Bangladesh - Legal Draft

Double Taxation

Avoidance AgreementBangladeshIncome-tax Act, 1961:

Notification under section 90: Double taxation agreement between India and

BangladeshNotification

No. G. S. R. 758(E), dtd. 8.09.1992.Whereas

the annexed Convention between the Government of the Republic of India and the

Government of the People's Republic of Bangladesh for the avoidance of double

taxation and the prevention of fiscal evasion with respect to taxes on income

has come into force on the 27th May, 1992, after the exchange of Instruments of

Ratification as required by paragraph 1 of article 31 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

India.ANNEXURECONVENTION

BETWEEN THE GOVERNMENT OF THE REPUBLIC OF INDIA AND THE GOVERNMENT OF THE

PEOPLE'S REPUBLIC OF BANGLADESH FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE

PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOMEThe

Government of the Republic of India and the Government of the People's Republic

of Bangladesh,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:CHAPTER

ISCOPE

OF THE CONVENTIONArticle

1PERSONAL

SCOPEThis

Convention shall apply to persons who are residents of one or both of the

Contracting States.Article

2TAXES

COVERED1. The existing taxes to

which this Convention shall apply are--a. In the case of

Bangladesh:the income-tax,(hereinafter referred to as "Bangladesh tax");a.b. In the case of India:i.

the

income-tax including any surcharge thereon;ii.

the

surtax;(hereinafter referred to as "Indian tax").1.1.2. This Convention shall

also apply to any identical or substantially similar taxes which are imposed by

either Contracting State after the date of signature of the present Convention

in addition to, or in place of, the taxes referred to in paragraph (1). The

competent authorities of the Contracting States shall notify each other of any

substantial changes which are made in their respective taxation laws.CHAPTER

IIDEFINITIONSArticle

3GENERAL

DEFINITIONS1. In this Convention,

unless the context otherwise requires:a. the term "

Bangladesh " means the People's Republic of Bangladesh;b. the term

"India" means the Republic of India;c. the terms " a

Contracting State " and " the other Contracting State " mean

Bangladesh or India as the context requires;d. the term " tax

" means Bangladesh tax or Indian tax, as the context requires;e. the term "

person " includes an individual, a company and any other entity which is

treated as a taxable unit under the tax laws in force in the respective

Contracting States;f. the term "

company " means any company, body corporate or any other entity which is

treated as a company under the tax laws of the respective Contracting States;g. the terms "

resident of a Contracting State " and " resident of the other

Contracting State " mean a person who is a resident of Bangladesh or a

person who is a resident of India, as the context requires;h. 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;i. the term

"nationals" means all individuals possessing the nationality of the

respective Contracting States and also all legal persons, partnerships and

associations deriving their status as such from the law in force in the

respective Contracting States;j. the term "

competent authority " means in the case of Bangladesh, the National Board

of Revenue or their authorised representative and in the case of India, the

Central Government in the Ministry of Finance (Department of Revenue) or their

authorised representative;k. the term "

international traffic " means any transport by a ship or aircraft operated

by an enterprise of a Contracting State, except when the ship or aircraft is

operated solely between places in the other Contracting State;1.2. As regards the

application of this Convention by a Contracting State any term not otherwise

defined shall, unless the context otherwise requires, have the meaning which it

has under the laws of that Contracting State relating to the taxes which are

the subject of this Convention.Article

4RESIDENT1. For the purposes of

this Convention, the term " resident of a Contracting State " means

any person who, under the law of that State, is liable to taxation therein by

reason of his domicile, residence, place of management or any other criterion

of a similar nature.2. Where by reason of

the provisions of paragraph (1) an individual is a resident of both Contracting

States, then his case shall be determined in accordance with the following

rules:a. He shall be deemed to

be a resident of the Contracting State in which he has a permanent home

available to him. If he has a permanent home available to him in both

Contracting States, he shall be deemed to be a resident of the Contracting

State with which his personal and economic relations are the closest (centre of

vital interests);b. If the Contracting

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 Contracting State, he

shall be deemed to be a resident of the Contracting State in which he has an

habitual abode;c. If he has an habitual

abode in both Contracting States or in neither of them he shall be deemed to be

a resident of the Contracting State of which he is a national;d. If he is a national

of both Contracting States or of neither of them, the competent authorities of

the Contracting States shall settle the question by mutual agreement.1.2.3. 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

