CBDT has released the synthesised text for India-Slovak Republic tax treaty. It represents their shared understanding of the modifications made to the Agreement by MLI.
SLOVAK REPUBLIC
AGREEMENT FOR AVOIDANCE OF DOUBLE TAXATION AND PREVENTION OF FISCAL EVASION WITH – SLOVAK REPUBLIC
Whereas a Agreement between the Government of the Republic of India and the Government of the Czechoslovak Socialist Republic was signed on the 27th January, 1986 for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and the same was published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R.526 (E), dated the 25th of May, 1987;
And whereas the Slovak Republic is one of the independent States that have succeeded the Czechoslovak Socialist Republic;
And whereas under the applicable international laws regarding application of treaties in case of succession of States, this Agreement continues to be applicable in respect of the Slovak Republic, being one of the independent States to have succeeded the Czechoslovak Socialist Republic;
Now, therefore, in exercise of the powers conferred by section 119 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby clarifies that for the purposes of section 90 of the said Act, the Agreement signed between the Government of the Republic of India and the Government of the Czechoslovak Socialist Republic on the 27th January 1986 for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income continues to be applicable to the residents of the Slovak Republic.
NOTIFICATION NO: G.S.R. 526(E) [NO. 7311(F.NO. 11/22/66-FTD)], DATED 25-5-1987 READ WITH, NOTIFICATION NO: SO 813(E) [NO.25/2015 (F.NO.501/12/1995-FTD-I)], DATED 23-3-2015
ANNEXURE
Whereas the Government of India and the Government of the Czechoslovak Socialist Republic have concluded an agreement as set out in the Annexure hereto, for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income;
And whereas all the requirements have been completed in India and Czechoslovakia as are necessary to give the said agreement the force of law in India and Czechoslovakia respectively, as required by Article 28 of the said Agreement;
And whereas the diplomatic notes to this effect have been exchanged between the said two Governments, as required by Article 28 of the said agreement;
Now, therefore, in exercise of the powers conferred by section 90 of the Income-tax Act, 1961 (43 of 1961), and section 24A of the Companies (Profits) Surtax Act, 1964 (7 of 1964), the Central Government hereby directs that all the provisions of the said Agreement shall be given effect to in the Union of India.
AGREEMENT BETWEEN THE GOVERNMENT OF INDIA AND THE GOVERNMENT OF THE CZECHOSLOVAK SOCIALIST REPUBLIC FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME
The Government of India and the Government of the Czechoslovak Socialist Republic,
Desiring to conclude an agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income,
Have agreed as follows:
ARTICLE 1
PERSONAL SCOPE
This agreement shall apply to persons who are residents of one or both of the Contracting States.
ARTICLE 2
TAXES COVERED
1. The taxes to which this agreement shall apply are:
(a) In the case of India:
(1) the income-tax including any surcharge thereon imposed under the Income-tax Act, 1961 (43 of 1961);
(2) the surtax imposed under the Companies (Profits) Surtax Act, 1964 (7 of 1964); , (hereafter referred to as “Indian tax”)
(b) In the case of Czechoslovakia:
(1) the taxes on profits;
(2) the wages tax;
(3) the tax on income from literary and artistic activities;
(4) the agricultural tax;
(5) the tax on population income;
(6) the house tax;
(hereafter referred to as “Czechoslovak tax”)
2. The agreement shall also apply to any identical or substantially similar taxes which are imposed by either Contracting State after the date of signature of the present agreement in addition to, or in place of, the taxes referred to in paragraph 1 of this Article.
3. At the end of each year, the competent authorities of the Contracting States shall notify to each other any significant changes which have been made in their respective laws governing the taxes which are the subject of this agreement and furnish copies of relevant enactments and regulations.
