37. Agreement for avoidance of
double taxation and prevention of fiscal evasion with
Whereas the
annexed Convention between the Government of the Republic of India and the Government
of the Republic of Philippines for the avoidance of double taxation and the
prevention of fiscal evasion with respect of taxes on income has entered into
force on the 21st March, 1994, after the notification by both the Contracting
States to each other of the completion of the procedures required under their
laws for bringing into force of the said Convention in accordance with Article
29 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 173(E), dated 2-4-1996 and as amended by Notification No.
SO 125(E), dated 2-2-2005.
Annexure
Convention between the Government of
The Government of the
Desiring to conclude a Convention 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 Convention shall apply to persons who
are residents of one or both of the Contracting States.
Article 2 : Taxes
covered - 1. This Convention shall apply are to
taxes of income imposed on behalf of each Contracting State, irrespective of
manner in which they are levied.
2. There shall be regarded as taxes on income
all taxes imposed on total income or on elements of income, including taxes on
gains from the alienation of movable or immovable property, and taxes on the
total amounts of wages or salaries paid by enterprises.
3. The taxes to which this Convention shall
apply are :
(a) in
(i) the income-tax
including any surcharge thereon imposed under the Income-tax Act, 1961 (43 of
1961) ;
(ii) the surtax imposed
under the Companies (Profits) Surtax Act, 1964 (7 of 1964) ;
(hereafter
referred to as “Indian tax”) ;
(b) in the
the
income-taxes imposed by the Government of the Republic of the
(hereafter
to as “Philippine tax”).
4. The 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 air space above it, as well as any other maritime zone in
which India has sovereign rights, other rights and jurisdictions, according to
the Indian law and in accordance with international law/the U.N. Convention on
the Law of the Sea ;
(b) the term “
(c) the terms “a
(d) the term “tax” means Indian tax or Philippine 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” includes an individual,
a company and any other taxable unit under 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 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 authorised representative; and in the case of the
Philippines, the Secretary of Finance or his authorized representative ;
(i) the term “national”
means any individual, possessing the citizenship of a
(j) the term “international traffic” means any
transport by a ship or aircraft operated by an enterprise of a
2. As regards the application of the 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 any person who, under the laws of that State, is
liable to tax therein by reason of his domicile, residence, place of management
of any other criterion of a similar nature. But this term does not include any
person who is liable to tax in that State in respect only of income from
sources in that State.
2. Where by reason of the provisions of
paragraph 1, an individual is a resident of both Contracting States, then his
status shall be determined as follows :
(a) he shall be deemed to be a resident of the State in which he has a
permanent home available to him; if he has a permanent home available to him in
both States, 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 State in which he has his centre of
vital interests cannot be determined, or if he has not a permanent home
available to him in either State, he shall be deemed to be a resident of the
State in which he has an habitual abode ;
(c) if he has an habitual abode in both States
or in neither of them, he shall be deemed to be a resident of the State of
which he is a national ;
(d) if he is a national of both States or of
neither of them, the competent authorities of the Contracting States shall
settle the question by mutual agreement.
3. Where, by reason of the provisions of
paragraph 1, a person other than an individual is a resident of both
Contracting States, then it shall be deemed to be a
resident of the State in which its place of effective management is situated.
If the place
of effective management cannot be determined, then the competent authorities
shall settle the question by mutual agreement.
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.
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 place of exploration of natural
resources ;
(h) a building site or construction project or
supervisory activities in connection therewith, where such site, project or
activity continues for a period of more than six months ;
(i) a warehouse, in
relation to a person providing storage facilities for others.
3. Notwithstanding the preceding provisions of
this Article, the term “permanent establishment” shall be deemed not to include :
(a) the use of facilities solely for the
purpose of storage, display or delivery 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,
display or delivery ;
(c) the maintenance of a stock of goods or
merchandise belonging to the enterprise solely for the purpose of processing by
another enterprise ;
(d) the maintenance of a fixed place of
business solely for the purpose of purchasing goods or merchandise or of
collecting information, for the enterprise ;
(e) the maintenance of a fixed place of
business solely for the purpose of carrying on, for the enterprise, any other
activity of a preparatory or auxiliary character ;
(f) the maintenance of a fixed place of
business solely for any combination of activities mentioned in sub-paragraphs (a)
to (e), provided that the overall activity of the fixed place of
business resulting from this combination is of a preparatory or auxiliary
character.
4. A person acting in a
(a) he has, and habitually exercises in the State, an authority to
conclude contracts on behalf of the enterprise, unless his activities are
limited to those mentioned in paragraph 3 of this Article ; or
(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 ; or
(c) in so acting, he manufactures or processes
in that State for the enterprise goods or merchandise belonging to the
enterprise.
