German Democratic Republic - Legal Draft

Double Taxation

Avoidance AgreementAgreement between the

Government of Republic of the India and the Government of the German Democratic

Republic for the avoidance of double taxation with respect to taxes on income

and on capitalNotification No. G.

S. R. 107(E), dtd. 2nd March, 1990.Whereas

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

Government of the German Democratic Republic for the avoidance of double

taxation with respect to taxes on income and on capital has come into force on

the 24th November, 1989, on the notification by both the Contracting States to

each other of the approval of the agreement under their laws in accordance with

article 31 of the said agreement;Now,

therefore, in exercise of the powers conferred by section 44A of the Wealth-tax

Act, 1957 (27 of 1957), and 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 GOVERNMENT OF THE REPUBLIC OF INDIA AND THE GOVERNMENT OF THE

GERMAN DEMOCRATIC REPUBLIC FOR THE AVOIDANCE OF DOUBLE TAXATION WITH RESPECT TO

TAXES ON INCOME AND ON CAPITAL.The

Government of the Republic of India and the Government of the German Democratic

Republic;Desiring

to promote economic co-operation between the two States through an Agreement

for the avoidance of double taxation with respect to taxes on income and on

capital;Have

agreed as follows:Article

1PERSONAL

SCOPEThis

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

Contracting States.Article

2TAXES

COVERED1. The taxes to which

this Agreement shall apply are:a. In the Republic of

India:i.

the

income-tax including any surcharge thereon imposed under the Income-tax Act,

1961 (43 of 1961); andii.

the

wealth-tax imposed under the Wealth-tax Act, 1957 (27 of 1957) (hereinafter

referred to as "Indian tax").a.b. In the German

Democratic Republic:i.

Einkommensteuer

(income-tax);ii.

Koerperschaftsteuer

(corporate income-tax);iii.

Gewinnabfuhrungen

der Staatlichen Betriebe (revenue transfer by public enterprises);iv.

Lohnsteue;

(tax on wages);v.

Steuer

auf Lizenzgebuhren (tax on royalties);vi.

Gewerbesteuer

(trade-tax); andvii.

Vermogensteuer

(property-tax)(hereinafter

referred to as "German Democratic Republic tax").2.

The

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 1.The

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

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

3GENERAL

DEFINITIONS1.

In

this Agreement, unless the context otherwise requires:a.

the

terms "a Contracting State" and "the other Contracting

State" mean Republic of India or the German Democratic Republic as the

context requires;b.

the

term "tax" means Indian tax or German Democratic Republic 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;c.

the

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

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

respective Contracting States;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

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;f.

the

term "competent authority" means in the case of India, the Central

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

authorised representative; and in the case of the German Democratic Republic,

the Ministry of Finance;g.

the

term "national" means:i. any individual

possessing the nationality of a Contracting State under the laws in force in

that State; andii. any legal person,

partnership or Organisation deriving its status from the laws in force in the

Contracting State;a.b.c.d.e.f.g.h. the term

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

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

aircraft is operated solely between places in the other Contracting State.2.

As

regards the application of the Agreement by a Contracting State, any term not

defined therein shall, unless the context otherwise requires, have the meaning

which it has for the purposes of the law of that State concerning the taxes to

which the 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.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,

as if he has not a permanent home available to him in either State, he shall be

deemed to be a resident of the State in which he has an habitual abode;c.

if

he has an habitual abode in both States or in neither of them, he shall be

deemed to be a resident of the State of which he is a national;d.

if

he is a national of both States or of neither of them, the competent

authorities of the Contracting States shall settle the question by mutual

Agreement.3.

Where

by reason of the provisions of paragraph 1, a person other than an individual

is a resident of both Contracting States then it shall be deemed to be a

resident of the State in which its place of effective management is situated.Article

5PERMANENT

ESTABLISHMENT1.

For

the purposes of this Agreement, the term "permanent establishment"

means a fixed place of business through which the business of the enterprise is

wholly or partly carried on.2.

The

term "permanent establishment" includes especially:a.

a

place of management;b.

a

branch;c.

an

office;d.

a

factory;e.

a

workshop or a warehouse;f.

a

mine, an oil or gas well, a quarry or any other place of extraction of natural

resources;g.

a

farm or plantation;h.

a

premises used as a sales outlet or for receiving or soliciting orders;i.

an

installation or structure used for the exploration or development of natural

resources;j.

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.3.

