43. Agreement for avoidance of
double taxation and prevention of fiscal evasion with Spain
Whereas the
annexed Convention between the Government of the Republic of India and the Kingdom
of Spain for the avoidance of double taxation and the prevention of fiscal
evasion with respect to taxes on income and on capital has entered into force
on 12th January, 1995 after the exchange of Instruments of Ratification as
required by paragraph 2 of 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 356(E), dated 21-4-1995.
Annexure
CONVENTION BETWEEN THE GOVERNMENT OF THE
REPUBLIC OF INDIA AND THE KINGDOM OF SPAIN 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
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 to taxes on income and on
capital imposed on behalf of a
2. There shall be regarded as taxes on income
and on capital all taxes imposed on total income, on total capital, or on
elements of income or of capital, including taxes on gains from the alienation
of movable or immovable property, taxes on the total amounts of wages or
salaries paid by enterprises, as well as taxes on capital appreciation.
3. The existing taxes to which the Convention
shall apply are in particular :
(a) in
(i) The Income-tax on Individuals (el Impuesto
sobre la Renta de las Personas Fisicas);
(ii) The Corporation Tax (el Impuesto sobre
Sociedades);
(iii) The Capital Tax (el Impuesto sobre el
Patrimonio);
(hereinafter referred to as
“Spanish tax”).
(b) In
(i) The income-tax including any surcharge
thereon;
(ii) The surtax; and
(iii) The wealth-tax (hereinafter referred to as
“Indian tax”).
4. This Convention shall also apply to any
identical or substantially similar taxes which are imposed after the date of
signature of the Convention in addition to, or in place of, the existing taxes.
The competent authorities of the Contracting States shall notify to each other
any significant changes which have been made in their respective taxation laws.
Article 3 : General
Definitions - 1. In this Convention, unless the context otherwise
requires :
(a) the term “
(b) the term “
(c) the terms “a
(d) the term “tax” means “Indian tax” or “Spanish tax”, as the context
requires;
(e) the term “person” includes an individual, a company, any other body
of persons or any other entity which is treated as a taxable unit under the
taxation laws in force in the respective
(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
(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 “national” means :
(i) any individual possessing the nationality of a
(ii) any legal person, partnership and association
deriving its status as such from the law in force in a
(i) the term “international traffic” means any
transport by a ship or aircraft operated by an enterprise of a
(j) the term “competent authority” means :
(i) in the case of
(ii) in the case of
2. In the application of this Convention by a
Contracting State, any term not defined therein shall, unless the context
otherwise requires, have the meaning which it has under the law of that
Contracting State relating to the taxes which are the subject of this
Convention.
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 taxation therein by reason of his domicile, residence, place of
management or any other criterion of 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, or capital situated therein.
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 in accordance with the following rules :
(a) He shall be deemed to be resident of the
(b) If the
(c) If he has an habitual abode in both Contracting States, or in
neither of them, he shall be deemed to be a resident of the Contracting State
of which he is a national.
(d) If he is a national of both Contracting States or of neither of
them the competent authorities of the Contracting States shall settle the
question by mutual agreement.
3. Where by reason of the provisions of
paragraph 1 a person other than an individual is a resident of both Contracting
States, then it shall be deemed to be a resident of the Contracting State in
which its place of effective management is situated.
Article 5 : Permanent
establishment - 1. For the purposes of this Convention, the term
“permanent establishment” means a fixed place of business through which the
business of an enterprise is wholly or partly carried on.
2. The term “permanent establishment” includes
especially :
(a) a place of management;
(b) a branch;
(c) an office;
(d) a factory;
(e) a workshop;
(f) a 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) a farm, plantation or other place where agriculture, forestry,
plantation or related activities are carried on;
(i) a premises used as a sales outlet;
(j) an installation or structure used for the exploration or
exploitation of natural resources, but only if so used for a period of more
than three months;
(k) a building site or construction, installation or assembly project
or supervisory activities in connection therewith, where such site, project or
activities (together with other such sites, projects or activities, if any)
continue for a period of more than six months in any twelve-months period, or
where such project or supervisory activity, being incidental to the sale of
machinery or equipment, continues for a period not exceeding six months and the
charges payable for the project or supervisory activity exceed 10 per cent of
the sale price of the machinery and equipment :
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 if the activities continue for a period
of more than thirty days in any twelve-month period.