5. An insurance enterprise of a
6. An enterprise shall not be deemed to have a
permanent establishment in a
7. The fact that a company which is a resident
of a Contracting State controls or is controlled by a company which is a
resident of the other Contracting State, or which carries on business in that
other State (whether through a permanent establishment or otherwise) shall not
of itself constitute for either company a permanent establishment of the other.
Article 6 : Income
from immovable property - 1. Income derived by a resident of a
2. The term “immovable property” shall have the
meaning which it has under the law of the
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
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.
3. In determining the profits of a permanent
establishment, there shall be allowed as deductions 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.
4. Insofar as it has been customary in a
Contracting State to determine the profits to be attributed to a permanent
establishment on the basis of an apportionment of the total profits of the
enterprise to its various parts, nothing in paragraph 2 shall preclude that
Contracting State from determining the profits to be taxed by such an
apportionment as may be customary; the method of apportionment adopted shall,
however, be such that the result shall be in accordance with the principles
contained in this article.
5. No profits shall be attributed to a permanent
establishment by reason of more purchase by that permanent establishment of
goods or merchandise for the enterprise.
6. For the purposes of the preceding paragraphs,
the profits to be attributed to the permanent establishment shall be determined
by the same method year by year unless there is good and sufficient reason to
the contrary.
7. Where profits include items of income which
are dealt with separately in other articles of this 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
2. Notwithstanding the provisions of paragraph
1, profits from sources within a
3. The provisions of paragraphs 1 and 2 shall
also apply to profits from the participation in a pool, a joint business or an
international operating agency.
Article 9 : Shipping - 1. Profits derived by an enterprise of a
2. Notwithstanding the provisions of paragraph
1, profits from sources within a
3. The provisions of paragraphs 1 and 2 shall
also apply to profits from the participation in a pool, a joint business or an
international operating agency.
Article 10 : Associated
enterprises - 1. Where :
(a) an enterprise of a
(b) the same persons participate directly or indirectly in the
management, control or capital of an enterprise of a Contracting State and an
enterprise of the other Contracting State, and in either case conditions are
made or imposed between the two enterprises in their commercial or financial
relations which differ from those which would be made between independent
enterprises, then any profits which would, but for those conditions, have
accrued to one of the enterprises, but by reason of those conditions, have not
so accrued, may be included in the profits of that enterprise and taxed
accordingly.
2. Where a Contracting State includes in the
profits of an enterprise of that State - and taxes accordingly - profits on
which an enterprise of the other Contracting State has been charged to tax in
that other State and the profits which would have accrued to the enterprise of
the first-mentioned State if the conditions made between the two enterprises
had been those which would have been made between independent enterprises, then
that other State shall make an appropriate adjustment to the amount of the tax
charged therein on those profits. In determining such adjustment, due regard
shall be had to the other provisions of this Convention and the competent
authorities of the Contracting States shall, if necessary, consult each other.
Article 11 : Dividends - 1. Dividends paid by a company which is a resident of a
2. However, such dividends may also be taxed in
the
(a) 15 per cent of the gross amount of the dividends if the beneficial
owner is a company which owns at least ten per cent of the shares of the company
paying the dividends;
(b) 20 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 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
insofar 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
2. However, such interest may also be taxed in
the
(a) 10% of the gross amount of interest if the interest is received by
a financial institution (including insurance companies) ;
(b) the Philippine tax on interest paid by a company which is a
resident of the Philippines to a resident of India in respect of public issues
of bonds, debentures or similar obligations shall not exceed 10 per cent of the
gross amount of interest ; and
(c) 15% of the gross amount of interest in all other cases.
3. Notwithstanding the provisions of paragraph
2—
(a) interest arising in a
(i) the Government, a
political sub-division or a local authority of the other
(ii) the Central Bank of
the other
(iii) other lending
institutions as may be specified and agreed in letters exchanged between the
competent authorities of the
(b) interest arising in a Contracting State shall be exempt from tax in
that Contracting State to the extent approved by the Government of that State
if it is derived and beneficially owned by any person [other than a person
referred to in sub-paragraph (a)] who is a resident of the other
Contracting State, provided that the transaction giving rise to the debt-claim
has been approved in this regard 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, including sales on credit of any
industrial, commercial or scientific equipment, 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 the 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 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
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
case, the excess part of the payments shall remain taxable according to the
laws of each
Article 13 : Royalties - 1. Royalties arising in a
2. However, such royalties 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, the tax so
charged shall not exceed 15 per cent of the gross amount of the royalties
provided that such royalties are payable :
(i) in the case of
(ii) in the case of
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 provisions of paragraphs 1 and 2 shall
not apply if the beneficial owner of the royalties, being a resident of a
Contracting State, carries on business in the other Contracting State in which
the royalties 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 or property in respect of which the royalties
are 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.
