments of SAARC (South Asian Association
for Regional Cooperation) Member States comprising the People's Republic of
Bangladesh, the Kingdom of Bhutan, the Republic of India, the Republic of
Maldives, the Kingdom of Nepal, the Islamic Republic of Pakistan and the
Democratic Socialist Republic of Sri Lanka for the avoidance of double taxation
and mutual administrative assistance in tax matters signed in Dhaka, Bangladesh
on the 13th day of November, 2005 shall come into force on the 19th day of May,
2010, being the thirtieth day after the notification dated 19th April, 2010
issued by SAARC Secretariat regarding completion of all formalities, including
ratification, wherever applicable, by all Member States, in accordance with
Article 16 of the said Agreement;
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 shall be given effect to in the Union of India
with effect from the 1st day of April, 2011.
ANNEXURE
Saarc
Limited Multilateral Agreement On Avoidance Of Double Taxation And Mutual
Administrative Assistance In Tax Matters
Preamble
The Governments of the SAARC (South Asian Association for Regional Cooperation)
Member States comprising the People's Republic of Bangladesh, the Kingdom of
Bhutan, the Republic of India, the Republic of Maldives, the Kingdom of Nepal,
the Islamic Republic of Pakistan and the Democratic Socialist Republic of Sri
Lanka; Desiring to conclude an Agreement on Avoidance of Double Taxation and
Mutual Administrative Assistance in tax matters with a view to promoting
economic cooperation amongst the SAARC Member States, Have agreed as follows :
ARTICLE
1
GENERAL
DEFINITIONS
1.
For the purposes of this Agreement, unless the context otherwise requires :
(a)
the term "Member State" means one of the States as per Schedule I;
(b)
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 Member States;
(c)
the term "tax" means, tax(es) covered as per Schedule II, as the
context requires;
(d)
the term "Competent Authority" means Competent Authority as per
Schedule III;
(e)
the term "national" means any individual possessing the nationality
of a Member State; and
(f)
the term "fiscal year" means the year as defined in Schedule IV.
2.
As regards the application of the Agreement at any time by a Member State any
term not defined therein shall, unless the context otherwise requires, have the
meaning that it has at that time under the law of that Member State for the
purposes of the taxes to which the Agreement applies and any meaning under the
applicable tax laws of that Member State prevailing over a meaning given to the
term under other laws of that Member State.
ARTICLE
2
PERSONS
COVERED
This
Agreement shall apply to persons who are residents of one or more of the Member
States, in respect of which it has entered into force in accordance with
Article 16.
ARTICLE
3
TAXES
COVERED
1.
This Agreement shall apply to taxes on income imposed by or on behalf of the
Member States.
2.
There shall be regarded as taxes on income all taxes imposed on total income,
or on elements of income, including taxes on gains from the alienation of
movable or immovable property and taxes on the total amounts of wages or
salaries paid or deemed to be paid by enterprises.
3.
The existing taxes to which the Agreement shall apply are listed in Schedule
II.
4.
The Agreement shall apply also to any identical or substantially similar taxes
that are imposed after the date of signature of the Agreement in addition to,
or in place of, the existing taxes. The Competent Authorities of the Member
States shall notify the SAARC Secretariat of any significant changes that have
been made in their respective taxation laws.
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ARTICLE
4
RESIDENT
1.
For the purposes of this Agreement, the term "resident of a Member
State" means any person who, under the laws of that Member State, is
liable to tax therein by reason of his domicile, residence, place of management
or any other criterion of a similar nature, and also includes that Member State
and any political sub-division or local authority thereof. This term, however,
does not include any person who is liable to tax in that Member State in
respect only of income from sources in that Member State.
2.
Where, by reason of the provisions of paragraph 1, an individual is a resident
of more than one Member State, his/her status shall be determined as follows :
(a)
he/she shall be deemed to be a resident only of the Member State in which
he/she has a permanent home available to him/her; if he/she has a permanent
home available to him/her in more than one Member State, he/she shall be deemed
to be a resident only of the Member State with which his/her personal and
economic relations are closer (centre of vital interests);
(b)
if the Member State in which he/she has his/her centre of vital interests
cannot be determined, or if he/she has not a permanent home available to
him/her in any Member State, he/she shall be deemed to be a resident only of
the Member State in which he/she has an habitual abode;
(c)
if he/she has an habitual abode in more than one Member State or in neither of
them, he/she shall be deemed to be a resident only of the Member State of which
he/she is a national;
(d)
if he/she is a national of more than one Member State or of none of them, the
Competent Authorities of the concerned Member States shall settle the question
by mutual agreement.
3.
Where, by reason of the provisions of paragraph 1, a person other than an
individual is a resident of more than one Member State, it shall be deemed to
be a resident only of the Member State in which its place of effective
management is situated. If the Member State in which its place of effective
management is situated cannot be determined, then the Competent Authorities of
the concerned Member States shall settle the question by mutual agreement.