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 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 and merchandise, or of collecting information for the
enterprise;
(e) the maintenance of a fixed place of business solely for the purpose
of advertising, for supply of information, for scientific research or for
similar activities which have a preparatory or auxiliary character, for the
enterprise.
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 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.
5. An enterprise of a Contracting State shall
not be deemed to have a permanent establishment in the other Contracting State
merely because it carries on business in that other State through a broker,
general commission agent or any other agent of an independent status, provided
that such persons are acting in the ordinary course of their business. However,
when the activities of such an agent are devoted wholly or almost wholly on
behalf of that enterprise itself or on behalf of that enterprise and other
enterprises controlling, controlled by, or subject to the same common control,
as that enterprise, he will not be considered an agent of an independent status
within the meaning of this paragraph.
6. The fact that a company which is a resident
of a Contracting State controls or is controlled by a company which is a
resident of the other Contracting State, or which carries on business in that
other 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 other Contracting State may be taxed in that other State.
2. The term “immovable property” shall have the
meaning which it has under the law of the Contracting State in which the property
in question is situated. The term shall in any case include property accessory
to immovable property, 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 or 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 but only so much of them as is
attributable to (a) that permanent establishment; (b) sales in
that other State of goods or merchandise of the same or similar kind as those
sold through that permanent establishment; or (c) other business
activities carried on in that other State of the same or similar kind as those
effected through that permanent establishment.
2. Subject to the provisions of paragraph 3,
where an enterprise of a Contracting State carries on business in the other
Contracting State through a permanent establishment situated therein, there
shall in each Contracting State be attributed to that permanent establishment
the profits which it might be expected to make if it were a distinct and separate
enterprise engaged in the same or similar activities under the same or similar
conditions and dealing wholly independently with the enterprise of which it is
a permanent establishment.
3. In the determination of the profits of a
permanent establishment, there shall be allowed as deductions expenses which
are incurred for the purposes of the permanent establishment, including
executive and general administrative expenses, research and development
expenses, interest and other similar 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 limitations of the taxation laws of
that State. However, no such deduction shall be allowed in respect of amounts,
if any, paid (otherwise than towards reimbursement of actual expenses) by the
permanent establishment to the head office of the enterprise or any of its
other offices, by way of royalties, fees or other similar payments in return
for the use of patents, know-how or other rights, or by way of commission or
other charges, for specific services performed or for management, or, except in
the case of a banking enterprise, by way of interest on moneys lent to the
permanent establishment. Likewise, no account shall be taken, in the
determination of the profits of a permanent establishment, for amounts charged
(otherwise than towards reimbursement of actual expenses), by the permanent
establishment to the head office of the enterprise or any of its other offices,
by way of royalties, fees or other similar payments in return for the use of
patents, know-how or other rights, or by way of commission or other charges for
specific services performed or for management, or, except in the case of a
banking enterprise, by way of interest on moneys lent to the head office of the
enterprise or any of its other offices.
4. No profits shall be attributed to a permanent
establishment by reason of the mere purchase by that permanent establishment of
goods or merchandise for the enterprise.
5. For the purposes of the preceding paragraphs,
the profits to be attributed to the permanent establishment shall be determined
by the same method year by year unless there is good and sufficient reason to
the contrary.
6. Where profits include items of income which
are dealt with separately in other Articles of this 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 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. Profits derived by an enterprise of a Contracting State from the operation
of ships 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 engaged in the operation of ships.
3. For the purposes of this Article, profits
derived from the operation of ships include profits 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 the international traffic.
Article 10 : Associated
enterprises - Where,
(a) an enterprise of a Contracting State participates directly or
indirectly in the management, control or capital of an enterprise of the other
Contracting State, or
(b) the same persons participate, directly or indirectly in the
management, control or capital of an enterprise of a Contracting State and an
enterprise of the other Contracting State,
and in either
case conditions are made or imposed between the two enterprises in their
commercial or financial relations which differ from those which would be made
between independent enterprises, then any profits which would, but for those
conditions, have accrued to one of the enterprises but, by reason of those
conditions, have not so accrued, may be included in the profits of that
enterprise and taxed accordingly.