ARTICLE 3
GENERAL DEFINITIONS
1. In 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, and jurisdictions, according to the Indian law and in accordance with International law/U.N. Convention on the Law of the Sea;
(b) the term “Czechoslovakia” means the Czechoslovak Socialist Republic;
(c) the terms “a Contracting State” and “the other Contracting State” mean India or Czechoslovakia, as the context requires;
(d) the term “tax” means Indian tax or Czechoslovak tax, as the context requires;
(e) the term “person” shall have the meaning assigned to it in the taxation laws in force in the respective Contracting States;
(f) the term “company” means any body corporate or any entity which is treated as a company under the taxation laws of the respective Contracting States;
(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 “competent authority” means in the case of India, the Central Government in the Ministry of Finance (Department of Revenue); and in the case of Czechoslovakia, the Minister of Finance of the Czechoslovak Socialist Republic or his duly authorised representative.
2. In the application of the provisions of this agreement by one of the Contracting States, any term not defined herein shall, unless the context otherwise requires, have the meaning which it has under the laws in force in that Contracting State relating to the taxes which are the subject of this Agreement.
ARTICLE 4
FISCAL DOMICILE
1. For the purposes of this agreement, the term “resident of a Contracting State” means any person who is a resident of that Contracting State in accordance with the taxation laws of that Contracting State.
2. Where, by reason of the provisions of paragraph 1, an individual is a resident of both Contracting States, then his residential status for the purposes of this agreement shall be determined in accordance with the following rules:-
(a) He shall be deemed to be a resident 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 deemed to be a resident of the Contracting State with which his personal and economic relations are closer (hereinafter referred to as his “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 Contracting State, he shall be deemed to be a resident of the Contracting State in which he has an habitual abode;
(c) If he has an habitual abode in both Contracting States or in neither of them, he shall be deemed to be a resident of the Contracting State of which he is a national;
(d) If he is a national of both Contracting States or of neither of them, the competent authorities of the Contracting 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 both the Contracting States, then it shall be deemed to be a resident of the Contracting State in which its place of effective management is situated.
ARTICLE 5
PERMANENT ESTABLISHMENT
1. For the purposes of this agreement, the term “permanent establishment” means a fixed place of business in which the business of the enterprise is wholly or partly carried on.
2. The term “permanent establishment” shall include:
(a) a place of management;
(b) a branch;
(c) an office;
(d) a factory;
(e) a workshop or a warehouse;
(f) a mine, a quarry, an oil field or other place of extraction of natural resources;
1(g) a building site or construction or assembly project or supervisory activities in connection therewith, where such site, project or supervisory activity continues for a period of more than six months, or where such project or supervisory activity, being incidental to the sale of machinery or equipment, continues for a period not exceeding six months and the charges payable for the project or supervisory activity exceed 10 per cent of the sale price of the machinery or equipment.
3. The term “permanent establishment” shall not be deemed to include:
2(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 stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by an enterprise of the other Contracting State;
(d) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise or for collecting information, for the enterprise;
(e) the maintenance of a fixed place of business solely for the purpose of advertising, for the supply of information or for scientific research, being activities solely of a preparatory or auxiliary character in the trade or business of the enterprise. However, this provision shall not be applicable where the enterprise maintains any other fixed place of business in the other Contracting State for any purpose or purposes other than the purposes herein specified.
4. A person acting in a Contracting State for or on behalf of an enterprise of the other Contracting State – other than an agent of an independent status to whom paragraph 5 applies – shall be deemed to be a permanent establishment of that enterprise in the first mentioned Contracting State if:
(a) he has, and habitually exercises in that Contracting State, an authority to negotiate and enter into contracts for or on behalf of the enterprise, unless his activities are limited to the purchase of goods or merchandise for the enterprise; or
(b) he habitually maintains in the first mentioned Contracting State a stock of goods or merchandise belonging to the enterprise from which he regularly delivers goods or merchandise for or on behalf of the enterprise; or
(c) he habitually secures orders in the first mentioned Contracting State exclusively or almost exclusively, for the enterprise itself, or for the enterprise and other enterprises which are controlled by it or have a controlling interest in it.
5. An enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that other State through a broker, general commission agent or any other agent of an individual status, where such persons are acting in the ordinary course of their business.
6. 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 Contracting State (whether through a permanent establishment or otherwise) shall not, of itself, constitute either company a permanent establishment of the other.
