Cyprus - Legal Draft

Double Taxation

Avoidance AgreementIncome-tax Act, 1961:

Notification under section 90: Agreement between the Republic of India and the

Republic of Cyprus for avoidance of double taxation and prevention of fiscal

evasion with respect to taxes on income and on capitalNotification

No. 9930 (F. NO. 503/4/89-FTD), dtd. 26.12.1995.Whereas

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

Government of the Republic of Cyprus for the Avoidance of Double Taxation with

respect to taxes on income has entered into force on 21-12-1994, after the

notification by both the Contracting States to each other of the completion of

the procedures required by their laws for bringing into force the said

Agreement in accordance with paragraph 1 of Article 30 of the said Agreement;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 Agreement shall be given effect to in the Union of

India.ANNEXUREAGREEMENT

BETWEEN THE REPUBLIC OF INDIA AND THE REPUBLIC OF CYPRUS FOR THE AVOIDANCE OF

DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON

INCOME AND ON CAPITALThe

Government of the Republic of India and the Government of the Republic of

Cyprus desiring to conclude an Agreement for the avoidance of double taxation

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

capital; have agreed as follows:CHAPTER

ISCOPE

OF THE AGREEMENTArticle

1PERSONAL

SCOPEThis

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

Contracting States.Article

2TAXES

COVERED1. This Agreement shall

apply to taxes on income and on capital imposed on behalf of a Contracting

State or of its political sub-divisions or local authorities, irrespective of

the manner in which they are levied.2. There shall be

regarded as taxes on income and capital all taxes imposed on total income, on

total capital, or on elements of income or of capital, including taxes on gains

form 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 taxes to which

this Agreement shall apply are:a. In India:i.

the

income-tax including any surcharge thereon;ii.

the

wealth tax; (hereinafter referred to as "Indian tax");a.b. In Cyprus:i.

the

income tax;ii.

the

corporate income tax;iii.

the

special contribution;iv.

the

capital gains tax;v.

the

immovable property tax; (hereinafter referred to as "Cyprus tax")1.2.3.4. This Agreement shall

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

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

in addition to, or in place of, the taxes referred to in paragraph 3. 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 Agreement,

unless the context otherwise requires:a. the term

"India" means the territory of India and includes the territorial sea

and airspace above it, as well as any other maritime zone in which India has

sovereign rights, 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

"Cyprus" means the Republic of Cyprus including the national

territory, the territorial sea, the continental shelf, and any other area which

in accordance with international law and the law of the Republic of Cyprus has

been or may hereafter be designated as an area within which the Republic of

Cyprus exercises sovereign rights or has jurisdiction or any other rights and

duties;c. the terms "a

Contracting State" and "the other Contracting State" mean India

or Cyprus as the context requires;d. 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;e. 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 Cyprus, the Minister of Finance

or his authorised representative;f. 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;g. the term "fiscal

year" means:i. in the case of India,

"previous year" as defined under section 3 of the Income-tax Act,

1961;ii. in the case of

Cyprus, "year of an assessment" as defined under section 2 of the

Income-tax Law 1961 as amended;a.b.c.d.e.f.g.h. the term

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

operated by an enterprise registered and having the headquarters (i.e.

effective management) in a Contracting State, except when the ship or aircraft

is operated solely between places in the other Contracting State;a.b.c.d.e.f.g.h.i. the term

"national" means:i. in the case of India,

any individual possessing the nationality of India and any legal person,

partnership or association deriving its status from the laws in force in India;ii. in the case of

Cyprus, individuals possessing the citizenship of Cyprus and any person other

than an individual deriving its status as such from the laws in force in

Cyprus;a.b.c.d.e.f.g.h.i.j. the term

"person" includes an individual, a company, a body of persons and any

other entity which is treated as a taxable unit under the taxation laws in

force in the respective Contracting States;k. the term

"tax" means Indian tax or Cyprus 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 Agreement applies or which

represents a penalty imposed relating to those taxes.2. As regards the

application of this Agreement 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 State concerning the taxes to which this Agreement

applies.Article

4RESIDENT1. For the purposes of

this Agreement, 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 or any other criterion of a

similar nature. But this term does not include a person who is liable to tax in

that State in respect only of income from sources in that State or on 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 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; andd. 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.Article