Article 11 : Dividends
- 1. Dividends paid by a company which is a resident of a Contracting
State to a resident of the other Contracting State may be taxed in that other
State.
2. However, such dividends may also be taxed in
the Contracting State of which the company paying the dividends is a resident
and according to the laws of that State, but if the 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 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 Contracting State and paid to a resident of
the other Contracting State may be taxed in that other State.
2. However, such interest may also be taxed in
the Contracting State in which it arises and according to the laws of that
State, but if the recipient is the beneficial owner of the interest the tax so
charged shall not exceed 15 per cent of the gross amount of the interest.
3. Notwithstanding the provisions of paragraph 2
:
(a) interest arising in a Contracting State shall be exempt from tax in
that State provided it is derived and beneficially owned by :
(i) the Government, a political sub-division or a
local authority of the other Contracting State; or
(ii) the Central Bank of the other Contracting
State;
(b) interest arising in a Contracting State shall be exempt from tax 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 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, whether or not, secured by
mortgage and whether or not carrying a right to participate in the debtor’s
profits, and in particular, income from Government securities and income from
bonds or debentures, including premiums and prizes attaching to such
securities, bonds or debentures. Penalty charges for late payment shall not be
regarded as interest for the purpose of this Article.
5. The provisions of paragraphs 1 and 2 shall
not apply if the beneficial owner of the interest, being a resident of a
Contracting State, carries on business in the other Contracting State in which
the interest arises, through a permanent establishment situated therein, or performs
in that other State independent personal services from a fixed base situated
therein, and the debt-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
Contracting State when the payer is that State itself, a political
sub-division, a local authority or a resident of that State. Where, however, the
person paying the 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 only to the last-mentioned amount. In
such case, the excess part of the payments shall remain taxable according to
the laws of each Contracting State, due regard being had to the other provisions
of this 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 law 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 :
(i) in the case of royalties relating to the
payments for the use of, or the right to use, industrial, commercial or
scientific equipment, 10 per cent of the gross amount of the royalties;
(ii) in the case of fees for technical services and
other royalties, 20 per cent of the gross amount of fees for technical services
or royalties.
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
cinematographic 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 kind to any person other than payments
to an employee of the person making the payments and to any individual for
independent personal services mentioned in Article 15 (Independent Personal
Services), in consideration for the services of a 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 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 in that State
itself, a political sub-division, a local authority or a resident of that
State. Where, however, the person paying the royalties or fees for technical
services whether he is a resident of a Contracting State or not, has in a
Contracting State a permanent establishment or fixed base in connection with
which the liability to pay the royalties or fees for technical services was
incurred, and such royalties or fees for technical services are borne by such
permanent establishment or fixed base, then such royalties or fees for
technical services shall be deemed to arise in the State in which the permanent
establishment or fixed base is situated.
7. Where, by reason of a special relationship
between the payer and the beneficial owner or between both of them and some
other person, the amount of the royalties or fees for technical services paid,
exceeds the amount which would have been paid in the absence of such
relationship, the provisions of this Article shall apply only to the
last-mentioned amount. In such case, the excess part of the payments shall
remain taxable according to the laws of each Contracting State, due regard
being had to the other provisions of this Convention.
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 of movable property pertaining to
the operation of such ships or aircraft shall be taxable only in the
Contracting State of which the alienator is a resident.
4. Gains from the alienation of shares of the
capital stock of a company the property of which consists, directly or
indirectly, principally of immovable property situated in a Contracting State
may be taxed in that State.
5. Gains for the alienation of shares of the
capital stock of a company forming part of a participation of at least 10 per
cent in a company which is a resident of a Contracting State may be taxed in
that Contracting 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 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
“taxable year”; 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 “taxable year”; and
(b) the remuneration is paid by, or on behalf of, an employer who is
not a resident of the other State; and
(c) the remuneration is not borne by a permanent establishment or a
fixed base which the employer has in the other State.
3. Notwithstanding the preceding provisions of
this Article, remuneration derived in respect of an employment exercised
aboard, a ship or aircraft operated in international traffic, by an enterprise
of a Contracting State may be taxed in that State.
Article 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 : Artistes
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 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, 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 paragraphs
1 and 2, 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 supported wholly or
substantially from the public funds of the first-mentioned Contracting State,
including any of its political sub-divisions or local authorities.