7. An enterprise of a Contracting State shall be deemed to have a permanent establishment in the other Contracting State if it carries on business which consists of providing the services of public entertainers (such as stage, motion picture, radio or television artists and musicians) or athletes in that other Contracting State unless the enterprise is directly or indirectly supported wholly or substantially, from the public funds of the Government of the first mentioned Contracting State in connection with the provision of such services.
ARTICLE 6
INCOME FROM IMMOVABLE PROPERTY
1. Income from immovable property may be taxed only in the Contracting State in which such property is situated.
2. The term “immovable property” shall be defined in accordance with the law and usage of the Contracting State in which the property 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, oilwells, quarries and other places of extraction of natural resources. Ships and aircraft shall not be regarded as immovable property.
3. The provisions of paragraph 1 shall apply to income derived from the direct use, letting, or use in any other form of immovable property.
4. The provisions of 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 professional services.
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 (a) that permanent establishment; (b) sales in that other State of goods or merchandise of the same or similar kind as those sold through that permanent establishment; or (c) other business activities carried on in that other State of the same or similar kind as those effected through 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. In any case, where the correct amount of profits attributable to a permanent establishment is incapable of determination or the determination thereof presents exceptional difficulties, the profits attributable to the permanent establishment may be estimated on a reasonable basis:
3. In the determination of the profits of a permanent establishment, there shall be allowed as deduction expenses which are incurred for the purposes of the business of the permanent establishment including executive and general administrative expenses so incurred, whether in the State in which the permanent establishment is situated or elsewhere, in accordance with the provisions of and subject to the limitation of the taxation 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 a banking enterprise, 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. 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.
5. 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.
6. Where profits include items of income which are dealt with separately in other Articles of this agreement, then the provisions of these Articles shall not be affected by the provisions of this Article.
ARTICLE 8
AIR TRANSPORT
1. Income derived from the operation of aircraft by an enterprise of one of the Contracting States shall not be taxed in the other Contracting State unless the aircraft is operated wholly or mainly between places within that other Contracting State.
2. Paragraph 1 shall likewise apply in respect of participations in pools of any kind by enterprises engaged in air transport.
3. For the purpose of paragraph 1, interest on funds directly connected with the operation of aircraft in international traffic shall be regarded as income from the operation of such aircraft.
ARTICLE 9
ASSOCIATED ENTERPRISES
Where—
(a) an enterprise of a Contracting State participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting State, or
(b) the same persons participate directly or indirectly in the management, control or capital of an enterprise of a Contracting State and an enterprise of the other Contracting State,
and in either case conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which 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.
ARTICLE 10
DIVIDENDS
1. Dividends paid by a company which is 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 recipient is the beneficial owner of the dividends, the tax so charged shall not exceed:
(a) 15 per cent of the gross amount of the dividends if the beneficial owner is a company which owns at least 25 per cent of the shares of company paying the dividends;
(b) 25 per cent of the gross amount of the dividends in all other cases.
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 or performs in that other State independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment or fixed base. In such case, the provisions of Article 7, or Article 14, as the case may be, shall apply.
5. Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company except in so far as such dividends are paid to a resident of that other State or so far as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other State, nor subject the company’s undistributed profits to a tax on the company’s undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State.
ARTICLE 11
INTEREST
1. Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.
2. However, such interest may also be taxed in the Contracting State in which it arises and according to the laws of that State, but if the recipient is the beneficial owner of the interest, the tax so charged shall not exceed 15 per cent of the gross amount of the interest.
3. Notwithstanding the provisions of paragraph 2,—
(a) interest arising in a Contracting State shall be exempt from tax in that State provided it is derived and beneficially owned by:
(i) the Government, a political sub-division or a local authority of the other Contracting State; or
(ii) the Central Bank of the other Contracting State;
(b) interest arising in a Contracting State shall be exempt from tax iff that State if it is beneficially owned by a resident of the other Contracting State and is derived in connection with a loan or credit extended or endorsed by:
(i) in the case of Czechoslovakia, the Czechoslovakian, the Czechoslovakian obchondni banka, to the extent such interest is attributable to financing of exports and imports only;
(ii) in the case of India, the Export-Import Bank of India (Exim Bank), to the extent such interest is attributable to financing of exports and imports only;
(iii) any institution of a Contracting State in charge of public financing of external trade;
(iv) any other person, provided that the loan or credit is approved by the Government of the first-mentioned Contracting State.