ARTICLE
5
EXCHANGE
OF INFORMATION
1.
The Competent Authorities of the Member States shall exchange such information,
including documents and public documents or certified copies thereof, as is
necessary for carrying out the provisions of this Agreement or of the domestic
laws of the Member States concerning taxes covered by this agreement insofar as
the taxation thereunder is not contrary to the Agreement. Any information
received by a Member State shall be treated as secret in the same manner as
information obtained under the domestic laws of that Member State 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, or the determination of appeals in relation to the
taxes covered by the agreement. 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.
2.
In no case shall the provisions of paragraph 1 be construed so as to impose on
a Member State the obligation :
(a)
to carry out administrative measures at variance with the laws and
administrative practices of that or of the other Member State;
(b)
to supply information, including documents and public documents or certified
copies thereof, which are not obtainable under the laws or in the normal course
of the administration of that or of the other Member 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).
ARTICLE
6
ASSISTANCE
IN THE COLLECTION OF TAXES
1.
The Member States shall lend assistance to each other in the collection of
revenue claims. The Competent Authorities of the Member States may, by mutual
agreement, settle the mode of application of this Article.
2.
The term "revenue claim" as used in this Article means an amount owed
in respect of taxes covered by the Agreement together with interest, penalties
and costs of collection or conservancy related to such amount.
3.
When a revenue claim of a Member State is enforceable under the laws of that
Member State and is owed by a person who, at that time, cannot, under the laws
of that Member State, prevent its collection, that revenue claim shall, at the
request of the Competent Authority of that Member State, be accepted for
purposes of collection by the Competent Authority of the other Member State,
and that revenue claim shall be collected by that other Member State in
accordance with the provisions of its laws applicable to the enforcement and
collection of its own taxes as if the revenue claim were a revenue claim of
that other Member State.
4.
When a revenue claim of a Member State is a claim in respect of which that
Member 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 Member State, be accepted for purposes of taking
measures of conservancy by the Competent Authority of the other Member State. That
other Member 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 Member State even if, at the time when
such measures are applied, the revenue claim is not enforceable in the
first-mentioned Member State or is owed by a person who has a right to prevent
its collection.
5.
The provisions of this Article shall be invoked on request of a Member State
only after all permissible measures of recovery under the domestic laws of that
Member State have been exhausted.
6.
Notwithstanding the provisions of paragraphs 3 and 4, a revenue claim accepted
by a Member State for purposes of paragraph 3 or 4 shall not, in that Member
State, be subject to the time limits or accorded any priority applicable to a
revenue claim under the laws of that Member State by reason of its nature as
such. In addition, a revenue claim accepted by a Member State for the purposes
of paragraph 3 or 4 shall not, in that Member State, have any priority
applicable to that revenue claim under the laws of the other Member State.
7.
Proceedings with respect to the existence, validity or the amount of a revenue
claim of a Member State shall only be brought before the courts or
administrative bodies of that Member 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 Member State.
8.
Where, at any time after a request has been made by a Member State under
paragraph 3 or 4 and before the other Member State has collected and remitted
the relevant revenue claim to the first-mentioned Member 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 Member State that is enforceable under the laws of that Member
State and is owed by a person who, at that time, cannot, under the laws of that
Member State, prevent its collection, or
(b)
in the case of a request under paragraph 4, a revenue claim of the
first-mentioned Member State in respect of which that Member State may, under
its laws, take measures of conservancy with a view to ensure its collection.
The Competent Authority of the first-mentioned Member State shall promptly
notify the Competent Authority of the other Member State of that fact and, at
the option of the other Member State, the first-mentioned Member State shall
either suspend or withdraw its request.
9.
In no case shall the provisions of this Article be construed so as to impose on
a Member State the obligation :
(a)
to carry out administrative measures at variance with the laws and
administrative practice of that or of the other Member State;
(b)
to carry out measures which would be contrary to public policy (ordre public);
(c)
to provide assistance if the other Member State has not pursued all reasonable
measures of collection or conservancy, as the case may be, available under its
laws or administrative practices;
(d)
to provide assistance in those cases where the administrative burden for that
Member State is clearly disproportionate to the benefit to be derived by the
other Member State.
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ARTICLE
7
SERVICE
OF DOCUMENTS
1.
At the request of the applicant Member State the requested Member State shall
serve upon the addressee, documents and public documents including those
relating to judicial decisions, which emanate from the applicant Member State
and which relate to a tax covered by this Agreement.
2.
The requested Member State shall effect service of documents, including public
documents :
(a)
by a method prescribed by its domestic laws for the service of documents of a
substantially similar nature;
(b)
to the extent possible, by a particular method requested by the applicant
Member State or the closest to such method available under its own laws.
3.