Article 19 : Pensions
- Subject to the provisions of paragraph 2 of Article 20, pensions and other
similar remuneration paid to a resident of a Contracting State in consideration
of past employment shall be taxable only in that State.
Article 20 : Remuneration
and pensions in respect of Government services - 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 Contracting State if
the individual is a resident of, and a national of, that other State.
3. The provisions of Articles 16, 17 and 19
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 a local authority thereof.
Article 21 : Students
- Payments which a student or business apprentice who is or was immediately
before visiting a Contracting State, a resident of the other Contracting State
and who is present in the first-mentioned State solely for the purpose of his
education or training receives for the purpose of this maintenance, education
or training shall not be taxed in that State, provided that such payments arise
from sources outside that 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 an officially recognised
university, college, school or other 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 not in the general interest but
primarily for the private benefit of a specific person or persons.
Article 23 : Other
income - 1. Subject to the provisions of paragraph 2, items of
income of a resident of a Contracting State, wherever arising, which are not
expressly dealt with in the foregoing Articles of this 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 a 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 or by movable property pertaining to the
operation of such ships or aircraft shall be taxable only in the Contracting
State of which the enterprise operating such ships, aircraft or property is a
resident.
4. Capital represented by shares of the capital
stock of a company the property of which consists, directly or indirectly,
principally of immovable property situated in Contracting State may be taxed in
that State.
5. Capital represented by shares of the capital
stock of a company which is a resident of a Contracting State representing a
participation of at least 10 per cent in the capital stock of that company may
be taxed in that Contracting State.
6. All other elements of capital of a resident of
a Contracting State shall be taxable only in that Contracting State.
Article 25 : Elimination
of double taxation - 1. The laws in force in either of the
Contracting States will continue to govern the taxation of income and capital
in the respective Contracting States except where express provisions to the
contrary are made in this Convention.
2. In India, double taxation will be avoided in
the following manner :
(a) Where a resident of India derives income or owns capital which, in
accordance with the provisions of this Convention, may be taxed in Spain, India
shall allow :
(i) as a deduction from the tax on the income of
that resident, an amount equal to the income-tax paid in Spain, whether
directly or by deduction; and
(ii) as a deduction from the tax on the capital of
that resident, an amount equal to the capital tax paid in Spain.
Such deduction in either
case shall not, however, exceed that part of the income-tax or capital tax, as
computed before the deduction is given, which is attributable, as the case may
be, to the income or the capital which may be taxed in Spain.
(b) Where a resident of India derives income or owns capital which in
accordance with the provisions of this Convention, shall be taxable only in
Spain, India may include this income or capital in the tax base but shall allow
as a deduction from the income-tax or capital tax, that part of the income-tax
or capital tax which is attributable, as the case may be, to the income derived
from or the capital owned in Spain.
3. In Spain, subject to the provisions of its
internal law, double taxation will be avoided in the following manner :
(a) Where a resident of Spain derives income or owns capital which, in
accordance with the provisions of this Convention, may be taxed in India, Spain
shall allow :
(i) as a deduction from the tax on the income of
that resident, an amount equal to the income-tax paid in India;
(ii) as a deduction from the tax on the capital of
that resident, an amount equal to the capital tax paid in India.
(b) In the case of a dividend paid by a company which is a resident of
India to a company which is a resident of Spain and which holds at least 25 per
cent of the capital of the company paying the dividend, the deduction shall
take into account [in addition to the deduction provided under sub-paragraph (a)]
the income-tax paid in India by the company in respect of the profits out of
which such dividend is paid provided that such tax is taken into account in
calculating the base of the Spanish tax.
Such deduction in either
case shall not, however, exceed that part of the income-tax or capital tax, as
computed before the deduction is given, which is attributable, as the case may
be, to the income or the capital which may be taxed in India.
(c) Where in accordance with any provision of the Convention income
derived or capital owned by a resident of Spain is exempt from tax in Spain,
Spain may nevertheless, in calculating the amount of tax on the remaining
income or capital of such resident, take into account the exempted income or
capital.