4. The term “interest” as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor’s profits, and in particular, income from Government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures. Penalty charges for late payment shall not be regarded as interest for the purpose of this Article.
5. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the debt claims in respect of which the interest is paid is effectively connected with such permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply.
6. Interest shall be deemed to arise in a Contracting State when the payer is that Contracting State itself, a political sub-division, a local authority or 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 or a fixed base in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment or fixed base, then such interest shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated.
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 to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of such Contracting State, due regard being had to the other provisions of this Agreement.
ARTICLE 12
ROYALTIES AND FEES FOR TECHNICAL SERVICES
1. Royalties and fees for technical 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 and fees for technical services may also be taxed in the Contracting State in which they arise and according to the laws of that State, but if the recipient is the beneficial owner of the royalties, or fees for technical services, the tax so charged shall not exceed 30 per cent of gross amount of the royalties or fees for technical services.
3. The term “royalties” as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work, including cinematograph films or films or tapes used for radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for the use, or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience.
4. The term “fees for technical Services” as used in this article means payments of any amount to any person other than payments to an employee of a person making payments, in consideration for the services of a managerial, technical or consultancy nature, including the provision of services of technical or other personnel.
5. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner or the royalties or fees for technical services, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties or fees for technical services arise, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right, property or contract in respect of which the royalties or fees for technical services are paid is effectively connected with such permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply.
6. Royalties and fees for technical services shall be deemed to arise in a Contracting State when the payer is that State itself, a political sub-division, a local authority or a resident of that State. Where, however, the person paying the royalties or fees for technical services, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the liability to pay the royalties or fees for technical services was incurred, and such royalties or fees for technical services are borne by such permanent establishment or fixed base, then such royalties or fees for technical services shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.
7. Where, by reason of special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of royalties or fees for technical services paid exceeds the amount which would have been paid 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 or of movable property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, including such gains from the alienation of such a permanent establishment (alone or together with the whole enterprises) or of such fixed base, may be taxed in that other State.
3. Gains from the alienation of ships or aircraft operated in international traffic or movable property pertaining to the operation of such ships or aircraft shall be taxable only in the Contracting State of which the alienator is a resident.
4. Gains from the alienation of shares of the capital stock of a company the property of which consists directly or indirectly 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 mentioned in paragraphs 1, 2, 3, 4 and 5 shall be taxable only in the Contracting State of which the alienator is a resident.
ARTICLE 14
INDEPENDENT PERSONAL SERVICES
1. Income derived by an individual who is a resident of a Contracting State from the performance of professional services or other independent activities of a similar character shall be taxable only in that State except in the following circumstances when such income may also be taxed in the other Contracting State:
(a) if he has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities; in that case, only so much of the income as is attributable to that fixed base may be taxed in that other State; or
(b) if his stay in the other Contracting State is for a period or periods amounting to or exceeding in the aggregate 90 days in the relevant “previous year” or “year of income”, as the case may be, in that case only so much of the income as is derived from his activities performed in that other State may be taxed in that other State.
2. The term “professional services” includes independent scientific literary, artistic, educational or teaching activities, as well as the independent activities of physicians, surgeons, lawyers, engineers, architects, dentists and accountants.
ARTICLE 15
DEPENDENT PERSONAL SERVICES
1. Subject to the provisions of Articles 16, 17, 18, 19, 20 and 21, 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 the relevant “previous year” or “year of income”, as the case may be; 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 16
DIRECTORS’ FEES & REMUNERATION OF TOP LEVEL MANAGERIAL OFFICIALS
1. Directors’ fees and 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.
2. Salaries, Wages and other similar remuneration derived by a resident of a Contracting State in his capacity as an official in a top level managerial position of a company which is a resident of the other Contracting State may be taxed in that other State.
