ICAI - Live Webcast
By the Committee on International Taxation of ICAI
on Friday 13th September, 2013
at 6.00 pm to 7.30 pm
Following DTAAs of India:

United Kingdom(UK)

Netherland

Singapore

Mauritius

UAE
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
2

For convenience of understanding of the
Articles, India has been treated as the source
country in the following slides.

The treaties would equally apply if the other
country would have been the source country.
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
3
4
Treaty with United kingdom
Signed on – January 25th, 1993
Date of notification in the official gazette:
February 11, 1994
 Date of coming into force April 1, 1994 i.e. A.Y.
1995-96
 Protocol signed on January 25th, 1993 (“Old
Protocol”)
 Protocol signed on October 30th, 2012 coming into
force from April 1, 2013 i.e. A.Y. 2014-15 (“New
Protocol”)


13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
5
Treaty with United kingdom

The Convention shall apply to persons who
are residents of India and/or United
Kingdom (UK)

India is defined in Article 3(1)(b) to mean –
“the Republic of India”

UK is defined in Article 3(1)(a) to mean –
“Great Britain and Northern Ireland”
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
6
Treaty with United kingdom
This Convention extends to the territory of India/UK,
including its territorial sea, and to those areas of the
exclusive economic zones or the continental shelf
adjacent to the outer limit of the territorial sea of
India which it has, in accordance with international
law, sovereign rights for the purpose of exploration
and exploitation of the natural resources of such
areas, and references in this Convention to India shall
be construed accordingly.
 The territory of India has not been extended to
include the airspace above it?? (contrast with DTAA s
with other countries eg. Singapore, Netherlands etc)

13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
7
Treaty with United kingdom






In India, income tax include surcharge thereon
In UK, corporation and petroleum tax are also covered
under the Convention.
Compare the same with India-Norway, India-Hungary
or India-Germany tax treaties.
In Norway: Nine types of taxes are covered; E.g.
Municipal tax on income, National contribution to Tax
Equalisation Fund, Seamen’s tax, etc.
In Hungary: Seven types of taxes are covered; E.g.
income-tax on household and auxiliary farms, Town
and community contributions, levy on dividends and
profit distributions of commercial companies, etc.
In Germany: Trade Tax is covered
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
8
Treaty with United kingdom

“Tax” excludes amount paid in relation to
any default, omission or penalty in relation to
the taxes.

“Fiscal year” defined for India to mean as
“previous year” as per Income Tax Act & for
UK to mean as a year beginning with April 6
in one year and ending with April 5 in the
following year.
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
9
Treaty with United kingdom

Prior to amendment the definition read as under:
The term “person” includes an individual, a company and any other entity which
is treated as a taxable unit under the taxation laws in force in the respective
Contracting States, but, subject to paragraph 2 of this Article, does not include a
partnership;
Para 2 of the Article states that a “partnership which is treated as a taxable unit
under the Income-tax Act, 1961 of India shall be treated as a person for the
purposes of this Convention.” (Refer Linklaters LLP vs. ITP (40 SOT 51) (TMum))

After the amendment vide the New Protocol, the definition of person has
been amended to read as under:
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;
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
10
Treaty with United kingdom

Prior to the amendment the Para 1 of the Article read as under:
“Resident of a Contracting State” means any person who, under the law of that
State, is liable to taxation therein by reason of his domicile, residence, place of
management or any other criterion of a similar nature.

The Para 1 of this Article has been replaced w.e.f. April 1, 2013.
“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, place of incorporation, or any other criterion of a similar nature,
provided, however, that:
a) This term does not include any person who is liable to tax in that State in respect only of
income from sources in that State; and
b) In the case of income derived or paid by a partnership, estate, or trust, this term applies
only to the extent that the income derived by such partnership, estate, or trust is subject to
tax in that State as the income of a resident, either in its hands or in the hands of its
partners or beneficiaries.
(Note: This definition has been brought in line with US Treaty. Difference between “liable to
tax” Vs. “subject to tax”)
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
11
Treaty with United kingdom
Tie-Breaker Tests:

Where an Individual is a resident of both India and
UK, then following would be considered sequentially
for the determination of the country of residence:






Permanent home available to the individual
Centre of vital interests
Country of habitual abode
Country of which he is a national
Mutual Agreement between the countries.
Person other than an Individual – deemed to be a
resident of the Country where the effective place of
management is situated.
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
12
Treaty with United kingdom
Means a fixed place of business of an enterprise through
which it is wholly or partly carried out.
 Permanent establishment incudes:

 a) to e) and h)—standard as per OECD Model
 f) Premises used as a sales outlet or for receiving or soliciting
orders
 g) a warehouse in relation to a person providing storage
facilities for others;
 i) an installation or structure used for the exploration or
exploitation of natural resources;
 j) Where charges payable for the project or supervisory activity
exceed 10% of the sales price of the machinery or equipment
and such activities continue for a period not exceeding 6
months – (to be read with the Protocol(old))
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
13
Treaty with United kingdom
Protocol in relation to sub-paragraph (j) of Article 5:

For determining whether a building site or construction,
installation or assembly project or supervisory activity in
connection therewith has continued for a period of more
than 6 months, a contracting state shall:
i.
ii.
iii.
13/09/2013
Take no account of time spent by employees on other sites
having no connection with the current site.
Apply more than 6 months test to each site which has no
connection with any other site, and
regard a building site as a single site, even if several contracts
have been entered into for work being done, provided it
forms a coherent whole, both geographically & commercially
How To Read A Tax Treaty - By CA Sushil Lakhani
14
Treaty with United kingdom
Service PE of an Indian Enterprise in UK
 k) the furnishing of services including managerial services,
other than those taxable under Article 13 (Royalties and
fees for technical services), within UK by an enterprise
through employees or other personnel, but only if:
i.
ii.
13/09/2013
activities of that nature continue within UK for a period or
periods aggregating more than 90 days within any twelvemonth period; or
services are performed within UK for an enterprise within the
meaning of Article 10(1) (Associated Enterprise) and continue
for a period or periods aggregating more than 30 days within
any twelve-month period. ( contrast with US Treaty where
one day presence triggers Service PE in case of related
enterprises)
How To Read A Tax Treaty - By CA Sushil Lakhani
15
Treaty with United kingdom
3. Exclusions from PE—auxiliary and preparatory
activities—in line with UN Model :
storage of stock of goods for delivery triggers PE;
4. Dependent Agency PE of Indian Enterprise in UK( in
line with Indian Income Tax Act,1961)
 A person acting in UK for or on behalf of an
enterprise of India other than an agent of an
independent status to whom paragraph (5)
applies, shall be deemed to be a PE of the Indian
enterprise in UK if:
(contd…)
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
16
Treaty with United kingdom
he has, and habitually exercises in UK, an authority to
negotiate and enter into contracts for or on behalf of the
Indian enterprise, unless his activities are limited to
purchase of goods or merchandise for the Indian
enterprise; or
b) he habitually maintains in UK a stock of goods or
merchandise from which he regularly delivers goods or
merchandise for or on behalf of the Indian enterprise; or
c) he habitually secures orders in UK, wholly or almost
wholly for the Indian enterprise or for other enterprise
and the enterprises controlling, controlled by, or subject
to the same common control, as the Indian enterprise.
a)
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
17
Treaty with United kingdom


Income from Immovable property will be
taxed in the state where such property is
situated
Immovable property shall include:
 Property accessory in immovable property
 Livestock and equipment used in agriculture
 Usufruct of immovable property

Ships and Aircrafts have been excluded from
the meaning of immovable property as there
are separate Articles for these.
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
18
Treaty with United kingdom
Profits of the UK PE of an Indian Resident
 The profits of an Indian enterprise shall be
taxable only in India unless the enterprise
carries on business in UK through a PE
situated in UK. If the enterprise carries on the
business as aforesaid, the profits of the
enterprise may be taxed in UK, but only so
much of them as is directly or indirectly
attributable to the PE.
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
19
Treaty with United kingdom
Special features of Article 7
 Taxation of PE income both by India & UK &
credit method for elimination of Double Taxation
 PE to be treated & taxed as separate & distinct
entity
 No Force of Attraction – However, Clause (b) of
old Protocol clarifies that tax authorities not
precluded from determining whether PE took
active part in Orders placed directly with HO
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
20
Treaty with United kingdom