4. For the purposes of deduction referred to in
paragraph 3, the term “income-tax paid in India” shall be deemed to include any
amount which would have been payable as Indian tax under the laws of India and
in accordance with this Convention for any year but for an exemption from, or
reduction of, tax granted for that year under :
(i) Sections 10(4), 10(15)(iv),
10A, 10B, 32A, 32AB, 80HH, 80HHC and 80-I of the Income-tax Act, 1961 (43 of
1961) so far as they were in force on, and have not been modified since, the
date of the signature of this Convention, or have been modified only in minor
respects so as not to affect their general character; or
(ii) any other provisions which may be enacted
hereafter granting a deduction in computing the taxable income or an exemption
or reduction from tax which the competent authorities of the Contracting States
agree to be of a substantially similar character if it has not been modified
thereafter or has been modified only in minor respects so as not to affect its
general character.
5. The provisions of paragraph 4 shall apply for
the first 10 years for which this Convention is effective but the competent
authorities of the Contracting States may consult each other to determine
whether this period shall be extended.
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 taxation on a permanent establishment
which an enterprise of a Contracting State has in the other Contracting State
shall not be less favourably levied in that other State than the taxation
levied on enterprises of that other State carrying on the same activities in
the same circumstances or under the same conditions.
3. 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 in 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.
4. Except where the provisions of Article 10, paragraph
7 of Article 12, or paragraph 7 of Article 13 apply, interest, royalties and
other disbursements paid by an enterprise of a Contracting State to a resident
of the other Contracting State shall, for the purpose of determining the
taxable profits of such enterprise, be deductible under the same conditions as
if they had been paid to a resident of the first-mentioned State. Similarly,
any debts of an enterprise of a Contracting State shall, for the purpose of
determining the taxable capital of such enterprise, be deductible under the
same conditions as if they had been contracted to a resident of the
first-mentioned State.
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 this Convention, he may,
notwithstanding the remedies provided by the national laws of those States,
present his case to the competent authority of the Contracting State of which
he is a resident, or, if his case comes under paragraph 1 of Article 26, to
that of the Contracting State of which he is a national. The case must be
presented within three years from the first notification of the action
resulting in taxation not in accordance with the provisions of the 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 the Convention. The competent authorities shall also, by mutual
agreement, develop appropriate actions, methods and techniques to improve the
exchange of information carried out under Article 28 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 28 : Exchange
of information - 1. The competent authorities of the Contracting States
shall exchange such information (including copies of documents when relevant)
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 tax evasion and of tax
avoidance. The exchange of information is not restricted by Article 1. 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 the 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.
2. In no case shall the provisions of paragraph
1 be construed so as to impose on a Contracting State the obligation :
(a) to carry out administrative measures at variance with the laws or
administrative practice of that or of the other Contracting State;
(b) to supply information which is not obtainable under the laws or in
the normal course of the administration of that or of the other Contracting
State;
(c) to supply information which would disclose any trade, business,
industrial, commercial or professional secret or trade process or information
the disclosure of which would be contrary to public policy.
Article 29 : Diplomatic
and consular officers - Nothing in this Convention shall affect the fiscal
privileges of diplomatic agents or consular officers under the general rules of
international law or under the provisions of special agreements.
Article 30 : Entry
into force - 1. This Convention shall be ratified and the
instruments of ratification shall be exchanged as soon as possible.
2. This Convention shall enter into force upon
the exchange of the instruments of ratification and its provisions shall have
effect :
(a) in Spain :
in respect of taxes
chargeable on income or on capital for any taxable year beginning on or after
the first day of January of the calendar year next following that in which the
Convention enters into force.
(b) in India :
(i) in respect of income arising in any taxable
year beginning on or after the first day of April of the calendar year next
following that in which the Convention enters into force,
(ii) in respect of capital which is held on the
last day of any taxable year beginning on or after the first day of April of
the calendar year next following that in which the Convention enters into
force.
Article 31 : Termination
- 1. The 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 Spain, in respect of taxes chargeable for any taxable year
beginning on or after the first day of January of the calendar year next
following that in which the notice of termination is given;
(b) in India, in respect of income arising in any taxable year
beginning on or after the first day of April of the calendar year next
following that in which the notice of termination is given and in respect of
capital which is held on the last day of any taxable year beginning on or after
the first day of April 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 New Delhi this 8th day of February, one thousand nine hundred and ninety
three in the Hindi, Spanish and English languages, all the texts being equally
authentic. In case of divergence between any of the texts, the English text
shall be the operative one.