5. Royalties shall be deemed to arise in a
6. 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, having regard to the use, right or
information for which they are paid, exceeds the amount which would have been
agreed upon by the payer and the beneficial owner in the absence of such
relationship, the provisions of this Article shall apply only to the
last-mentioned amount. In such case, the excess part of the payments shall
remain taxable according to the laws of each
Article 14 : Capital
gains - 1. Gains derived by a resident of a
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
4. Gains from the alienation of shares of a
company, the property of which consists principally of immovable property
situated in a
5. Gains from the alienation of any property
other than that mentioned in paragraphs 1, 2, 3 and 4 shall be taxable only in
the
Article 15 : Independent
personal services - 1. Income derived by a resident of a
Contracting State in respect 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 Contracting State ; or
(b) 1[if the recipient is present in the other State for a period or periods
exceeding in the aggregate 183 days in the relevant ‘previous year’ in the case
of Republic of India or ‘calendar year’ in the case of Republic of the
Philippines.]
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 (Directors’ Fees), 18 (Entertainers and Athletes), 19 (Government
Service), 20 (Non-Government Pensions and Annuities), 21 (Students and
Trainees) and 22 (Professors and Teachers), 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
(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” in the
case of Republic of India or “calendar year” in the case of the Republic of the
Philippines ;
(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
Article 17 : Directors’
fees - Directors’ fees and similar payments derived
by a resident of a
Article 18 : Entertainers
and Athletes - 1. Notwithstanding the provisions of
Articles 15 (Independent Personal Services) and 16 (Dependent Personal
Services), income derived by a resident of a Contracting State as an
entertainer such as 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. While income in respect of personal
activities exercised by an entertainer or an 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 (Business Profits), 15
(Independent Personal Services) and 16 (Dependent Personal Services), 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 exercised pursuant
to a special programme between the Governments of the
two Contracting States for cultural exchange and are supported substantially
from the public funds of the first-mentioned Contracting State or a political
sub-division, or a local authority thereof or from the funds of a statutory
body, or a non-profit organisation which is certified
as qualifying under this provision by the competent authority of that State.
4. Notwithstanding the provisions of paragraph 2
and Articles 7 (Business Profits), 15 (Independent Personal Services), and 16 (Dependent
Personal Services), 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 such activities
are exercised by an entertainer or athlete of that other Contracting State
pursuant to a special programme between the
Governments of the two Contracting States for cultural exchange and are
supported substantially from the public funds of that other State, a political
sub-division or a local authority thereof or from the funds of a statutory
body, or a non-profit organisation which is certified
as qualifying by the competent authority of that other State of which he is a
resident.
Article 19 : 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 or authority shall be taxable only in that State.
(b)
However, such pension shall be taxable only in the other
3. The Provisions of Articles 16 (Dependent
Personal Services), 17 (Directors’ Fees) and 20 (Non-Government Pensions and
Annuities) shall apply to remuneration and pensions in respect of services
rendered in connection with business carried on by a Contracting State or a
political sub-division or a 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
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 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 21 : Students
and trainees - 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 other State
solely for the purpose of his education or training, shall be exempt from tax
in that 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 Rs. 15,000 or its equivalent in Philippine
currency during any “previous year” in the case of Republic of India or
“calendar year” in the case of the Republic of the Philippines, provided that
such employment is directly related to his studies or is undertaken for the
purpose 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 three consecutive
years from the date of his first arrival in that other
3. The amounts referred to in paragraphs 1 and 2
of this Article may be reviewed and agreed upon by the competent authorities of
both Contracting States from time to time.
Article 22 : Professors
and teachers - 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 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 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” in the case of
Republic of India or “calendar year” in the case of the Republic of the
Philippines, in which he visits the other Contracting State or in the
immediately preceding “previous year” or the “year of income”.
4. 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
Article 23 : Other
income - Items of income of a resident of a
Article 24 : Elimination
of double taxation - 1. The laws in force in either of the
Contracting States shall continue to govern the taxation of income in the
respective Contracting States except where provisions to the contrary are made
in this Convention.