5PERMANENT

ESTABLISHMENT1. For the purposes of

this Agreement, 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 building site,

construction, assembly or installation project or supervisory activities in

connection therewith, but only where such site, project or activity continues

for a period of more than twelve months.1.2.3. 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 advertising, for the supply

of information or for scientific research, being activities solely of a

preparatory or auxiliary character in the trade or business of the enterprise.

However, this provision shall not be applicable where the enterprise maintains

any other fixed place of business in the other Contracting State for any

purpose or purposes other than the purposes specified in this paragraph; andf. 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. Notwithstanding the

provisions of paragraphs 1 and 2, where a person -- other than an agent of

independent status to whom paragraph 5 applies -- is acting on behalf of an

enterprise and has, and habitually exercises, in a Contracting State an

authority to conclude contracts on behalf of the enterprise, that enterprise

shall be deemed to have a permanent establishment in that State in respect of

any activities which that person undertakes for the enterprise, unless the

activities of such person are limited to those mentioned in paragraph 3 which

if exercised through a fixed place of business, would not make this fixed place

of business a permanent establishment under the provisions of that paragraph.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 person is acting in the ordinary course

of their business. However, when the activities of such an agent are devoted

wholly on behalf of 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 Contracting State (whether through a permanent

establishment or otherwise), shall not of itself constitute either company a

permanent establishment of the other.CHAPTER

IIITAXATION

OF INCOMEArticle

6INCOME

FROM IMMOVABLE PROPERTY1. Income derived by a

resident of a Contracting State from immovable property (including income from

agriculture or forestry) situated in the other Contracting State may be taxed

in that other State.2. The term

"immovable property" shall have the meaning which it has under the

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 and forestry, rights to which the

provisions of general law respecting landed property apply, usufruct of

immovable property and rights to variable or fixed payments as consideration

for the working of, or the right to work, mineral deposits, sources and other

natural resources. Ships, boats and aircraft shall not be regarded as immovable

property.3. The provisions of

paragraph 1 shall also apply to income derived from the direct use, letting, or

use in any other form of immovable property.4. The provisions of

paragraphs 1 and 3 shall also apply to the income from immovable property of an

enterprise and to income from immovable property used for the performance of

independent personal services.Article

7BUSINESS

PROFITS1. The profits of an

enterprise of a Contracting State shall be taxable only in the 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; orc. other business activities carried on

in that other State of the same or similar kind as those effected through that

permanent establishment.The

provisions of sub-paragraphs (b) and (c) above shall not apply if the

enterprise proves that such sale or activity could not have been reasonably

undertaken by the 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 attributable 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 deduction

expenses which are incurred for the purposes of the business of the permanent

establishment including executive and general administrative expenses so

incurred, whether in the State in which the permanent establishment is situated

or elsewhere in accordance with the provisions of and subject to the limitation

of the tax laws of that State.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 the 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 the mere 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

Agreement, then the provisions of those Articles shall not be affected by the

provisions of this Article.Article

8SHIPPING

AND AIR TRANSPORT1. Profits derived by an

enterprise registered and having the headquarters (i.e. effective management)

in a Contracting State from the operation by that enterprise of ships or

aircraft in international traffic shall be taxable only in that State.2. For the purposes of

