7. Agreement for avoidance of
double taxation and prevention of fiscal evasion with Bulgaria
Whereas the
annexed Convention between the Government of the Republic of India and the
Government of the Republic of Bulgaria for the avoidance of double taxation and
the prevention of fiscal evasion with respect to taxes on income and on capital
has come into force on the 23rd June, 1995, after the notification by both the
Contracting States to each other of the completion of the procedures required
under their laws for the bringing into force of the said Convention in
accordance with Article 30 of the said Convention;
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 Convention shall be given effect to in the Union of
Notification : No. GSR 205(E), dated 9-5-1996.
ANNEXURE
CONVENTION BETWEEN THE GOVERNMENT OF THE REPUBLIC OF INDIA AND THE
GOVERNMENT OF THE REPUBLIC OF BULGARIA FOR THE AVOIDANCE OF DOUBLE TAXATION AND
THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND ON CAPITAL
The Government
of the
desiring to
further expand and facilitate mutual economic relations,
have resolved
to conclude a Convention for the avoidance of double taxation and the
prevention of fiscal evasion with respect to taxes on income and on capital and
have agreed as follows :
Article 1 : Personal scope -
This Convention shall apply to persons who are residents of one or both of the
Contracting States.
Article 2 : Taxes covered -
1. The taxes to which the Convention shall apply are :—
(a) In
(i) the income-tax, including any surcharge
thereon; and
(ii) the wealth-tax;
(hereinafter referred to as
“Indian tax”);
(b) In
(i) the tax on total income;
(ii) the tax on profits; and
(iii) the tax on buildings;
(hereinafter referred to as “Bulgarian
tax”).
2. This Convention shall also apply to any
identical or substantially similar taxes which are imposed by either
Article 3 : General
definitions - 1. In this Convention, 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 laws and in accordance with International law;
(b) the term “Bulgaria” means the Republic of Bulgaria, and, when used
in a geographical sense means the territory over which it exercises its State
sovereignty, as well as the continental shelf and exclusive economic zone over
which it exercises sovereign rights and jurisdiction according to international
law;
(c) the terms “Contracting State” and “the other Contracting State”
mean India or Bulgaria, as the context requires;
(d) the term “tax” means Indian tax or Bulgarian 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 Convention applies
or which represents a penalty imposed relating to those taxes;
(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 or a body corporate under the taxation laws in force in
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) or their
authorized representative; and in the case of Bulgaria - the Minister of
Finance or his authorized representative;
(i) the term “international traffic” means any
transport by a ship or aircraft operated by an enterprise of a Contracting
State, except when the ship or aircraft is operated solely between places in
the other Contracting State.
2. As regards the application of this Convention
by a Contracting State, any term not defined herein shall, unless the context
otherwise requires, have the meaning which it has under the law of that State
concerning the taxes to which the Convention applies.
Article 4 : Resident - 1.
For the purposes of this Convention, the term “resident of a Contracting State”
means :
(a) in the case of India, any person who, under the laws of India, is
liable to tax therein by reason of his domicile, residence, place of management
or any other criterion of a similar nature;
(b) in the case of Bulgaria, any individual who is national of
Bulgaria, as well as any legal person which has its head office in Bulgaria or
is registered therein.
2. (a) Where by reason of the provisions
of paragraph 1 of this Article, an individual is a resident of both Contracting
States, then he shall be deemed to be a resident 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, the competent authorities of the Contracting States shall settle
the question by mutual agreement.
3. Where by reason of the provisions of
paragraph 1 of this Article, a person other than an individual is a resident of
both Contracting States, then it shall be deemed to be a resident of the State
in which its place of effective management is situated.
Article 5 : Permanent
establishment - 1. For the purposes of this Convention, the term
“permanent establishment” means a fixed place of business through which the
business of the enterprise is wholly or partly carried on separately or
together with other persons.
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 mine, an oil or gas well, a quarry or any other place of
extraction of natural resources;
(g) a warehouse in relation to a person providing storage facilities
for others;
(h) an installation on structure used for the exploration or
exploitation of natural resources;
(i) a building site or construction, installation
or assembly project or supervisory activities in connection therewith, where
such site, projects or activities (together with other such sites, projects or
activities, if any) continue for a period of more than six months :
Provided that for the purpose of this paragraph an
enterprise shall be deemed to have a permanent establishment in a Contracting
State and to carry on business through that permanent establishment if it
provides services or facilities in connection with or supplies plant and
machinery on hire, used or to be used in the prospecting for, or extraction or
production of mineral oils in the State.