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For the
Government of the |
For the
Government of the |
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Republic
of India |
Kingdom
of Spain |
PROTOCOL
At the moment
of signing the Convention between the Government of the Republic of India and the
Government of the Kingdom of Spain 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 be an
integral part of the Convention :
1. In respect of clause (d) of paragraph
1 of Article 3 (General Definitions), it is understood that the term “tax”
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.
2. In respect of clause (g) of paragraph
2 of Article 5 (Permanent Establishment), it is understood that this clause
refers to a warehouse where space is rented to other persons.
3. In respect of clauses (b) and (c)
of paragraph 1 of Article 7 (Business Profits), it is understood that in the
case of any doubt as to whether the goods or merchandise sold are of the
similar kind as those sold through the permanent establishment or whether the
other business activities carried on are of the similar kind as those effected
through the permanent establishment, the competent authorities may consult each
other with a view to resolving the case by mutual agreement.
4. In respect of paragraph 3 of Article 7
(Business Profits), it is understood that in case of any substantial changes in
the provisions of the taxation laws of a Contracting State relating to
limitation on the deductibility of the expenses which are incurred for the
purposes of the business of a permanent establishment, the competent
authorities of the Contracting States shall consult each other on the necessity
of modifying the provisions of this paragraph.
5. In respect of Article 8 (Air Transport) and
Article 9 (Shipping), it is understood that interest on funds connected with
the operation of aircraft or ships in international traffic shall be regarded
as profits derived from the operation of such aircraft or ships, as the case
may be, and the provisions of Article 12 (Interest) shall not apply in relation
to such interest.
6. Paragraph 2 of Article 11 (Dividends), shall
not be applicable, in the case of Spain, to the income attributable, whether
distributed or not, to the shareholders of the corporations and entities
referred to in Article 12.2 of Law 44/1978 of 8 September, 1978, and Article 19
of Law 61/1978 of 27 December, 1978, as long as the said income is not subject
to the Spanish Corporation Tax. Such income may be taxed in Spain according to
its Internal Law.
7. The competent authorities shall initiate the
appropriate procedures to review the provisions of Article 13 (Royalties and
fees for technical services) after a period of five years from the date of its
entry into force. However, if under any Convention or Agreement between India
and a third State which is a Member of the OECD, which enters into force after
1-1-1990, India limits its taxation at source on royalties or fees for
technical services to a rate lower or a scope more restricted than the rate or
scope provided for in this Convention on the said items of incomes, the same
rate or scope as provided for in that Convention or Agreement on the said items
of income shall also apply under this Convention with effect from the date on
which the present Convention comes into force or the relevant Indian Convention
or Agreement, whichever enters into force later.
8. In respect of paragraph 2 of Article 26
(Non-discrimination), it is understood that the provision of this paragraph
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
State, nor as being in conflict with the provisions of paragraph 3 of Article 7
(Business Profits) of this Convention. It is also understood that in no case
the taxation of a permanent establishment which an enterprise of a Contracting
State has in the other Contracting State shall be less favourably levied than
the taxation levied on a permanent establishment of an enterprise of a third
State carrying on the same activities under a double taxation Convention
concluded by the other Contracting State with that third State.
9. Notwithstanding the provisions of paragraph 4
of Article 26 (Non-discrimination), it is understood that in the case of India,
payments by way of interest, royalties and fees for technical services made by
an enterprise of India to a resident of Spain, shall not be allowed as a
deduction for the purpose of determining the taxable profits of such enterprise
unless tax has been paid or deducted at source from such payments under Indian
law and in accordance with the provisions of this Convention.
10. For the purposes of this Convention, it is
understood that the term “taxable year” in the case of India shall mean the
“previous year” as defined in the Income-tax Act, 1961.
In witness whereof the
undersigned, being duly authorised thereto, have signed the present Protocol.
Done in duplicate at
New Delhi this 8th day of February, one thousand nine hundred and ninety-three
in the Hindi, Spanish and English languages, all the texts being equally
authentic. In case of divergence between any of the texts, the English text
shall be the operative one.
|
For the
Government of the |
For the
Government of the |
|
Republic
of India |
Kingdom
of Spain |