ARTICLE 17
ARTISTES AND ATHLETES
1. Notwithstanding the provisions of Articles 14 and 15, income derived by public entertainers (such as stage, motion picture, radio or television artists and musicians) or athletes, from their personal activities as such may be taxed only in the Contracting State in which these activities are exercised:
Provided that such income shall not be taxed in the said Contracting State if the visit of the public entertainers or athletes to that State is directly or indirectly supported, wholly or substantially, from the public funds of the other Contracting State.
2. For the purposes of this Article, the term “public funds” means the funds of a Contracting State or its political sub-divisions, or local or statutory authorities.
ARTICLE 18
REMUNERATION AND PENSIONS IN RESPECT OF GOVERNMENT SERVICE
1. (a) Remuneration, other than a pension, paid by a Contracting State or a political sub division or a local authority thereof to an individual in respect of services rendered to that State or sub-division or authority shall be taxable only in that State.
(b) However, such remuneration shall be taxable only in the other Contracting State if the services are rendered in that other 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 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 other State.
3. The provisions of Articles 15,16 and 17 shall apply to remuneration and pensions in respect of services rendered in connection with a business carried on by a Contracting State or a political sub-division or local authority thereof.
ARTICLE 19
NON-GOVERNMENT PENSIONS AND ANNUITIES
1. Any pension, other than a pension referred to in Article 18, or any annuity derived by a resident of a Contracting State from sources within the other Contracting State may be taxed only in the first-mentioned Contracting State.
2. The term “pension” means a periodic payment made in consideration of past services or by way compensation for injuries received in the course of performance of services.
3. The term “annuity” means a stated sum payable periodically at stated times during life or during a specified or ascertainable period of time, under an obligation to make the payments in return for adequate and full consideration in money or money’s worth.
ARTICLE 20
STUDENTS AND APPRENTICES
1. An individual who is a resident of one of the Contracting State and is temporarily present in the other Contracting State solely,—
(a) as a student at a recognized university, college or school in that other Contracting State, or
(b) as a business apprentice, or
(c) as the recipient of a grant, allowance, or award for the primary purpose of study or research from a Governmental, religious, charitable, scientific, literary or educational organisation,
shall not be subjected to tax in that other Contracting State—
(aa) on the remittances from abroad for the purposes of his maintenance, education, training, study or research, and
(bb) the grant, allowance or award.
2. For the purposes of this Article and Article 21, an individual shall be deemed to be a resident of a Contracting State if he is resident in that Contracting State in the “previous year” or calendar year, as the case may be, in which he visits the other Contracting State or in the immediately preceding “previous year” or calendar year.
ARTICLE 21
PAYMENTS RECEIVED BY PROFESSORS, TEACHERS AND RESEARCH SCHOLARS
1. A professor or teacher who is or was a resident of one of the Contracting States immediately before visiting the other Contracting State for the purpose of teaching or engaging in research or both, at a university, college, school or other approved institution in that other Contracting State shall be exempt from tax in that other State on any remuneration for such teaching or search for a period not exceeding two years from the date of his arrival in that other State.
2. This Article shall not apply to income from research if such research is undertaken primarily for the private benefit of a specific person or persons.
3. For the purposes of paragraph 1, “approved institution” means an institution which has been approved in this regard by the competent authority of the concerned Contracting State.
ARTICLE 22
OTHER INCOME
1. Subject to the provisions of paragraph 2, items of income of a resident of a Contracting State, wherever arising, which are not expressly dealt with in the foregoing Articles of this Agreement, shall be taxable only in that Contracting 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, or performs in that other State independent personal services from a fixed base situated therein and the right or property in respect of which the income is paid is effectively connected with such permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply.
3. Notwithstanding the provisions of paragraphs 1 and 2, items of income of a resident of a Contracting State not dealt with in the foregoing Articles of this Agreement and arising in the other Contracting State may be taxed in that other State.