Profits derived from the operation of aircraft
in international traffic by an Indian enterprise
shall not be taxed in UK.
Profits to include interest derived from the
investment or deposit of receipts arising
directly from the operation of aircraft in
international traffic but shall not include
interest derived from reinvestment of such
interest
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
21
Treaty with United kingdom


Income of an Indian enterprise from the
operation of ships in international traffic shall
be taxable only in UK.
This Articles does not apply to income from
journeys between places which are situated
in India or UK
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
22
Treaty with United kingdom
Article 10(1) permits transfer pricing adjustment Where:
a) an enterprise of India participates directly or indirectly
in the management, capital or control (MCC) of an
enterprise of UK, or
b) the same persons participate directly or indirectly in
the MCC of an Indian and an UK enterprise, and
conditions are made between the two enterprises in
their commercial or financial relations which differs
from those which would be made between
independent enterprises, then any profits which would
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.
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
23
Treaty with United kingdom

Article 10(2): Mandates corresponding adjustment
in the other Country

Similar clause for corresponding adjustment
in the other country is missing in the treaties
of India-Mauritius and India-Singapore.
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
24
Treaty with United kingdom
Old Provision
In respect of dividend paid by a UK Company to an Indian resident:
 Taxable in India
 UK tax on dividends to Individual resident of India limited to 15% of gross
dividends provided that the Individual is entitled to tax credit in India.
 UK tax on dividends to other Indian residents (other than Individuals) to be
exempt in UK.
In respect of dividends paid by an Indian Company to a UK resident
 Taxable in UK
 India tax not to exceed 15% of gross amount
 DDT (in India) not affected
New Provision wef AY 2014-15
 Standard Article
 10% of gross dividends in the source country (15% in case of distribution of
income/gains from immovable property)
 Para 6 – Anti – Avoidance provision – clarified that benefit not available if the
“main purpose” of creation or assignment of shares was to take advantage of
this Article.
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
25
Treaty with United kingdom
1. Interest arising in UK and paid to resident of
India may be taxed in India.
2. However, such interest may also be taxed in
UK where it arises and according to the laws
of UK provided that where the resident of
India is the beneficial owner of the interest,
the tax so charged shall not exceed 15% of
the gross amount of interest.
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
26
Treaty with United kingdom
3. Notwithstanding the provisions of para 2:
a) Where the interest is paid to a bank carrying on a
bonafide banking business which is a resident of
India and is the beneficial owner of the interest,
the tax charged in UK in which the interest arises
shall not exceed 10% of the gross amount of
interest.
b) Where the interest is paid to the Government of
India or a political sub-division or a local
authority of India or the RBI, it shall not be
subject to tax in UK.
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
27
Treaty with United kingdom
Example UK resident as recipient of income:


Royalties & FTS arising in India and paid to
resident of UK may be taxed in UK.
However, such Royalties & FTS may also be
taxed in India where they arise and according to
the laws of India but if the beneficial owner of
Royalties / FTS is resident of UK, the tax so
charged shall not exceed……
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
28
Treaty with United kingdom
Tax Rates for Royalties & FTS are as follows:
For Equipment Royalties & Services ancillary &
subsidiary to enjoyment of such equipments – 10% of
gross amounts
 For Royalties & Fees for Technical Services other than
those covered above:
 During first five years for which this Convention has
effect:

 15% where the payer is Government or its political sub
division
 20% where the payer is other than what stated above

During subsequent years – 15% of gross amounts
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
29
Treaty with United kingdom

Definition of “fees for technical service” inter-alia
includes payments of any kind in consideration for the
rendering of any technical or consultancy services
which:
 C) “make available” technical knowledge, experience,
skill know-how or processes, or consist of the
development and transfer of a technical plan or technical
design.