A Member State may affect service of documents directly through the post on a
person in another Member State.
4.
Nothing in the Agreement shall be construed as invalidating any service of
documents by a Member State in accordance with its laws.
5.
When a document is served in accordance with this Article and it is not in
English language, the same should be accompanied by a translation into English.
ARTICLE
8
PROFESSORS,
TEACHERS AND RESEARCH SCHOLARS
1.
A professor, teacher or research scholar who is or was a resident of the Member
State immediately before visiting the other Member State for the purpose of
teaching or engaging in research, or both, at a university, college or other
similar approved institution in that other Member State shall be exempt from
tax in that other Member State on any remuneration for such teaching or
research for a period not exceeding two years from the date of his/her arrival
in that other Member State.
2.
For the purposes of this Article, an individual shall be deemed to be a
resident of a Member State if he/she is resident in that Member State in the
fiscal year in which he/she visits the other Member State or in the immediately
preceding fiscal year.
3.
For the purposes of paragraph 1 "approved institution" means an
institution which has been approved in this regard by the Government of the
concerned Member State.
ARTICLE
9
STUDENTS
1.
A student who is or was a resident of one of the Member States immediately
before visiting the other Member State and who is present in that other Member
State solely for the purpose of his/her education or training shall, besides
grants, loans and scholarships and any payments received from sources outside
that State for the purpose of his/her maintenance, education or training, be
exempt from tax in that other Member State on remuneration which he/she derives
from an employment which he/she exercises in the other Member State if the
employment is directly related to his/her studies.
2.
The exemption available under paragraph 1 above in respect of remuneration from
employment shall not exceed an amount equal to US$ 3000 per annum.
3.
The benefits of this Article shall extend only for such period of time as may
be reasonable or customarily required to complete the education or training
undertaken, but in no event shall any individual have the benefits of this
Article, for more than six consecutive years from the date of his/her first
arrival in that other Member State.
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ARTICLE
10
TRAINING
1.
The Member States shall endeavour to hold and organise training programmes,
seminars and workshops for the tax administrators with the objective of :
(i)
providing a common forum for senior tax administrators to meet and discuss
problems of common concern;
(ii)
enhancing the technical and administrative knowledge and skills of tax
administrators; and
(iii)
evolving strategies to combat common tax problems like tax avoidance/evasion in
the SAARC region.
ARTICLE
11
SHARING
OF TAX POLICY
1.
Each Member State shall endeavour to bring out a yearly report on changes made
in its tax laws. This may also cover introduction of new systems or techniques
for circulation among the Member States.
2.
A Member State may, on request, make available its pool of talented experts to
other Member States for the purposes of drafting and organising legislation,
tax procedures, operational management, on the job training programmes,
information system and technology etc.
ARTICLE
12
IMPLEMENTATION
The
Member States shall hold periodic consultations, as appropriate, of Competent
Authorities, with a view to facilitating the effective implementation of this
Agreement.
ARTICLE
13
REVIEW
The
Member States shall meet in order to review this Agreement on request or at the
end of five years from the date of its entry into force, unless they notify the
SAARC Secretariat, in writing, that no such review is necessary.
ARTICLE
14
AMENDMENTS
This
Agreement may be amended by consensus. Any such amendment will become effective
upon the deposit of instrument(s) of acceptance with the Secretary-General of
SAARC by all Member States and issuance of notification thereof by the SAARC
Secretariat. Such an amendment shall have effect in the Member States from the
date of commencement of their respective fiscal year following the issuance of
notification by the SAARC Secretariat.
ARTICLE
15
DEPOSITORY
This
Agreement will be deposited with the Secretary General of SAARC, who will
furnish a certified copy thereof to each Member State.
ARTICLE
16
ENTRY
INTO FORCE
1.
This Agreement shall enter into force on the thirtieth day after the
notification issued by the SAARC Secretariat regarding completion of all
formalities, including ratification, wherever applicable, by all Member States.
2.
The provisions of this Agreement shall have effect :
(i)
In Bangladesh
(a)
in respect of taxes withheld at source, in respect of amounts paid or credited
on or after the first day of July next following the date upon which the
Agreement enters into force;
(b)
with regard to other taxes, in respect of tax years beginning on or after the
first day of July next following the date upon which the Agreement enters into
force;
(ii)
In Bhutan
(a)
in respect of taxes withheld at source, in respect of amounts paid or credited
on or after the first day of July next following the date upon which the
Agreement enters into force;
(b)
with regard to other taxes, in respect of tax years beginning on or after the
first day of July next following the date upon which the Agreement enters into
force;
(iii)
In India, in respect of income derived in any fiscal year on or after the first
day of April next following the date upon which the Agreement enters into
force;
(iv)
In Maldives in respect of income derived in any fiscal year on or after the
first day of January next following the date upon which the Agreement enters
into force;
(v)
In Nepal in respect of income arising in any year of income beginning on or
after the first day of Nepalese fiscal year starting mid-July next following
the date upon which the Agreement enters into force;
(vi)
In Pakistan:
(a)
in respect of taxes withheld at source, in respect of amounts paid or credited
on or after the first day of July next following the date upon which the
Agreement enters into force;
(b)
with regard to other taxes, in respect of tax years beginning on or after the
first day of July next following the date upon which the Agreement enters into
force; and
(vii)
In Sri Lanka in respect of income derived on or after the first day of April of
the year next following the date upon which the Agreement enters into force.