3. Notwithstanding the preceding provisions of
this Article, the term “permanent establishment” shall not be deemed to include
:
(a) the use of facilities solely for the purpose of storage or display
of goods or merchandise belonging to the enterprise;
(b) the maintenance of a stock of goods or merchandise belonging to the
enterprise solely for the purpose of storage or display;
(c) the maintenance of a stock of goods or merchandise belonging to the
enterprise solely for the purpose of processing by another enterprise;
(d) the maintenance of a fixed place of business solely for the purpose
of purchasing goods or merchandise, or of collecting information, for the
enterprise;
(e) the maintenance of a fixed place of business solely for the purpose
of advertising, for the supply of information, for scientific research, or for
similar activities which have a preparatory or auxiliary character, for the
enterprise;
(f) the selling of goods or merchandise belonging to the enterprises
displayed in an occasional temporary fair or exhibition in the process of closing
down of such fair or exhibition; and
(g) the maintenance of a fixed place of business solely for any
combination of activities mentioned in sub-paragraphs (a) to (f),
provided that overall activity of the fixed place of business resulting from
this combination is of a preparatory or auxiliary character.
However, the
provisions of sub-paragraphs (a) to (g) shall not be applicable
where the enterprise maintains any other fixed place of business in the other
Contracting State for any purposes other than the purposes specified in the
said sub-paragraphs.
4. Notwithstanding the provisions of paragraphs
1 and 2, where a person - other than an agent of an independent status to whom
paragraph 5 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, if,
(a) he has, and habitually exercises in that State an authority to
conclude contracts on behalf of the enterprise, unless his activities are
limited to the purchase of goods or merchandise for the enterprise;
(b) he has no such authority, but habitually maintains in the
first-mentioned State a stock of goods or merchandise from which he regularly
delivers goods or merchandise on behalf of the enterprise;
(c) he habitually secures orders in the first-mentioned State, wholly
or almost wholly for the enterprise itself or for the enterprise and other
enterprises in which the first-mentioned enterprise has a majority
participation, or for the enterprise and other enterprises which have a
majority participation in the first-mentioned enterprise.
5. An enterprise of a Contracting State shall
not be deemed to have a permanent establishment in the other Contracting State
merely because it carried on business in that other State through a broker, a
general commission agent or any other agent of an independent status, provided
that 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 the
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 (including income from agriculture or
forestry) 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 laws of the Contracting State in which the
property in question is situated. The term shall in any case include property
accessory to immovable property, 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 and
aircraft shall not be regarded as immovable property.
3. The provisions of paragraph 1 shall also
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.
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, 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 attribute to that permanent establishment
the profits which it might be expected to make if it were a distinct and
separate enterprise engaged in the same or similar activities under the same or
similar conditions and dealing wholly independently with the enterprise of
which it is a permanent establishment.
3. In 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.
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 the profits include items of income which
are dealt with separately in other Articles of this Convention, then the
provisions of those Articles shall not be affected by the provisions of this
Article.
Article 8 : Air transport -
1. Profits derived by an enterprise of a Contracting State from the
operation of aircraft in international traffic shall be taxable only in that
State.
2. The provisions of paragraph 1 shall also
apply to profits from the participation in a pool, a joint business or an
international operating agency.
3. The provisions of paragraphs 1 and 2 shall
also apply where the enterprise has an office or agency in the other State for
the transportation of goods or persons. However, this shall apply only to
activities directly connected with the business of the operation of aircraft in
inter-national traffic.
4. For the purposes of this Article, interest on
funds connected with the operation of aircraft in international traffic shall
be regarded as profits derived from the operation of such aircraft, and the
provisions of Article 12 shall not apply in relation to such interest.
5. The term “operation of aircraft” shall mean
business of transportation by air of passengers, mail, livestock or goods
carried on by the owners or lessees or charterers of aircraft, including the
sale of tickets for such transportation on behalf of other enterprises, the
incidental lease of aircraft and any other activity directly connected with
such transportation.
Article 9 : Shipping - 1.
Income derived by an enterprise of a Contracting State from the operation of
ships in international traffic shall be taxable only in that State.
2. Notwithstanding anything contained in
paragraph 1 of this Article and paragraph 2 of Article 10 of the Agreement on
merchant shipping dated 18-11-1976, between the Government of the Republic of
India and the Government of the People’s Republic of Bulgaria, income derived
by an enterprise of a Contracting State from the operation of ships in
international traffic from the ports of the other Contracting State to the
ports of third countries and from the ports of third countries to the ports of
the other Contracting State may be taxed in the other Contracting State, but
the tax imposed in that other Contracting State shall not exceed :
(a) 50 per cent of the tax otherwise imposed by the taxation law of
that other Contracting State, or
(b) 2.50 per cent of the gross amount payable in respect of such
operation of ships, whichever is lower.