this Article, profits from the operation of ships or aircraft in international

traffic shall mean profits derived by an enterprise described in paragraph 1

from the transportation by sea or air respectively of passengers, mail,

livestock or goods carried on by the owners or lessees or charterers of ships

or aircraft including:--a. the sale of tickets

for such transportation on behalf of other enterprises;b. other activity

directly connected with such transportation; andc. the rental of ships

or aircraft incidental to any activity directly connected with such

transportation.1.2.3. Profits of an

enterprise of a Contracting State described in paragraph 1 from the use,

maintenance, or rental of containers (including trailers, barges, and related

equipment for the transport of containers) used in connection with the

operation of ships or aircraft in international traffic shall be taxable only

in that State4. The provisions of

paragraphs 1 and 3 shall also apply to profits from participation in pool, a

joint business, or an international operating agency.5. For the purposes of

this Article interest on fund connected with the operation of ships or aircraft

in international traffic shall be regarded as profits derived from the

operation of such ships or aircraft, and the provisions of Article 11

(Interest) shall not apply in relation to such interest.6. Gains derived by an

enterprise of a Contracting State described in paragraph 1 from the alienation

of ships, aircraft or containers owned and operated by the enterprise, the

income from which is taxable only in that State, shall be taxed only in that

State.Article

9ASSOCIATED

ENTERPRISES1. 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, orb. 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.1.2.3. Nothing in this Article

shall affect the application of any law of a Contracting State relating to the

determination of such liability by the exercise of a discretion or the making

of an estimate by the competent authority of that State in cases which, from

the information available to the competent authority of that State, it is not

possible or not practicable to determine the income to be attributed to an

enterprise, provided that law shall be applied, so far as the information

available to the competent authority permits, consistently with the principles

of this Article.4. 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 so included are profits

which would have accrued to that 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 Agreement and the competent authorities of the Contracting State

shall, if necessary, consult each other.Article

10DIVIDENDS1. Dividends paid by a

company which is resident of a Contracting State to a resident of the other

Contracting State may be taxed in that other State.2. However, such

dividends may also be taxed in the Contracting State of which the company

paying the dividends is a resident and according to the laws of that State, but

if the recipient is the beneficial owner of the dividends, the tax so charged

shall not exceed:a. 10 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; andb. 15 per cent of the

gross amount of the dividends in all other cases. The competent authorities of

the Contracting States shall by mutual agreement settle the mode of application

of these limitations. 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 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

11INTEREST1. 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 10 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; orii.

the

Central Bank of the other Contracting State or any agency or instrumentality

(including a financial institution) wholly owned by the other Contracting State

or political sub-division or local authority thereof;a.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, 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 Contracting State

itself, a political sub-division, a local authority or a resident of that

State. Where, however, the person paying the interest, whether he is a resident

of Contracting State or not, has in a Contracting State a permanent

establishment or a fixed base in connection with which the indebtness on which

the interest is paid was incurred, and such interest is borne by such permanent

establishment or fixed base, then such interest shall be deemed to arise in the

Contracting State in which the permanent establishment or fixed base is

situated.7. Where, by reason of a

special relationship between the payer and the beneficial owner or between both

of them and some other person, the amount of the interest, having regard to the

debt-claim for which it is paid, exceeds the amount which would have been

agreed upon by the payer and the beneficial owner in the absence of such

relationship, the provisions of this Article shall apply to the last mentioned

amount. In such case, the excess part of the payments shall remain taxable

according to the laws of each Contracting State, due regard being had to the

other provisions of this Agreement.Article

12ROYALTIES

AND FEES FOR INCLUDED SERVICES1. Royalties and fees

for included 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 included services may also be taxed in the Contracting

State in which they arise and according to the laws of that State, but if the

recipient is the beneficial owner of the royalties or fees for included

services the tax so charged shall not exceed 15 per cent of the gross amount of

the royalties or fees for included services.3. The term

"royalties" in this Article means payments or credits, whether

periodical or not, and however described or computed, to the extent to which

they are made as consideration for:a. the use of, or the

right to use any copyright, patent, design or model, plan, secret formula or

process, trademark or other like property or right;b. the use of, or the

right to use, any industrial, commercial or scientific equipment;c. the supply of

scientific, technical, industrial or commercial knowledge or information;d. the use of, or the