ARTICLE
17
TERMINATION
This
Agreement shall remain in force indefinitely until terminated by a Member
State. A Member 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 :
(i)
In Bangladesh, in respect of income derived in any fiscal year on or after the
first day of July next following the expiration of six months period from the
date on which the written notice of termination is given;
(ii)
In Bhutan, in respect of income derived in any fiscal year on or after the
first day of July next following the expiration of six months period from the
date on which the written notice of termination is given;
(iii)
In India, in respect of income derived in any fiscal year on or after the first
day of April next following the expiration of six months period from the date
on which the written notice of termination is given;
(iv)
In Maldives, in respect of income derived in any fiscal year on or after the
first day of January next following the expiration of six months period from
the date on which the written notice of termination is given;
(v)
In Nepal, in respect of income derived in any fiscal year on or after the first
day of mid-July next following the expiration of six months period from the
date on which the written notice of termination is given;
(vi)
In Pakistan, in respect of income derived in any fiscal year on or after the
first day of July next following the expiration of six months period from the
date on which the written notice of termination is given; and
(vii)
In Sri Lanka, in respect of income derived on or after the first day of April
of the year next following the expiration of six months period from the date on
which the written notice of termination is given;
In
witness whereof, the undersigned, duly authorized thereto, have signed this
Agreement.
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| National Memorial Chorten in Thimpu, Bhutan
PROTOCOL
On
formalization, this SAARC Limited Multilateral Agreement on Avoidance of Double
Taxation and Mutual Administrative Assistance in Tax Matters shall be
applicable only in the Member States where an adequate Direct Tax Structure is
in place. Further, in case of a Member State where such a structure is not in
place, this Agreement shall become effective from the date on which such a
Member State introduces a proper Direct Tax Structure and notifies the SAARC
Secretariat to this effect.
Further
that in the event of a conflict between the provisions of this Limited
Multilateral Agreement and that of any bilateral Double Taxation Avoidance
Agreement between the Member States, the provisions of the Agreement signed or
amended at a later date shall prevail.
Executed
in Dhaka, Bangladesh, on 13th November, 2005, In Nine Originals In English
Language, All Texts Being Equally Authentic.
SCHEDULE
I
MEMBER
STATES TO THE AGREEMENT
1.
The People's Republic of Bangladesh
2.
Kingdom of Bhutan
3.
Republic of India
4.
Republic of Maldives
5.
Kingdom of Nepal
6.
Islamic Republic of Pakistan
7.
Democratic Socialist Republic of Sri Lanka
SCHEDULE
II
TAXES
COVERED
The
existing taxes to which this Agreement shall apply :
1.
In Bangladesh, Taxes on income that is direct tax
2.In
Bhutan, Income-tax imposed under Income-tax Act, 2001 and the rules thereof
3.
In India, Income-tax, including any surcharge thereon
4.
In Maldives, Taxes on income that is direct tax
5.
In Nepal, Income-tax imposed under the Income-tax Act, 2058
6.
In Pakistan, Taxes on Income
7.
In Sri Lanka, Income-tax including the income-tax based on the turnover of
enterprises licensed by the Board of Investment
SCHEDULE
III
COMPETENT
AUTHORITY
The
term "Competent Authority" means :
1.
In Bangladesh, National Board of Revenue or its authorized representative
2.
In Bhutan, The Ministry of Finance or its authorized representative
3.
In India, The Finance Minister, Government of India, or its authorized
representative
4.
In Maldives, Department of Inland Revenue, Ministry of Finance and Treasury
5.
In Nepal, His Majesty's Government of Nepal, Ministry of Finance or its
authorized representative
6.
In Pakistan, Central Board of Revenue or its authorized representative
7.
In Sri Lanka, Commissioner General of Inland Revenue
SCHEDULE
IV
FISCAL
YEAR
The
term "fiscal year" means :
1.
In case of Bangladesh,1st July - 30th June
2.
In case of Bhutan, 1st July - 30th June
3.
In case of India, 1st April - 31st March
4.
In case of Maldives, 1st January - 31st December
5.
In case of Nepal, The fiscal year beginning mid-July
6.
In case of Pakistan, 1st July - 30th June
7.
In case of Sri Lanka, 1st April -31st March
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