2. The amount of Philippine tax payable, under
the laws of the Philippines and in accordance with the provisions of this Convention,
whether directly or by deduction, by a resident of India, in respect of profits
or income arising in the Philippines, which have been subjected to tax both in
India and in the Philippines, shall be allowed as a credit against the Indian
tax payable in respect of such profits or income provided that such credit
shall not exceed the Indian tax (as computed before allowing any such credit)
which is appropriate to the profits or income arising in the Philippines.
Further, where such resident is a company by which surtax is payable in
3. The term “Philippine tax payable” shall be
deemed to include the amount of Philippine tax which would have been paid if
the Philippine tax had not been exempted or reduced in accordance with this
Convention and the special incentive laws designed to promote economic
development in the Philippines, effective on the date of signature of this
Convention, or which may be introduced in the future in the Philippine taxation
laws in modification of, or in addition to, the existing laws.
4. The amount of Indian tax payable under the
laws of India and in accordance with the provisions of this Convention, whether
directly or by deduction, by a resident of the Philippines, in respect of
profits or income arising in India, which has been subjected to tax both in
India and the Philippines, shall be allowed as a credit against Philippine tax
payable in respect of such profits or income provided that such credit shall
not exceed the Philippine tax (as computed before allowing any such credit)
which is appropriate to the profits or income arising in India.
5. For the purposes of the credit referred to in
paragraph 4, the term “Indian tax payable” shall be deemed to include any
amount which would have been payable as Indian tax for any assessment year but
for an exemption or reduction of tax granted for that year or any part thereof
by the special incentive measures under the provisions of the Income-tax Act,
1961 (43 of 1961), which are designed to promote economic development, or which
may be introduced hereafter in modification of, or in addition to, the existing
provisions for promoting economic development in India.
Article 25 : Non-discrimination - 1. The nationals of a
2. The taxation on a permanent establishment
which an enterprise of a
3. Nothing contained in this Article shall be construed
as obliging a
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.
5. Notwithstanding the preceding provisions of
this Article, either
6. In this Article, the term “taxation” means
taxes which are the subject of this Convention.
Article 26 : Mutual
agreement procedure - 1. Where a person considers that the
actions of one or both of the Contracting States result or will result for him
in taxation not in accordance with the provisions of this Convention, he may,
irrespective of the remedies provided by the domestic laws of those States,
present his case to the competent authority of the Contracting State of which
he is a resident or, if his case comes under paragraph 1 of Article 25, to that
of the Contracting State of which he is a national. The case must be presented
within three years from the first notification of the action resulting in
taxation not in accordance with the provisions of this 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 a satisfactory solution, to resolve
the case by mutual agreement with the competent authority of other Contracting
State, with a view to the avoidance of taxation which is not in accordance with
the provisions of this Convention.
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
this Convention. They may also consult together for the elimination of double
taxation in cases not provided for in this Convention relating to the taxes
which are the subject of 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 27 : 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
2. The exchange of information or documents
shall be either on a routine basis or on request with reference to particular
cases 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 paragraphs
1 and 2 be construed so as to impose on a
(a) to carry out administrative measures at
variance with the laws or administrative practice of that or of the other
(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
(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 28 : Diplomatic
agents and consular officers
- 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 29 : Entry
into force - Each of the Contracting States shall notify
to the other 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 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 next following the calendar year
in which the later of the notifications is given ;
(b) in
Article 30 : 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 the other Contracting State through diplomatic
channels, written notice of termination and, in such event, this Convention
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
IN WITNESS
WHEREOF the undersigned, being
duly authorised thereto, have signed the present
Convention.
DONE in duplicate at
PROTOCOL
1. For purposes of Article 1, nothing in this Convention
shall be construed as preventing either
2. For purposes of paragraph 3 of Article 7, the
deductions in respect of expenses incurred outside the
3. For purposes of paragraph 2 of Articles 8 and
9, the rate of tax prescribed therein is understood to include the Branch
Profit Remittance Tax as may be leviable by either
4. With reference to Articles 8 and 9 if at any
time after the date of signature of the Convention the Philippines agrees to a
lower or nil rate of tax with a third State the Government of the
Republic of the Philippines shall without undue delay inform the Government of
India through diplomatic channels and the two Governments will undertake to
review these Articles with a view to providing such lower or nil rate to
profits of the same kind derived under similar circumstances by enterprises of
both Contracting States.
IN WITNESS
WHEREOF the undersigned, being
duly authorised thereto, have signed this Protocol.
DONE in duplicate at Manila this twelfth day of
February, one thousand nine hundred and ninety-six in Hindi and English
languages, both the texts being equally authentic. In case of divergence in
interpretation, the English text shall prevail.