Meaning of “make available” as explained in other
treaties would have to applied to the UK Treaty.
 CIT vs. De Beers India Minerals (P.) Ltd. (346 ITR 467) (Kar.)
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
30
Treaty with United kingdom




Each Contracting state may tax capital gains
in accordance with the provisions of its
domestic laws.
Instead of providing for allocation of taxing
rights, the Article makes a reference to
Domestic Laws of respective Contracting
States.
Same is the case with India-US tax treaty
Compare with other Tax treaties or even
Model Conventions – Vast Difference
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
31
Treaty with United kingdom

Income derived by an individual, whether in his own capacity or as
a member of a partnership, who is a resident of India in respect of
professional or other independent activities of a similar character
may be taxed in India. Such income may also be taxed in UK if such
services are performed in UK and if :
a)
b)
he is present in UK for a period or periods aggregating to 90 days in
the relevant fiscal year; or
he, or the partnership, has a fixed base regularly available to him, or
it, in UK for the purpose of performing his activities
but in each case only so much of the income as is attributable to
those services
 It should be noted that the provisions of this Article apply only to
income derived by an “individual”. Whereas in the treaty between
India and Netherlands, similar Article applies to a “resident”.
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
32
Treaty with United kingdom
How to Calculate No. of Days for
partnerships:
For the purposes of paragraph 1 of this Article
an individual who is a member of a partnership
shall be regarded as being present in the UK
during days on which, although he is not
present, another individual member of the
partnership is so present and performs
professional services or other independent
activities of a similar character in UK.
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
33
Treaty with United kingdom
“Professional services” include independent:
- Scientific, literary, artistic, educational or
teaching activities
as well as independent activities of:
- Physicians, surgeons, lawyers, engineers,
architects, dentists and accountants
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
34
Treaty with United kingdom
Indian resident deriving salary from UK:
 Subject to ………. Salaries, wages and other
similar remuneration derived by an Indian
resident in respect of an employment shall
be taxable only in India unless the
employment is exercised in UK. If the
employment is so exercised, such
remuneration as is derived therefrom may be
taxed in UK.
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
35
Treaty with United kingdom

Remuneration derived by Indian resident in
respect of an employment exercised in UK
shall not be taxed in UK if :
 he is present in UK for a period not exceeding in
aggregate 183 days during the relevant fiscal year;
 the remuneration is paid by, or on behalf of, an
employer who is not resident of UK, and
 the remuneration is not deductible in computing
the profits of an enterprise chargeable to tax in
UK
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
36
Treaty with United kingdom


Directors’ fees and similar payments derived
by a resident of India in his capacity as a
member of the board of directors of a
company which is a resident of UK may be
taxed in UK.
Taxability at place where the company is
resident
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
37
Treaty with United kingdom


Income derived by entertainers (such as stage,
motion picture, radio or television artistes and
musicians) or athletes, from their personal
activities, whether accruing to themselves or to
any other person, may be taxed in the source
country.
Provisions of the Article would not apply if the
entertainer or the athlete is directly or indirectly
supported, wholly or substantially, from the
public funds of the other Contracting State
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
38
Treaty with United kingdom

Standard as per UN and OECD Model
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
39
Treaty with United kingdom

Any pension, other than a pension referred to
in Art. 19(2) of this Convention, or annuity
paid to a resident of India shall be taxable
only in India.
“CASE OF DOUBLE NON-TAXATION”
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
40
Treaty with United kingdom

Indian residents, who are temporarily present in
UK for purpose of studying, or for securing
necessary training or studying or doing research
as a recipient of a grant, allowance, or award
from governmental, religious, …. organisation
shall not be subject to tax in UK in respect of
following (for a maximum of 5 years):
 Gifts from abroad for the purposes of his
maintenance, education, study, research or training;
 the grant, allowance or award; and
 income from personal services to the extent of 750
sterling pounds for each relevant fiscal year
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
41
Treaty with United kingdom

An individual who visits UK for a period not
exceeding two years for the purpose of
teaching or engaging in research at a
university, college or other recognised
educational institution in UK, and who was
immediately before that visit a resident of
India, shall be exempted from tax by UK.
CAN BE A CASE OF “DOUBLE NON
TAXATION”
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
42
Treaty with United kingdom


Subject to the provisions of para 2 of this Article,
items of income beneficially owned by an Indian
resident, wherever arising, other than income
paid out of trusts or the estates of deceased
persons in the course of administration, which
are not dealt with in the foregoing Articles of
this Convention, shall be taxable only in India.
Notwithstanding the provisions of para 1 & 2,
income of an Indian resident not dealt with in
the other Articles, and arising in UK may be
taxed in UK
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
43
Treaty with United kingdom



Credit for the tax on the income doubly
taxed: Allowed
Underlying tax credit allowed only in UK and
not in India.
(DTAAs of Mauritius and Singapore with India
provide for underlying tax credit in India also)
Tax sparing: allowed in source??? country
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
44
Treaty with United kingdom