5PERMANENT

ESTABLISHMENT1. For the purposes of

this Convention, the term "permanent establishment" means a fixed

place of business in which the business of the enterprise is wholly or partly

carried on.2. The term

"permanent establishment" shall include especially:a. a place of

management;b. a branch;c. an office;d. a factory;e. a workshop;f. a warehouse;g. a mine, quarry or

other place of extraction of natural resources;h. a building site or

construction or assembly project or the like which exists for more than 183

days.2.3. The term "

permanent establishment " shall not be deemed to include:a. the use of facilities

solely for the purposes of storage or display of goods or merchandise belonging

to the enterprise;b. the maintenance of a

stock of goods or merchandise belonging to the enterprise solely for the

purpose of storage or display;c. the maintenance of a

stock of goods or merchandise belonging to the enterprise solely for the

purpose of processing by another enterprise;d. the maintenance of a

fixed place of business solely for the purpose of purchasing goods or

merchandise, or for collecting information, for the enterprisee. the maintenance of a

fixed place of business solely for the purpose of advertising, for the supply

of information, for scientific research or for similar activities which have a

preparatory or auxiliary character for the enterprise.1.2.3.4. 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 the first-mentioned State a general authority to

conclude contracts for or on behalf of the enterprise, unless his activities

are limited to the purchase of goods or merchandise for the enterprise, orb. he habitually

maintains in the first-mentioned State a stock of goods or merchandise belonging

to the enterprise from which that person regularly delivers goods or

merchandise for or on behalf of the enterprise, orc. he habitually secures

orders in the first-mentioned State, wholly or almost wholly, for the

enterprise itself, or for the enterprise or other enterprises which are

controlled by it or have controlling interest in it.1.2.3.4.5. 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, where such persons are acting in the ordinary course of

their business and their activities do not fall within the scope of paragraph

(4)(c) above.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 make either company a permanent establishment of

the other.7. An enterprise of a

Contracting State shall be deemed to have a permanent establishment in the

other Contracting State if it carries on a business which consists of providing

the services of public entertainers (such as stage, motion picture, radio or

television artistes and musicians) or athletes in that other Contracting State

unless such services are provided within the scope of a cultural or sports

exchange programme agreed or by both the Contracting States.CHAPTER

IIITAXATION

OF INCOMEArticle

6INCOME

FROM IMMOVABLE PROPERTY1.

Income

from immovable property shall be taxable only in the Contracting State in which

such property is situated.2.

The

term " immovable property " shall be defined in accordance with the

law and usage (having the force of 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, livestock and equipment used in agriculture,

forestry and fishery rights to which the provisions of general law respecting

landed property apply, usufruct of immovable property and rights to variable or

fixed payments in cash or kind as consideration for the working of, or the

right to work, mineral deposits, sources and other natural resources; ships and

aircraft shall not be regarded as immovable property.3.

The

provisions of paragraph (1) shall apply to income derived from the direct use,

letting, or use in any other form of immovable property.4.

The

provisions of paragraphs (1) and (3) shall also apply to the income from

immovable property of an enterprise and to income from immovable property used

for the performance of independent personal services.Article

7BUSINESS

PROFITS1.

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, then so much of the profits of the enterprise as is

attributable to that permanent establishment shall be taxable only in that

other Contracting State.2.

Where

an enterprise of a Contracting State carries on business in the other

Contracting State through a permanent establishment situated therein, there

shall in each Contracting State be attributed to that permanent establishment

the profits which it might be expected to make if it were a distinct and

separate enterprise engaged in the same or similar activities under the same or

similar conditions and dealing wholly independently with the enterprise of

which it is a permanent establishment. In any case, where the correct amount of

profits attributable to a perrmanent establishment is incapable of determination

or the ascertainment thereof presents exceptional difficulties, the profits

attributable to the permanent establishment may be computed on a reasonable

basis.3.

In

the determination of the profits of a permanent establishment, there shall be

allowed as deductions expenses which are incurred for the purpose 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, but this does not include any expenses which, under the

law of that State, would not be allowed to be deducted by an enterprise of that

State.4.

In

so far 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 laid down in this Article.5.

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.6.

For

the purpose 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

8AIR

TRANSPORT1.

Profits

derived by an enterprise of a Contracting State from the operation of aircraft

in international traffic shall be taxable only in that Contracting State.2.

The

provisions of paragraph (1) shall likewise apply in respect of income derived

from participation in pools of any kind by enterprises engaged in air

transport.Article

9SHIPPING1.

Profits

of an enterprise of a Contracting State derived from the other Contracting

State from the operation of ships in international traffic may be taxed in that

other Contracting State, but the tax chargeable in that other Contracting State

on such income shall be reduced by an amount equal to fifty per cent. of such

tax.2.

The

provisions of paragraph 1 shall also apply to profits derived from the

participation in a pool, a joint business or an international operating agency.Article

10ASSOCIATED

ENTERPRISESWhere

--1. an enterprise of a

Contracting State participates directly or indirectly in the management,

control or capital of an enterprise of the other Contracting State, or2. 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

11DIVIDENDS1. 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 Contracting 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

Contracting State, but if the recipient is the beneficial owner of the

dividends, the tax so charged shall not exceed:a. 10 per cent. of the

gross amount of the dividends if the beneficial owner is a company which holds

directly at least 10 per cent. of the capital of the company paying the

dividends;b. 15 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.1.2.3. The term "

dividends " as used in this Article means income from shares, mining

shares, founder's 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.