Notwithstanding

the preceding provisions of this article, the term "permanent

establishment" shall be deemed not to include:a.

a

temporary building site or construction or installation project executed by the

Government of a Contracting State in the other State;b.

the

use of facilities solely for the purpose of storage or display of goods or

merchandise belonging to the enterprise;c.

the

maintenance of a stock of goods or merchandise belonging to the enterprise

solely for the purpose of storage or display;d.

the

maintenance of a stock of goods or merchandise belonging to the enterprise

solely for the purpose of processing by another enterprise;e.

the

maintenance of a fixed place of business solely for the purpose of purchasing

goods or merchandise, or of collecting information, for the enterprise;f.

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.However,

the provisions of sub-paragraphs (b) to (f) shall not be applicable where the

enterprise maintains any other fixed place of business in the other Contracting

State for any purposes other than the purposes specified in the said sub-paragraphs.4.

Notwithstanding

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

independent status to whom paragraph 5 applies--is acting in a Contracting

State on behalf of an enterprise of the other Contracting State, that

enterprise shall be deemed to have a permanent establishment in the

first-mentioned State, ifa.

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; orc.

he

habitually secures orders in the first-mentioned State, wholly or almost wholly

for the enterprise itself or for the enterprise and other enterprises

controlling, controlled by, or subject to the same common control as, that

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 Contracting State (whether through a

permanent establishment or otherwise), shall not of itself constitute either

company a permanent establishment of the other.Article

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 the law of the Contracting State 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 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 are 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. In any case where the correct amount of profits attributable to

a permanent establishment is incapable of determination or the determination

thereof presents exceptional difficulties, the profits attributable to the

permanent establishment may be estimated 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 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 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 amount 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 Agreement, 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 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.

For

the purposes of this article, interest on the funds connected with the

operation of aircraft in international traffic shall be regarded as profits

derived from the operation of such aircraft, and the provisions of article 12

shall not apply in relation to such interest.4.

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

9SHIPPING1.

Income

derived by an enterprise of a Contracting State from the operation of ships in

international traffic may be taxed in the other Contracting State.2.

No

income-tax and/or turnover-tax shall be levied or collected by the Government

of the German Democratic Republic on the freight earnings and/or profits on

national cargo carried by the Indian vessels including those under time-charter

between ports of the two States, and, similarly, no income-tax and/or

turnover-tax shall be levied or collected by the Government of the Republic of

India on the freight earnings and/or profits on an national cargo carried by

the vessels of the German Democratic Republic including those under

time-charter between ports of the two States.3.

Income

derived by an enterprise of a Contracting State from the operation of ships in

international traffic for the transport of cargo other than that belonging to

either Contracting State may be taxed also in that other Contracting State; but

such tax shall be restricted to 50 per cent. of the tax otherwise leviable in

the source country.4.

The

provisions of this article shall also apply to profits from the participation

in a pool, a joint business or an international operating agency engaged in the

operation of ships.5.

For

the purposes of this article:a.

interest

on funds connected with the operation of ships in international traffic shall

be regarded as income from the operation of such ships and the provisions of

article 12 shall not apply in. relation to such interest; andb.

income

from the operation of ships includes income derived from the use, maintenance

or rental of containers (including trailers and related equipment for the

transport of containers) in connection with the transport of goods or

merchandise in international traffic.Article

10ASSOCIATED

ENTERPRISESWhere: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.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 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 as charged

shall not exceed:a.

15

per cent. of the gross amount of the dividends if the beneficial owner is a

company which owns at least 25 per cent. of the shares of the company paying

the dividends;b.

25

pet cent. of the gross amount of the dividends in all other cases.This

paragraph shall not affect the taxation of the company in respect of the

profits out of which the dividends are paid.3.

The

term "dividends" as used in this article means income from shares or

other rights, not being debt-claims, participating in profits, as well as

income from other corporate rights which is subjected to the same taxation

treatment as income from shares by the laws of the State of which the company

making the distribution is a resident.4.

The

provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the

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

other Contracting State of which the company paying the dividends is a

resident, through a permanent establishment situated therein or performs in

that other State independent personal services from a fixed base situated

therein, and the holding in respect of which the dividends are paid is

effectively connected with such permanent establishment or fixed base. In such

a case, the provisions of article 7 or article 15, as the case may be, shall

apply.5.

Where

a company which is a resident of a Contracting State derives profits or income

from the other Contracting State, that other State may not impose any tax on

the dividends paid by the company except in so far as such dividends are paid

to a resident of that other State or so far as the holding in respect of which

the dividends are paid is effectively connected with a permanent establishment

or a fixed base situated in that other State, nor subject the company's

undistributed profits to a tax on the company's undistributed profits, even if

the dividends paid or the undistributed profits consist wholly or partly of

profits or income arising in such other State.Article

12INTEREST1.