This Article has been deleted w.e.f. April 1,
2013
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
45
Treaty with United kingdom


“Nationals” and “enterprises” of other
Country shall not be subjected to taxation in
the source country, which is more
burdensome than that of nationals and
enterprises of the source country.
Discrimination of individuals on the basis of
residence is permitted.
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
46
Treaty with United kingdom

Standard Clause as per UN Model
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
47
Treaty with United kingdom

This Article has been amended by the New Protocol wef 1st
April,2013 and made more stringent in the following respects:
 The two countries can exchange information which is “foreseably
relevant “ as against info which is “necessary” as per the old Article
 If information is requested by 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 standard imitations in Para 3 shall not be construed to
permit a Contracting State to decline to supply information solely
because it has no domestic interest in such information.
 The standard limitations in Para 3 shall not 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.
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
48
Treaty with United kingdom

Inserted by New Protocol w.e.f. 1st April,2013
For instance in case Indian tax authorities
request for examination of a UK Resident
 The representatives of India may request the
competent authority of UK to interview a UK
Citizen and examine records with prior
written consent of the persons concerned.
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
49
Treaty with United kingdom





Inserted by New Protocol w.e.f. 1st April,2013
Contracting States shall lend assistance to each other in the collection of
revenue claims in respect of taxes covered by the Convention
“Revenue claim" means an amount owed in respect of taxes covered by
this Convention as well as interest, administrative penalties and costs of
collection or conservancy related to such amount.
Claim of a contracting state owed by a resident of the other contracting
state may, at request of such contracting state, be collected by the other
contracting state as collection of its own taxes as if the revenue claim
were a revenue claim of that other state.
When a Contracting State may, under its law, take interim measures of
conservancy by freezing of assets before a revenue claim is raised against
a person, the competent authority of the other Contracting State, if
requested by the competent authority of the first mentioned State, shall
take measures for freezing the assets of that person in that Contracting
State in accordance with the provisions of its law.
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
50
Treaty with United kingdom

Benefits of this treaty shall not be available if
the main purpose or one of the main
purposes of the creation or existence of such
a resident or of the transaction undertaken by
him, was to obtain benefits under this treaty.
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
51
Treaty with United kingdom
Nothing in this Convention shall affect the fiscal
privileges of diplomatic or consular officials
under the general rules of international law or
under the provisions of special agreements.
 Notwithstanding the provisions of para 1 of Art.
4 (Fiscal domicile), an individual who is a
member of the diplomatic, consular or
permanent mission of India situated in UK and
who is subject to tax in UK only if derives income
from sources therein, shall not be deemed to be
a resident of UK.

13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
52
53
Treaty with Netherlands




Signed on – July 13th, 1988
Date of coming into force – January 21st, 1989
Year of coming into force – A.Y. 1990-91
Protocol signed on May 10th , 2012 coming
into force from November 2nd , 2012.
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
54
Treaty with Netherlands

Netherland taxes covered include:






Income tax;
Wages tax;
Company tax;
Dividend tax; and
Capital tax
Indian taxes covered include:
 Income tax
 Surtax
 Wealth tax
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
55
Treaty with Netherlands
NATURE OF PE
CONDITIONS
Installation used for
exploration activities
 Construction PE
(Supervision not covered)

Six Month

Six Month
Prep. & Aux. Activities
 Dep. Agent PE

“delivery” not permitted
Third condition “securing
orders” missing
No PE if the DAPE paid
arms’ length commission




13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
56
Treaty with Netherlands
Protocol clarifies that profit of PE to be
determined not w.r.t. full amount but only w.r.t.
remuneration attributable to PE’s activity.
 Protocol clarifies that profit of PE to be
determined not w.r.t. full amount but only w.r.t.
remuneration attributable to PE’s activity.
 MFN Clause for HO expenses - Protocol caps the
restriction U/s. 44C to that existing on date of
signing the Treaty.