ARTICLE 23
ELIMINATION OF DOUBLE TAXATION
1. The laws in force in either of the Contracting States will continue to govern the taxation of income in the respective Contracting States except where provisions to the contrary are made in this Agreement.
2. In both the Contracting States, double taxation will be avoided in the following manner:
(a) Where a resident of a Contracting State derives income which in accordance with the provisions of this Agreement, may be taxed in the other Contracting State, the first-mentioned State shall, subject to the provisions of sub-paragraph (b) of this paragraph, exempt such income from tax but may, in calculating tax on the remaining income of that person, apply the rate of tax which would have been applicable if the exempted income had not been so exempted.
(b) Either of the Contracting States, when imposing taxes on its residents may include in the tax base upon which such taxes are imposed, the items of income which according to the provisions of Articles 10, 11 and 12 of this Agreement may also be taxed in the other State but shall allow as a deduction from the amount of tax computed on such a base an amount equal to the tax paid in the other Contracting State. Such deduction shall not, however, exceed that part of tax leviable by the first-mentioned State, as computed before the deduction is given, which is appropriate to the income which, in accordance with the provisions of Articles 10, 11 and 12 of this Agreement may be taxed in the other State.
3. For the purposes of sub-paragraph (b) of paragraph 2, the term “tax paid in the other Contracting State” shall be deemed to include any amount which would have been payable as tax but for any relief by way of the deduction allowed in computing the taxable income or an exemption or a reduction of tax or otherwise under the laws relating to taxation of income in force in that other Contracting State.
ARTICLE 24
NON-DISCRIMINATION
1. The 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 resident nationals of that other State in the same circumstances and under the same conditions are or may be subjected.
2. The taxation on a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favourably levied in that other State than the taxation levied on enterprises of that other State carrying on the same activities in the same circumstances or under the same conditions.
3. Nothing contained in this Article shall be construed as obliging a Contracting State to grant to persons not resident in that State any personal allowances, reliefs and reductions for taxation purposes which are by law available only to persons who are so resident.
4. Enterprises of a Contracting State, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State, shall not be subjected in the first-mentioned Contracting 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 that first-mentioned State are or may be subjected in the same circumstances and under the same conditions.
5. In this Article, the term “taxation” means taxes which are the subject of this Agreement.
ARTICLE 25
MUTUAL AGREEMENT PROCEDURE
1. Where a resident of a Contracting State considers that the actions of one or both of the Contracting States results or will result for him in taxation not in accordance with this Agreement, he may, notwithstanding the remedies provided by the national laws of those States, present his case to the competent authority of the Contracting State of which he is a resident. This case must be presented within three years of the date of receipt of notice of the action which gives rise to taxation not in accordance with 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 an appropriate solution, to resolve the case by mutual agreement with the competent authority of the other Contracting State, with a view to avoidance of taxation not in accordance with the agreement. Any agreement reached shall be implemented notwithstanding any time limits in the national laws 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 for the purposes of reaching an agreement in the sense of the preceding paragraphs. When it seems advisable in order to reach an 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 26
EXCHANGE OF INFORMATION
1. The competent authorities of the Contracting States shall exchange such information or document as is necessary for carrying out the provisions of this Agreement or for the prevention or detection of evasion or avoidance of the taxes which are the subject of this Agreement. Any information or document so exchanged shall be treated as secret but may be disclosed to persons (including a court or administrative body) concerned with the assessment, collection, enforcement, investigation or prosecution in respect of the taxes which are the subject of this Agreement, or any frauds connected therewith, or to persons with respect to whom the information or document relates.
2. The exchange of information or documents shall be either on a routine basis or on request with reference to particular cases. The competent authorities of the Contracting States shall agree from time to time on the list of the information or documents which shall be furnished on a routine basis.
3. In no case shall the provisions of paragraph 1 be construed so as to impose on a Contracting State the obligation:
(a) to carry out administrative measures at variance with the laws or administrative practice of that or of the other Contracting State;
(b) to supply information or documents which are 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 or documents 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.