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; orii. the Central Bank of

the other Contracting State;a.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 a

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

permanent establishment or a fixed base in connection with which the

indebtedness on which the interest is paid was incurred, and such interest is

borne by such permanent establishment or fixed base, then such interest shall be

deemed to arise in the Contracting State in which the permanent establishment

or fixed base is situated.7.

Where,

by reason of a special relationship between the payer and the beneficial owner

or between both of them and some other person, the amount of the interest,

having regard to the debt-claim for which it is paid, exceeds the amount which

would have been agreed upon by the payer and the beneficial owner in the

absence of such relationship, the provisions of this article shall apply to the

last-mentioned amount In such 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

13ROYALTIES

AND FEES FOR TECHNICAL SERVICES1.

Royalties

and fees for technical services arising in a Contracting State and paid to a

resident of the other Contracting State may be taxed in that other State.2.

However,

such royalties and fees for technical services may also be taxed in the

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

but if the recipient is the beneficial owner of the royalties, or fees for

technical services, the tax so charged shall not exceed 22.5 (twenty-two and a

half) per cent. of the gross amount of the royalties or fees for technical

services.3.

The

term "royalties" as used in this article means payments of any kind

received as a consideration for the use of, or the right to use, any copyright

of literary, artistic or scientific work, including cinematograph films or

tapes used for radio or television broadcasting, any patent, trade mark, design

or model, plan, secret formula or process, or for the use of, or the right to

use, industrial, commercial or scientific equipment, or for information

concerning industrial, commercial or scientific experience.4.

The

term "fees for technical services" as used in this article means

payments of any amount to any person other than payments to an employee of a

person making payments, in consideration for the services of a managerial,

technical or consultancy nature, including the provision of services of

technical or other personnel.5.

The

provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the

royalties or fees for technical services, being a resident of a Contracting

State, carries on business in the other Contracting State in which the

royalties or fees for technical services arise, through a permanent

establishment situated therein, or performs in that other State independent

personal services from a fixed base situated therein, and the right, property

or contract in respect of which the royalties or fees for technical services

are paid is effectively connected with such permanent establishment or fixed

base. In such case, the provisions of article 7 or article 15, as the case may

be, shall apply.6.

Royalties

and fees for technical services shall be deemed to arise in a Contracting State

when the payer is that State itself, a political sub-division, a local

authority or a resident of that State. Where, however, the person paying the

royalties or fees for technical services, whether he is a resident of a

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

or a fixed base in connection with which the liability to pay the royalties or

fees for technical services was incurred, and such royalties or fees for

technical services are borne by such permanent establishment or fixed base,

then such royalties or fees for technical services shall be deemed to arise in

the State in which the permanent establishment or fixed base is situated.7.

Where,

by reason of special relationship between the payer and the beneficial owner or

between both of them and some other person, the amount of royalties 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 Agreement.Article

14CAPITAL

GAINS1.

Gains

derived by a resident of a Contracting State from the alienation of immovable

property, referred to in article 6, and situated in the other Contracting State

may be taxed in that other State.2.

Gains

from the alienation of movable property forming part of the business property

of a permanent establishment which an enterprise of a Contracting State has in

the other Contracting State or of movable property pertaining to a fixed base

available to a resident of a Contracting State in the other Contracting State

for the purpose of performing independent personal services, including such

gains from the alienation of such a permanent establishment (alone or together

with the whole enterprise) or of such fixed base, may be taxed in that other

State.3.

Gains

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

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

taxable only in the Contracting State of which the alienator is 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

from the alienation of shares other than those mentioned in paragraph 4 in a

company which is a resident of a Contracting State may be taxed in that State.6.

Gains

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

2, 3, 4 and 5 shall be taxable only in the Contracting State of which the

alienator is a resident.Article

15INDEPENDENT

PERSONAL SERVICES1.

Income

derived by an individual who is a resident of a Contracting State from the

performance of professional services or other independent activities of a

similar character shall be taxable only in that State except in the following

circumstances when such income may also be taxed in the other Contracting

State:a. if he has a fixed

base regularly available to him in the other Contracting State for the purpose

of performing his activities; in that case, only so much of the income as is

attributable to that fixed base may be taxed in that other State; orb. (b)if his stay in the

other Contracting State is for a period or periods amounting to or exceeding in

the aggregate 90 days in the relevant "previous year" or "year

of income", as the case may be; in that case, only so much of the income

as is derived from his activities performed in that other State may be taxed in

that other State.2.