13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
57
Treaty with Netherlands

Taxable where place of effective
management is situated.
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
58
Treaty with Netherlands


Profits from the operation of ships in
international traffic shall be taxable only in
the State in which the place of effective
management of the enterprise is situated.
interest on funds connected with the
operation of ships in international traffic shall
be regarded as profits from the operation of
such ships and the provisions of Article 11
shall not apply in relation to such interest.
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
59
Treaty with Netherlands

Tax in source country limited to 10%
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
60
Treaty with Netherlands


Article 12 of India-USA Treaty & MOU to US
Treaty substituted for Article 12 by Protocol.
Protocol provides for MFN in respect of R & D
cess.
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
61
Treaty with Netherlands

Gains from the alienation of ships or aircraft operated
in international traffic shall be taxable only in the
State in which the place of effective management of
the enterprise is situated.

Gains derived by a resident of Netherlands from the
alienation of shares (other than shares quoted on an
approved stock exchange) forming part of a
substantial interest in the capital stock of an Indian
company, the value of which shares is derived
principally from immovable property situated in India
may be taxed in that other State.
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
62
Treaty with Netherlands

A substantial interest exists when the
resident owns 25 per cent or more of the
shares of the capital stock of a company.

Gains from alienation of shares is taxable in
source country unless realized in course of
corporate re-organization / amalgamation
etc.
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
63
Treaty with Netherlands


Unlike in the DTAA with UK, this article is
applicable to all residents.
The limit for the number of days i.e. 183 days
is available to all residents.
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
64
Treaty with Netherlands

Method

Credit Method

Underlying Tax Credit

No

Tax Sparing

No
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
65
Treaty with Netherlands


Inserted w.e.f. November 2nd, 2012
Similar to UK Treaty
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
66
67
Treaty with Singapore
•
Year of coming into force - A.Y. 1995-96
•
Amending Protocol w.e.f. 1st August, 2005
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
68
Treaty with Singapore


Singapore Income tax
Indian taxes covered include Income tax and
any surcharge thereon
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
69
Treaty with Singapore
NATURE OF PE
CONDITIONS
Installation for Natural
Resources
 Only if used for > 120 days in

Construction PE
183 days in a fiscal year

Supervisory PE
183 days in a fiscal year

13/09/2013
a fiscal year.
How To Read A Tax Treaty - By CA Sushil Lakhani
70
Treaty with Singapore
Service PE
for exploration activities
> 183 days in a fiscal year.
For other services
> 90 days in a fiscal year (>30
days for related enterprise)
Prep & Aux Activities
Includes “Occasional Delivery”
Dep. Agent PE
All three alternate tests.
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
71
Treaty with Singapore
Art. 7(1) r.w. 7(8)
Art. 7(3)
13/09/2013
“directly or indirectly”
attributable to PE (similar to
Japan Treaty Protocol).
Deduction of exp. Subject to
domestic law
How To Read A Tax Treaty - By CA Sushil Lakhani
72
Treaty with Singapore

Taxable in country of residence
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
73
Treaty with Singapore

Source country – 10% / 15%
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
74
Treaty with Singapore
Source State Tax
Limited to 10% (Protocol)
Definition of “royalty”
Includes gains from alienation of rights
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
75
Treaty with Singapore




“make available” which
“enables …….. to apply the technology”
Development & Transfer of technical plan /
design covered only if it enables application
of technology.
Excludes services linked to sale of property.
Excludes services in connection with
exploration activities.
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
76
Treaty with Singapore

From all property other
than immovable
property or PE
property or ships /
aircraft
13/09/2013

Taxable only in the
country of residence
of alienator (Protocol)
How To Read A Tax Treaty - By CA Sushil Lakhani
77
Treaty with Singapore
> 90 days in fiscal year
> limited only to – individuals.
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
78
Treaty with Singapore

Taxable @ 15% in source state if the
remuneration deductible in employees’
country against FTS derived by employer.
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
79
Treaty with Singapore

Reduced rate of tax or exemption only
applicable to that part of the income which is
remitted to the residence state.
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
80
Treaty with Singapore

Credit Method

Underlying Tax credit on inbound investment
& outbound investment.