3. For the purposes of clause (b) of
paragraph 2 of this Article, the gross amount payable in respect of the
operation of ships shall mean the aggregate of the following amounts,
namely :
(a) the gross amount paid or payable on account of the carriage of
passengers, livestock, mail or goods shipped at a port or ports in the other
Contracting State;
(b) the gross amount received in the other Contracting State on account
of carriage of passengers, livestock, mail or goods shipped at a port of the
third country;
(c) interest arising in the other Contracting State on funds connected
with the operation of ships in international traffic;
(d) the gross amount payable on account of the use, maintenance or rent
of containers (including trailers and related equipment for the transport of
containers) in connection with the transport of goods or merchandise in
international traffic.
4. The provisions of paragraphs 1 and 2 shall
also apply to profits from the participation in a pool, a joint business or an
international operating agency engaged in the operation of ships.
5. For the purposes of this Article,
(a) interest on funds connected with the operation of ships in
international traffic shall be regarded as income from the operation of such
ships and the provisions of Article 12 shall not apply in relation to such
interest; and
(b) income from the operation of ships includes income derived from the
use, maintenance or rental of containers (including trailers and related
equipment for the transport of containers) in connection with the transport of
goods or merchandise in international traffic.
Article 10 : Associated
enterprises - 1. Where—
(a) an enterprise of a Contracting State participates directly or
indirectly in the management, control or capital of an enterprise of 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 11 : 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 15 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 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 a case the provisions of Article 7, or
Article 15, 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 insofar as such dividends are paid to a resident of that other State or
in 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 12 : Interest - 1.
Interest arising in a Contracting State and paid to a resident of the other
Contracting State may be taxed in that other State.
2. However, such interest may also be taxed in
the Contracting State in which it arises and according to the laws of that
State, 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 in
that State if it is beneficially owned by a resident of the other Contracting
State and it is derived in connection with a loan or credit extended or
endorsed by :
(i) in the case of Bulgaria, the Foreign Trade
Bank 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
incharge 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 payments 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-claim 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 15, 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 thereof 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.
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 to the last-mentioned amount. In such a case, the
excess part of the payments shall remain taxable according to the laws of each
Contracting State, due regard being had to the other provisions of this
Convention.
Article 13 : Royalties 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 :
(a) 15 per cent of the gross amount of the royalties relating to
copyrights of literary, artistic or scientific works, other than cinematograph
films or films or tapes used for radio or television broadcasting; and
(b) 20 per cent of the gross amount of the royalties in all other cases
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 of, 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 the 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 of the royalties or fees for technical
services, being a resident of a Contracting State, carries on business in the
other Contracting State in which the royalties or fees for technical services
arise, through a permanent establishment situated therein, or performs in that
other State independent personal services from a fixed base situated therein,
and the right, 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 15, 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 thereof, 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.
Article 14 : 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 enterprise) 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 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 of 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 15 : 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 183 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 16 : Dependent
personal services - 1. Subject to the provisions of Articles 17, 18,
19, 20, 21 and 22, salaries, wages and other similar remuneration derived by a
resident of a Contracting State in respect of an employment shall be taxable
only in that State unless the employment is exercised in the other Contracting
State. If the employment is so exercised, such remuneration as is derived
therefrom may be taxed in that other State.
2. Notwithstanding the provisions of paragraph
1, remuneration derived by a resident of a Contracting State in respect of an
employment exercised in the other Contracting State shall be taxable only in
the first-mentioned State if :
(a) 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 ;
(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 17 : Directors’ fees -
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.
Article 18 : Income earned by
entertainers and athletes - 1. Notwithstanding the provisions of
Articles 15 and 16, 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 an athlete, 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 athlete in his capacity as such
accrues not to the entertainer or athlete himself but to another person, that
income may, notwithstanding the provisions of Articles 7, 15 and 16, be taxed
in the Contracting State, in which the activities of the entertainer or athlete
are exercised.
3. Notwithstanding the provisions of paragraph
1, income derived by an entertainer or an athlete who is a resident of a
Contracting State, from his personal activities as such, exercised in the other
Contracting State, shall be taxable only in the first-mentioned Contracting
State, if the activities in the other Contracting State are performed within
the framework of cultural exchange between the two Contracting States, or are
supported wholly or substantially, from the public funds of the first-mentioned
Contracting State, including any of its political sub-divisions or local
authorities.