ARTICLE 27
DIPLOMATIC AND CONSULAR OFFICIALS
Nothing in this Agreement shall affect the fiscal privileges of diplomatic or consular officials under the general rules of International law or under the provisions of special agreements.
ARTICLE 28
ENTRY INTO FORCE
Each of the Contracting States shall notify to the other the completion of the procedures required by its law for the bringing into force of this Agreement. This Agreement shall enter into force on the date of the later of these notifications and shall thereupon have effect:
(a) in India, in respect of income arising in any previous year beginning on or after the first day of April, 1985;
(b) in Czechoslovakia, in respect of income arising in any year of income beginning on or after the first day of January, 1985.
ARTICLE 29
TERMINATION
This Agreement shall remain in force indefinitely but either of the Contracting States may, on or before the thirtieth day of June in any calendar year beginning after the expiration of a period of five years from the date of its entry into force, give the other Contracting State through diplomatic channels, written notice of termination and, in such event, this Agreement shall cease to have effect:
(a) in India, in respect of income arising in any previous year beginning on or after the 1st day of April next following the calendar year in which the notice is given;
(b) in Czechoslovakia, in respect of income arising in any year of income beginning on or after the 1st day of January next following the calendar year in which the notice of termination is given.
In witness whereof, the undersigned, being duly authorised thereto, have signed the present Agreement.
Done in duplicate at New Delhi this 27th day of January one thousand nine hundred and eighty six in the English language.
PROTOCOL
At the time of signing the Agreement for the Avoidance of Double Taxation and the prevention of fiscal evasion with respect to taxes on income, this day concluded between the Government of India and the Government of the Czechoslovak Socialist Republic, the undersigned Plenipotentiaries have agreed that the following provisions shall form an integral part of the Agreement.
I. ARTICLE 5 – (Permanent Establishment)
(i) The term ”assembly project” as used in clause (g) of paragraph 2 includes installation of equipment.
(ii) The provisions of clauses (a) and (b) of paragraph 3 shall apply, mutatis mutandis, to a case where the use of facilities or maintenance of stock of goods or merchandise is, in addition to storage or display, for the purpose of delivery of spare parts, and components by way of replacement, during the period of the respective contract, from stock of goods stored in the Contracting State.
II. ARTICLE 8 – (Air Transport)
Notwithstanding anything contained in Article 28, the provisions of Article 8 relating to Air Transport shall be applicable from 1st January, 1961, and the tax paid, if any, will be refunded on application being made within twelve months of the entry into force of the Agreement.
No. PRA/204/2/86-Com-dated 14th April, 1986.
1. The Embassy of India presents its compliments to the Federal Ministry of Foreign Affairs, Government of the Czechoslovak Socialist Republic and with reference to Article 28 of the Agreement between the Government of India and the Government of the Czechoslovak Socialist Republic for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, signed at New Delhi on the 27th January, 1986, has the honour to state that the Government of India have complied with the requirements necessary for bringing into force of the Agreement.
2. Accordingly, the Embassy has the honour further to state that the aforesaid Agreement will enter into force with a similar note confirming that the Government of the Czechoslovak Socialist Republic have also complied with the requirements of Article 28 of the said Agreement.
3. The Embassy of India avails itself of the opportunity to renew to the Federal Ministry of Foreign Affairs the assurances of its highest consideration.
No. 1042/87.
The Embassy of the Czechoslovak Socialist Republic in India presents its compliments to the Ministry of External Affairs, Government of India, and has the honour to notify that the Agreement between the Government of the Czechoslovak Socialist Republic and the Government of the Republic of India for the Avoidance of Double Taxation and the prevention of fiscal evasion with respect to taxes on income, signed in New Delhi on 27th January, 1986, has been, as required in Article 28 of the said Agreement, duly ratified in accordance with the Czechoslovak legal regulations.
The Embassy of the Czechoslovak Socialist Republic avails itself of this opportunity to renew to the Ministry of External Affairs the assurances of its highest consideration.