The

term "professional services" includes independent scientific,

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

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

dentists and accountants.Article

16DEPENDENT

PERSONAL SERVICES1. 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 firstmentioned 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", as the case

maybe; andb.

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 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.4. Exports of either

Contracting State delegated to the other Contracting State under Agreements for

Scientific Exchanges and Co-operation between India and the German Democratic

Republic in force from time to time shall be exempted by the other State from

payment of income-tax on the salaries and allowances paid to them by their

respective States.Article

17DIRECTORS'

FEES AND REMUNERATION OF TOP LEVEL MANAGERIAL OFFICIALS1.

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.2.

Salaries,

wages and other similar remuneration derived by a resident of a Contracting

State in his capacity as an official in a top-level managerial position of a

company which is a resident of the other Contracting State may be taxed in that

other State.Article

18INCOME

EARNED BY ENTERTAINERSNotwithstanding

the provisions of articles 15 and 16, income derived by a resident of a

Contracting State as an entertainer such as a theatre, motion picture, radio or

television artiste or a musician from his personal activities as such exercised

in the other Contracting State may be taxed in that other State:Provided

that income derived by individuals or groups of persons from activities

exercised in the framework of cultural exchanges agreed between the Contracting

States on a bilateral or multilateral basis may be taxed only in the State of

which they are residents.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:1.

is

a national of that State; or2.

did

not become a resident of that State solely for the purpose of rendering the

services2.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 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 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 Rs.15,000 or its

equivalent in "Mark of the GDR" during any "previous year"

or the "year of income", as the case may be, provided that such

employment is directly related to his studies or is undertaken for the purpose

of his maintenance.2.

The

benefits of this article shall extend only for such period of time as may be

reasonable or customarily required to complete the education or training

undertaken, but in no event shall any individual have the benefits of this

article, for more than six consecutive years from the date of his first arrival

in that other Contracting State.Article

22PAYMENTS

RECEIVED BY PROFESSORS, TEACHERS AND RESEARCH SCHOLARS1.

A

professor or teacher who is or was a resident of one of the Contracting States

immediately before visiting the other Contracting State for the purpose of

teaching or engaging in research, or both, at a university, college, school or

other approved institution in that other Contracting State shall be exempt from

tax in that other State on any remuneration for such teaching or research for a

period not exceeding two years from the date of his arrival in that other

State.2.

This

article shall not apply to income from research if such research is undertaken

primarily for the private benefit of a specific person or persons.3.

For

the purposes of this article and article 21, an individual shall be deemed to

be a resident of a Contracting State if he is resident in that Contracting

State in the "previous year" or the "year of income", as

the case may be, in which he visits the other Contracting State or in the

immediately preceding "previous year" or the "year of

income".4.

For

the purposes of paragraph 1, "approved institution" means an

institution which has been approved in this regard by the competent authority

of the concerned Contracting State.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 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 resident of a

Contracting State not dealt with in the foregoing articles of this Agreement

and arising in the other Contracting State may 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 or aircraft, operated in international traffic and by

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

taxed only in the Contracting State of which the enterprise owning such

property is a resident.4.

All

other elements of capital of a resident of la Contracting State may be taxed in

both Contracting States.Article

25ELIMINATION

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 an express provision to the contrary is made in this Agreement.2.

Where

a resident of a Contracting State derives income or owns capital which, in

accordance with the provisions of this Agreement may be taxed in the other

Contracting State, the first-mentioned State shall, subject to the provisions

of paragraph 3, exempt such income or capital from tax.3.

Where

in accordance with any provision of the Agreement income derived or capital

owned 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 or capital of such resident, take into account the exempted income or

capital.Article

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 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 and under the same

conditions.3.

Nothing

contained in this article shall be construed as obliging a Contracting State to

grant to persons not resident in that State any per sonal 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 and under the same conditions.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. The case must be

presented within three years 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 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 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 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

States.Article

28EXCHANGE

OF INFORMATION1.

The

competent authorities of the Contracting States shall exchange such information

(including documents) as is necessary for carrying out the provisions of the

Agreement or of the domestic laws of the Contracting States concerning taxes

covered by the Agreement, in so far as the taxation thereunder is not contrary

to the Agreement, in particular for the prevention of fraud or evasion of such

taxes. Any information received by a Contracting State shall be treated as,

secret in the same manner as information obtained under the domestic laws of

that State. However, if the information is originally regarded as secret in the

transmitting State, it shall be disclosed only to persons or authorities

(including courts and administrative bodies) involved in the assessment or

collection of, the enforcement or prosecution in respect of, or the

determination of appeals in relation to, the taxes which are the subject of the

Agreement. Such persons or authorities shall use the information only for such

purposes but may disclose the information in public court proceedings or in

judicial decisions. The competent authorities shall, through consultation,

develop appropriate conditions, methods and techniques concerning the matters

in respect of which such exchange of information shall be made, including,

where appropriate, exchange of information regarding tax avoidance.2.