4. Notwithstanding the provisions of paragraph 2
and Articles 7, 15 and 16, where income in respect of personal activities exercised
by an entertainer or an athlete in his capacity as such in a Contracting State
accrues not to the entertainer or athlete himself but to another person, that
income shall be taxable only in the other Contracting State, if that other
person is supported wholly or substantially from the public funds of that other
State, including any of its political sub-divisions or local authorities.
Article 19 :
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 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
other State.
3. The provisions of Articles 16, 17 and 20 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 20 :
Non-Government pensions and annuities - 1. Any pension, other
than a pension referred to in Article 19, 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 of compensation for injuries received in the course of
performance of services.
3. The term “annuity” means a stated sum payable periodically at stated
time 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 21 :
Payments received by students and apprentices - 1. A student or
business apprentice 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 State solely for the purpose of his education or training, shall 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 from employment in that other
State, in an amount not exceeding Lev. 1500 or its equivalent in Indian
currency during any “previous year” or “year of income”, as the case may be,
provided that such employment is directly related to his studies or is
undertaken for the purposes of his maintenance.
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 five consecutive years from the date of his first
arrival in that other Contracting State.
Article 22 :
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 research
for a period not exceeding two years from the date of his arrival in that other
State.
2. This paragraph 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 purpose 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 the “year of income”, as the case
may be, in which he visits the other Contracting State or in the immediately
preceding “previous year” or “year of income”.
4. For the purposes of paragraph 1, “approved
institution” means an institution which has been approved or established by the
competent authority of the concerned Contracting State.
Article 23 : Other income -
1. Subject to the provisions of paragraphs 2 and 3, items of income of a
resident of a Contracting State, wherever arising, which are not expressly
dealt with in the foregoing Articles of this Convention, 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 case, the provisions of Article
7 or Article 15, 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 Convention and arising in the other Contracting
State may be taxed in that other State.
Article 24 : Capital - 1.
Capital represented by immovable property referred to in Article 6, owned by a
resident of a Contracting State and situated in the other Contracting State,
may be taxed in that other State.
2. Capital represented by 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 by
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, may be taxed in that other State.
3. Capital represented by ships or aircraft
operated in international traffic and by movable property pertaining to the
operation of such ships or aircraft, shall be taxable only in the Contracting
State of which the enterprise owning such property is a resident.
4. All other elements of capital of a resident
of a Contracting State may be taxed in the Contracting State in which such elements
of capital are situated.
Article 25 : Elimination of
double taxation - 1. The laws in force in either of the Contracting
States shall continue to govern the taxation of income or capital in the
respective Contracting States except where provisions to the contrary are made
in this Convention.
2. In both the Contracting States, double
taxation shall be avoided in the following manner :
(a) where a resident of a Contracting State derives income or owns
capital which, in accordance with the provisions of this Convention, 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 or capital from tax but may, in calculating tax on the remaining income or
capital of that person, apply the rate of tax which would have been applicable
if the exempted income or capital 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 9, 11, 12 and 13
of this Convention 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 9, 11, 12 and 13 of this Convention
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 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 26 : 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 nationals of that other State in the same circumstances
and under the same conditions are or may be subjected.
2. The term
“nationals” means :
(a) All individuals possessing the nationality of a Contracting State;
(b) All legal persons, partnerships and associations deriving their
status as such from the laws in force in a Contracting State.
3. 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. This provision shall not
be construed as preventing a Contracting State from charging the profits of a
permanent establishment which an enterprise 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 enterprise of the first-mentioned Contracting
State, nor as being not in accordance with the provisions of paragraph 3 of
Article 7 of this Convention.
4. Nothing in this Article shall be construed as
obliging a Contracting State to grant to non-residents of that State any
personal allowances, reliefs, reductions and deductions for taxation purposes
which are by law available only to persons who are so resident.
5. 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.
6. In this Article, the term “taxation” means
taxes which are the subject of this Convention.
Article 27 : Mutual agreement
procedure - 1. Where a resident of a Contracting State 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 Convention, he may,
notwithstanding the remedies provided by the national laws of these 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 Convention.
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 the
avoidance of taxation not in accordance with the Convention. 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 Convention. They
may also consult together for the elimination of double taxation in cases not
provided for in this Convention.