Tax sparing by both countries.
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
81
Treaty with Singapore

Treaty Benefit not available
 where primary purpose was treaty shopping.
 to shell / conduct companies
▪
13/09/2013
where annual expenditure on operations less than
$200,000 or Rs. 50 lakhs in preceding 24 months.
How To Read A Tax Treaty - By CA Sushil Lakhani
82
83
Treaty with Mauritius
•
Treaty
13/09/2013
A.Y. 1983-84
How To Read A Tax Treaty - By CA Sushil Lakhani
84
Treaty with Mauritius

PIB press release dt. 13.4.2000

(Certificate of Residency to be taken as proof
of Residency.)

also refer to SC decision in Azadi Bachao(263
ITR 706 (SC))
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
85
Treaty with Mauritius
Construction & Supervisory PE
Activity > 9 months
Prep & Aux. activities
Delivery not permitted
Dependent Agent
- Third condition of securing orders
absent
- In second condition “fulfill” used
instead of “delivers”
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
86
Treaty with Mauritius

No restriction on deduction of HO expenses
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
87
Treaty with Mauritius

Taxable where “place
management situated”
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
of
effective
88
Treaty with Mauritius
Source Country Tax
No limit
Exemption in source country
To interest paid to government or Bank
or if the loan was approved by
Government (refer DLJMB (228 ITR 268
(AAR) & Yobo (Unreported)
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
89
Treaty with Mauritius
Source Country Tax
Limited to 15%
FTS
Not covered
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
90
Treaty with Mauritius
From shares
13/09/2013
Taxable only in resident country of
alienator.
How To Read A Tax Treaty - By CA Sushil Lakhani
91
Treaty with Mauritius

No time limit specified only test of “fixed
base” provided for.

Available to all residents & not restricted to
individuals.
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
92
Treaty with Mauritius

Taxable only in the resident country
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
93
Treaty with Mauritius



Credit method
Underlying Tax Credit for both inbound &
outbound investment.
Tax sparing by both countries.
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
94
95
Treaty with UAE
•
Limited Air Traffic treaty w.e.f. A.Y. 1991-92
•
Comprehensive Treaty w.e.f.
A.Y. 1995-96
•
Protocol Amending w.e.f.
A.Y. 2009-10
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
96
Treaty with UAE


Concept
UAE Individual
(By Protocol)
UAE Company
(By Protocol)
 UAE Govt. & Govt.
Institutions
 Abu Dhabi Invt.
Authority

13/09/2013
“Liable to tax”
Physical presence of
183 days in the
calendar year
 Managed & controlled
wholly in UAE
 Deemed to Resident in
UAE
 Deemed to Resident in
UAE


How To Read A Tax Treaty - By CA Sushil Lakhani
97
Treaty with UAE
Construction PE
“Supervision” included
Service PE
If service continue for 9 month within any
12 month period
Prep. & Aux Activities
“delivery” permitted
Dependent Agent PE
Only one test of “authority to conclude
contracts”
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
98
Treaty with UAE

Deduction of Expenses (Art. 7(3) –
Subject to domestic law (by Protocol)
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
99
Treaty with UAE

Where taxable – Taxable in country of
Residence
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
100
Treaty with UAE

Source Country Tax – Limited to 10%
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
101
Treaty with UAE

Source Country Tax – Limited to 5% / 12.5%
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
102
Treaty with UAE

Exclusions from def. of “royalty” –
royalty or other payments for operation of
mines or quarries or exploitation of
petroleum or natural resources.

“FTS” not covered
implications ?
13/09/2013
by
How To Read A Tax Treaty - By CA Sushil Lakhani
the
Treaty
–
103
Treaty with UAE

On Shares - Taxable in source country
(By protocol)
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
104
Treaty with UAE
No. of days of physical presence
183 days in the fiscal year
Whether limited to individuals & firms
No; available to all residents
13/09/2013
How To Read A Tax Treaty - By CA Sushil Lakhani
105
Treaty with UAE



Method
Tax Sparing in UAE
Underlying Tax Credit
13/09/2013
-
How To Read A Tax Treaty - By CA Sushil Lakhani
Credit Method
Yes
No
106
Treaty with UAE

Taxability of PE at a
higher rate
13/09/2013
–
How To Read A Tax Treaty - By CA Sushil Lakhani
Permitted
107
Treaty with UAE

By Protocol -

No objective test specified like in Singapore
Treaty or USA Treaty
13/09/2013
No treaty benefits if the
main purpose was to
obtain the treaty
benefit
How To Read A Tax Treaty - By CA Sushil Lakhani
108
109