right to use:i. motion picture films;ii. films or video tapes

for use in connection with television; oriii. tapes for use in

connection with radio broadcasting; ora.b.c.d.a.b.c.d.e. total or partial

forbearance in respect of the use or supply of any property or right referred

to in this paragraph.4. The term "fees

for included services" in this Article means payments or credits, whether

periodical or not, and however described or computed, to the extent to which

they are made as consideration for:a. the supply of any

assistance that is ancillary and subsidiary to, and is furnished as a means of

enabling the application or enjoyment of, any such property or right as is

mentioned in sub-paragraph (a) of paragraph (3), any such equipment as is

mentioned in sub-paragraph (b) of paragraph (3), or any such knowledge or

information as is mentioned in sub-paragraph (c) of paragraph (3);b. rendering of any

technical or consultancy services (including the provision of technical or

other personnel) if such services make available technical knowledge,

experience, skill, know-how or process or consist of the development and

transfer of a technical plan or technical design.5. The provisions of

paragraphs (1) and (2) shall not apply if the beneficial owner of the royalties

or fees for included services, being a resident of a Contracting State, carries

on business in the other Contracting State in which the royalties or fees for

included 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 or property in respect of which the royalties

or fees for included 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 included services shall be deemed to arise in a Contracting State when the

payer is that State itself, a political sub-division, a local authority or a

resident of that State. Where, however, the person paying the royalties or fees

for included 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 included

services was incurred, and such royalties or fees for included services are

borne by such permanent establishment or fixed base, then such royalties 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 included

services 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

Contracting State, due regard being had to the other provisions of this

Agreement.Article

13TECHNICAL

FEES1. Technical fees

arising in a Contracting State which are derived by a resident of the other

Contracting State may be taxed in that other State.2. However, such

technical fees 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

own of the technical fees, the tax so charged shall not exceed 10 per cent of

the gross amount of the technical fees.3. The term

"technical fees" as used in this Article means payments of any kind

to any person, other than to an employee of the person making the payments, in

consideration for any services of a technical, managerial or consultancy

nature.4. The provisions of

paragraphs (1) and (2) shall not apply if the beneficial owner of the technical

fees, being a resident of a Contracting State carries on business in the other

Contracting State in which the technical fees arise through a permanent

establishment situated therein, or performs in that other State independent

personal services, and the technical fees are effectively connected with such

permanent establishment or such services. In such case, the provisions of

Article 7 or Article 15, as the case may be, shall apply.5. Technical fees 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 statutory body thereof, or a

resident of that State. Where, however, the person paying the technical fees,

whether he is a resident of a Contracting State or not, has in a Contracting

State a permanent establishment in connection with which the obligation to pay

the technical fees was incurred, and such technical fees are borne by that

permanent establishment, then such technical fees shall be deemed to arise in the

Contracting State in which the permanent establishment is situated.6. Where, by reason of a

special relationship between the payer and the recipient or between both of

them and some other person, the amount of the technical fees paid, exceeds for

whatever reason, 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 law of each

Contracting State due regard being had to the other provisions of this

Agreement.Article

14CAPITAL

GAINSGains

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.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.Gains

from the alienation of ships or aircraft operated in international traffic or

movable property pertaining to the operation of such ships or aircraft shall be

taxable only in the Contracting State in which the place of effective

management of the enterprise is situated.Gains

from the alienation of any property other than that mentioned in paragraphs 1,

2 and 3 shall be taxable only in the Contracting State of which the alienator

is a resident.Article

15INDEPENDENT

PERSONAL SERVICESIncome

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;

orb. 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 fiscal 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.The

term "professional services" includes especially independent scientific,

literary, artistic, educational or teaching activities, as well as the

independent activities of physicians, surgeons, lawyers, engineers, architects,

dentists and accountants.Article

16DEPENDENT

PERSONAL SERVICES1. Subject to the

provisions of Articles 17, 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 fiscal year;b. the remuneration is

paid by, or on behalf of, an employer who is not a resident of the other State;

andc. the remuneration is

not home 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 shall be taxable only in the Contracting State in

which the place of effective management of the enterprise is situated.Article

17DIRECTORS'

FEES1.