The

exchange of information or documents shall be either on a routine basis or on a

request with reference to particular cases or both. The competent authorities

of the Contracting States shall agree from time to time on the list of

information or documents which shall be furnished on a routine basis.3.

In

no case shall the provisions of Paragraph 1 be construed so as to impose on a

Contracting State the obligation:a.

to

carry out administrative measures at variance with the laws or administrative

practice of that or of the other Contracting State;b.

to

supply information or documents which are not obtainable under the laws or in

the normal course of the administration of that or of the other Contracting

State;c.

to

supply information or documents which would disclose any trade, business,

industrial, commercial or professional secret or trade process or information

the disclosure of which would be contrary to public policy.Article

29ASSISTANCE

IN COLLECTION1.

The

Contracting States undertake to lend assistance and support to each other, in

the collection of the taxes to which this Agreement relates, in the cases where

the taxes are definitely due according to the laws of the State making the

request.2.

In

the case of a request for enforcement of collection, tax claims of either of

the Contracting States which have been finally determined will be accepted for

enforcement by the other Contracting State to which the request is made and

collected in that State in accordance with the laws applicable to the

enforcement and collection of its taxes.3.

In

the case of Indian tax, the request will be sent by the Central Board of Direct

Taxes, Department of Revenue to the Ministry of Finance of the German

Democratic Republic, and will be accompanied by such certificate as is required

by the laws of India to establish that the taxes have been finally determined

on the basis of the relevant domestic laws and are due from the taxpayer.4.

In

the case of the German Democratic Republic tax, the request will be sent by the

Ministry of Finance to the Central Board of Direct Taxes, Department of

Revenue, in India and will be accompanied by such certificate as is required by

the laws of the German Democratic Republic to establish that the taxes have

been finally determined on the basis of the relevant domestic laws, and are due

from the taxpayer.5.

Where

the tax claim has not become final by reason of its being subject to appeal or

any other proceeding, a Contracting State may, in order to protect its

revenues, request the other Contracting State to take such interim measures in

this behalf as are lawful under the laws of that other Contracting State.6.

A

request for assistance in collection of taxes due from a taxpayer shall be made

only if adequate income or assets of that taxpayer are not available for

recovering the taxes from him in the Contracting State making the request.7.

The

Contracting State in which tax is recovered in pursuance of Paragraphs 1, 2 and

5 of this article shall immediately thereafter remit the amount so recovered to

the Contracting State which made the request but it shall be entitled to

reimbursement of costs, if any, incurred in the course of rendering assistance

in the recovery of such tax but in no event, such costs shall exceed 10 per

cent. of the amount so recovered.Article

30DIPLOMATIC

AND CONSULAR ACTIVITIESNothing

in this Agreement shall affect the fiscal privileges of diplomatic or consular

officials under the general rules of international law or under the provisions

of special agreements.Article

31ENTRY

INTO FORCE1.

This

Agreement shall be ratified or approved in accordance with the laws in force in

the two Contracting States.2.

This

Agreement shall enter into force upon the exchange of notes notifying the

approval or ratification of the Agreement in accordance with the laws in force.3.

The

provisions of the Agreement shall apply:a.

in

the Republic of India, to taxes covered by this Agreement which are levied for

any year of assessment, beginning on or after the first day of April, 1985;b.

in

the German Democratic Republic, to taxes covered by this Agreement which are

levied for any year of assessment, beginning on or after the first day of

January, 1985.Article

32PERIOD

OF VALIDITY1.

This

Agreement is concluded for unlimited duration but either Contracting State may

terminate the Agreement by giving written notice after five years from the day

of its entry into force, so however, that at least six months remain before the

end of the calendar year in which the notice is given. 2. In such event, the

Agreement shall cease to have effect:a.

in

the Republic of India, in respect of income arising in any previous year

beginning on or after the 1st day of January next following the calendar year

in which the notice is given;b.

in

the German Democratic Republic, in respect of income arising in any year of

income beginning on or after the 1st day of January next following the calendar

year in which the notice of termination is given.IN

WITNESS WHEREOF the undersigned, being duly authorised thereto,