4. The competent authorities of the Contracting
States may communicate with each other directly 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 28 : Exchange of
information - 1. The competent authorities of the Contracting States
shall exchange such information (including documents) as is necessary for
carrying out the provisions of the Convention or of the domestic laws of the
Contracting States concerning taxes covered by the Convention insofar as the
taxation thereunder is not contrary to the Convention, in particular for the
prevention of fraud or evasion of such taxes. Any information received by a
Contracting State shall be treated as secret in the same manner as information
obtained under the domestic laws of that State. However, if the information is
originally regarded as secret in the transmitting State, it shall be disclosed
only to persons or authorities (including courts and administrative bodies)
involved in the assessment or collection of, the enforcement or prosecution in
respect of, or the determination of appeals in relation to, the taxes which are
subject of the Convention. Such persons or authorities shall use the
information only for such purposes but may disclose the information in public
court proceedings or in judicial decisions. The competent authorities shall,
through consultation, develop appropriate conditions, methods and techniques
concerning the matters in respect of which such exchange of information shall
be made, including, where appropriate, exchange of information regarding tax
avoidance.
2. The exchange of information or documents
shall be either on a routine basis or on request with reference to particular
case or both. 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
the 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 (ordre
public).
Article 29 : Diplomatic and
consular officials - 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.
Article 30 : 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
Convention. This Convention shall enter into force on the date of the latter of
these notifications and shall thereupon have effect :
(a) in India :
(i) in respect of income arising in any “previous
year” beginning on or after the first day of April next following the calendar
year in which the Convention enters into force; and
(ii) in respect of capital which is held on the
last day of any previous year beginning on or after the first day of April next
following the calendar year in which the Convention enters into force; and
(b) in Bulgaria :
(i) in respect of income arising in any year of
income beginning on or after the first day of January, next following the
calendar year in which the Convention enters into force; and
(ii) in respect of capital which is held on the
last day of any year of income beginning on or after the first day of January
next following the calendar year in which the Convention enters into force.
Article 31 : Termination -
This Convention 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 to the other Contracting State through diplomatic
channels, written notice of termination. In such event, the Convention shall
cease to have effect :
(a) in India :
(i) in respect of income arising in any “previous
year” beginning on or after the first day of April, next following the calendar
year in which the notice of termination is given; and
(ii) in respect of capital which is held on the
last day of any previous year beginning on or after the first day of April next
following the calendar year in which the notice of termination is given.
(b) In Bulgaria :
(i) in respect of income arising in any year of
income beginning on or after the first day of January, next following the
calendar year in which the notice of termination is given; and
(ii) in respect of capital which is held on the
last day of any year of income beginning on or after the first 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 Convention.
Done in duplicate at Sofia on this 26th day of May of one thousand nine
hundred and ninety-four in Hindi, Bulgarian and English languages, all the
texts being equally authentic. In case of divergence between any of the two
texts, the English text shall prevail.
PROTOCOL
At the signing today of the Convention between the Government of the
Republic of India and the Government of the Republic of Bulgaria for the
avoidance of double taxation and the prevention of fiscal evasion with respect
to taxes on income and on capital, the undersigned have agreed upon the
following provisions which shall form an integral part of the Convention :
1. To Article 7 (Business Profits) :
(a) In respect of paragraph 1, the profits
attributable to a permanent establishment which an enterprise of a Contracting
State has in the other Contracting State shall include profits directly or
indirectly attributable to the permanent establishment and in parti-cular shall
include profits of the enterprise from the sales in that other State of goods
or merchandise of the same or similar kind as those sold through the permanent
establishment.
(b) In respect of paragraph 3, it is agreed that
while determining the profits of a permanent establishment, no 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 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 money 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 other
of its 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 the management or, except
in the case of a banking enterprise, by way of interest on money lent to the
head office of the enterprise or any of its other offices.
2. To Article 12 (Interest) :
In respect of paragraph 3(a)(ii), it is understood that
the Central Bank in the case of India means the Reserve Bank of India.
3. To Article 26 (Non-discrimination) :
In respect of paragraph 3, it is understood that a Contracting State may
not exercise in respect of a resident of the other Contracting State a higher
or more burdensome taxation than the taxation which that State would exercise
in respect of a resident of a third State.
IN WITNESS WHEREOF the undersigned, being duly authorized
thereto, have signed the present Protocol.
DONE in duplicate at Sofia on this 26th day of May
of one thousand nine hundred and ninety-four in the Hindi, Bulgarian and
English languages, all the texts being equally authentic. In case of divergence
between any of the two texts, the English text shall prevail.