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

18INCOME

EARNED BY ARTISTES AND ATHLETES1. 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 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

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.4. Notwithstanding the

provisions of paragraph 2 and Articles 7, 15 and 16, where income in respect of

personal activities exercised by an entertainer or an athlete in his capacity

as such in a Contracting State accrues not to the entertainer or athlete

himself but to another person, that income shall be taxable only in the other

Contracting State, if that other person is supported wholly or substantially

from the public funds of that other State, including any of its political

sub-divisions or local authorities.Article

19REMUNERATION

AND PENSIONS IN RESPECT OF GOVERNMENT SERVICE1.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; orii. did not become a

resident of that State solely for the purpose of rendering the services.1.2.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.1.2.3. The provisions of Articles

16, 17 and 18 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

20NON-GOVERNMENT

PENSIONS AND ANNUITIES1. Any pension, other

than a pension referred to in Article 19, or any annuity derived by a resident

of a Contracting State from sources within the other Contracting State may be

taxed only in the first-mentioned Contracting State.2. The term

"pension" means a periodic payment made in consideration of past

services or by way of compensation for injuries received in the course of

performance of services.3. The term

"annuity" means a stated sum payable periodically at stated 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

21PAYMENTS

RECEIVED BY STUDENTS AND APPRENTICES1. 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 other State on:a. payments made to him

by persons residing outside that other State for the purposes of his

maintenance, education or training; andb. remuneration from

employment in that other State, in an amount not exceeding US $ 5,000 or its

equivalent during any fiscal year, provided that such employment is directly

related to his studies or is undertaken for the purpose of his maintenance.1.2. The benefit of

sub-paragraph (b) or paragraph (1) 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

benefit of sub-paragraph (b) of paragraph (1) of this Article for more than

three consecutive years from the date of his first arrival in that other

Contracting State.Article

22PAYMENTS

RECEIVED BY PROFESSORS, TEACHERS AND RESEARCH SCHOLARS1. Remuneration which a professor

or teacher 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 for a period not exceeding two years for the purpose of

carrying out advanced study or research or for teaching at a university,

receives for such work shall not be taxed in that State, provided that such

remuneration is derived by him from outside that 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 resident of a

Contracting State if he is a resident in that Contracting State in the fiscal

year in which he visits the other Contracting State or in the immediately

preceding fiscal year.Article

23OTHER

INCOME1. Subject to the

provisions of paragraph 2, items of income of a resident of a Contracting

State, wherever arising, which are not expressly dealt with in the foregoing

Articles of this Agreement, shall be taxable only in that Contracting State.2. The provisions of

paragraph 1 shall not apply to income, other than income from immovable

property as defined in paragraph 2 of Article 6, if the recipient of such

income, being a resident of a Contracting State, carries on business in the

other Contracting State through a permanent establishment situated therein, or

performs in that other State independent personal services from a fixed base

situated therein, and the right or property in respect of which the income is

paid is effectively connected with such permanent establishment or fixed base.

In such 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 Agreement

and arising in the other Contracting State may also be taxed in that other

State.Article

24CAPITAL1. 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 and aircraft operated in international traffic and by movable property

pertaining to the operation of such ships and aircraft, shall be taxable only

in the Contracting State in which the place of effective management of the

enterprise is situated.4. All other elements of

capital of a resident of a Contracting State shall be taxable only in that

State.CHAPTER

IVMETHOD

FOR ELIMINATION OF DOUBLE TAXATIONArticle

25AVOIDANCE

OF DOUBLE TAXATION1. The laws in force in

either of the Contracting States shall continue to govern the taxation of

income and capital in the respective Contracting States except where express

provision to the contrary is made in this Agreement.2. Where a resident of

India derives income or owns capital which, in accordance with the provisions

of this Agreement, may be taxed in Cyprus, India shall allow as a deduction

from the tax on the income of that resident an amount equal to the income-tax

paid in Cyprus whether directly or by deduction; and as a deduction from the

tax on the capital of that resident an amount equal to the capital-tax paid in

Cyprus. 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 Cyprus.3. In the case of

Cyprus, double taxation shall be avoided, subject to the provisions of the law

of Cyprus regarding the allowance as a credit against Cyprus tax of tax payable

in a territory outside Cyprus. Indian tax payable under the laws of India

whether directly or by deduction in respect of profits, income or gains from

sources within India shall be allowed as a credit against any Cyprus tax

payable in respect of that profit, income or gains. Such deduction shall not,

however, exceed that part of the tax, as computed before the deduction is

given, which is appropriate to such income derived in India.4. The tax payable in a

Contracting State mentioned in paragraph 2 and paragraph 3 of this Article

shall be deemed to include the tax which would have been payable but for the

tax incentives granted under the laws of the Contracting State and which are

designed to promote economic development. For the purpose of paragraph 2 of

Article 10 of the amount of tax shall be deemed to be 10 per cent or 15 per

cent, as the case may be, of the gross amount of dividend, for the purpose of

paragraph 2 of Article 11, the amount of tax shall be deemed to be 10 per cent

of the gross amount of interest and for the purpose of paragraph 2 of Article

12, the amount of tax shall be deemed to be 15 per cent of the gross amount of

royalties and fees for included services and for the purpose of paragraph 2 of

Article 13, the amount of tax shall be deemed to be 10 per cent of the gross

amount of technical fees.5. When in accordance

with any provision of this Agreement income derived by a resident of a

Contracting State is exempt from tax in that State, such State may

nevertheless, in calculating the amount of tax on the remaining income of such

resident, take into account the exempted income.CHAPTER

VSPECIAL

PROVISIONSArticle

26NON-DISCRIMINATION1. 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 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. This provision shall not be

construed as preventing a Contracting State from charging the profits of a

permanent establishment which an enterprise of the other Contracting State has

in the first-mentioned State at a rate which is higher than that imposed on the

profits of a similar enterprise of the first-mentioned Contracting State, nor

as being in conflict with the provisions of paragraph 3 of Article 7 of this

Agreement.3. Nothing contained in

this Article shall be construed as obliging a Contracting State to grant to

persons not resident in that State any personal allowances, reliefs, reductions

and deductions for taxation purposes which are by law available only to persons

who are so resident.4. Enterprises of a

Contracting State, the capital of which is wholly or partly owned or

controlled, directly or indirectly, by one or more residents of the other

Contracting State, shall not be subjected in the first-mentioned Contracting

State to any taxation or any requirement connected therewith which is other or

more burdensome than the taxation and connected requirements to which other

similar enterprises of that first-mentioned State are or may be subjected in

the same circumstances.5. In this Article, the

term "taxation" means taxes which are the subject of this Agreement.Article

27MUTUAL

AGREEMENT PROCEDURE1. 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

Agreement, he may, notwithstanding the remedies provided by the national laws

of those States, present his case to the competent authority of the Contracting

State of which he is a resident. This case must be presented within three years

of the date of receipt of notice of the action which gives rise to taxation not

in accordance with the Agreement.2. The competent

authority shall endeavour, if the objection appears to it to be justified and

if it is not itself able to arrive at an appropriate solution, to resolve the

case by mutual agreement with the competent authority of the other Contracting

State, with a view to the avoidance of taxation not in accordance with the

Agreement. Any agreement reached shall be implemented notwithstanding any time

limits in the national laws of the Contracting State.3. The competent

authorities of the Contracting States shall endeavour to resolve by mutual

agreement any difficulties or doubt arising as to the interpretation or

application of the Agreement. They may also consult together for the

elimination of double taxation in cases not provided for in the Agreement.4. The competent

authorities of the Contracting States may communicate with each other directly

for the 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 S