Indonesia - Legal Draft

Double Taxation

Avoidance AgreementAgreement between the

Republic of India and the Republic of Indonesia for the avoidance of double

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

No.G.S.R.77 (E) dtd. 4.2.1988.INCOME

TAXWhereas

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

Government of the Republic of Indonesia for the avoidance of double taxation

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

into force, on the 19th December, 1987 on the notification by both the

Contracting States to each other of the completion of the procedures required

by their laws, as specified by Article 28 of the said agreement;Now,

therefore, in exercise of the powers conferred by section 90 of the Income-tax

Act, 1961 (43 of 1961) and section 24A of the Companies (Profits) Surtax Act,

1964 (7 of 1964), the Central Government hereby directs that all the provisions

of the said Agreement shall be given effect to in the Union of India.AGREEMENT

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

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

ON INCOMEThe

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

Indonesia,DESIRING

to conclude an Agreement for the avoidance of double taxation and the

prevention of fiscal evasion with respect to taxes on income.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 India:i.

the

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

1961 (43 of 1961);ii.

the

surtax imposed under the Companies (Profits) Surtax Act, 1964 (7 of 1964);(hereinafter

referred to as "Indian Tax").a.b. In Indonesia:the

income-tax imposed under the Undangundang Pajak Penghasilan 1984 (Law No. 7 of

1983) and to the extent provided in such income-tax law, the company tax

imposed under the Ordonansi Paiak Perseroan 1925 (State Gazette No. 319 of 1925

as lastly amended by Law No. 8 of 1970) and the tax imposed under the

Undang-undanq Paiak atas Bunga. Dividend an Royalty 1970 (Law No. 10 of 1970).(hereinafter

referred to as "Indonesia Tax").1.2. 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,

under the context otherwise requires:a. the term

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

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

sovereignty, sovereign rights, other rights and jurisdiction according to the

Indian Law and in accordance with International Law, particularly the United

Nations Convention on the Law of the Sea, 1982;b. the term

"Indonesia" comprises the territory of the Republic of Indonesia as

defined in its laws and the includes the territorial sea and air space above in

adjacent areas over which the Republic of Indonesia has sovereignty, sovereign

rights or jurisdiction in accordance with International Law, particularly the

provisions of the United Nations Conventions on the Law of the Sea, 1982;c. the terms "a

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

or Indonesia as the context requires;d. the term

"tax" means Indian tax or Indonesian 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;e. 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;f. the term

"company" means any body corporate or any entity which is treated as

a company or body corporate under the taxation laws in force in the respective

Contracting States;g. the terms

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

Contracting State" mean respectively an enterprise carried on by a

resident of a Contracting State and an enterprise carried on by a resident of

the other Contracting State;h. the term

"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;i. 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 Indonesia, the Minister of

Finance or his authorized representative;j. the term

"national" means any individual, possessing the nationality of a

Contracting State and any legal person, partnership or association deriving its

status from the laws in force in the 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 under the law of that State concerning the tax 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. But this term does not include any person who is liable to tax

in that State in respect only of income from sources in that State.2. Where by reason of

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

States, then his status shall be determined as follows:a. he shall be deemed to

be a resident of the State in which he has a permanent home available to him;

if he has a permanent home available to him in both States, he shall be deemed

to be a resident of the State with which his personal and economic relations

are closer (centre of vital interests);b. if the State in which

he has his centre of vital interests cannot be determined, or if he has not a

permanent home available to him in either State, he shall be deemed to be a

resident of the State in which he has an habitual abode;c. if he has an habitual

abode in both States or in neither of them, 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, the competent authorities of the contracting States

shall settle he question by mutual agreement keeping in view of its place of

incorporation, place of effective management and other relevant factors.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 or

construction, installation or assembly project or supervisory activities in

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

for a period of more than 183 days.3. Notwithstanding the

preceding provisions of this article, the term "permanent

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

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

to the enterprise;b. the maintenance of a

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

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

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

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

fixed place of business solely for the purpose of purchasing goods 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, for scientific research or for similar activities which have a

preparatory or auxiliary character for the enterprise.4. Where a person (other

than an agent of an independent status to whom the provisions of paragraph 7

apply) 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 in respect of any activities which

that person undertakes for the enterprise, if:a. that person has, and

habitually exercises in the first-mentioned State, an authority to conclude

contracts on behalf of the enterprise; orb. that person maintains

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

belonging to the enterprise from which he regularly delivers goods or

merchandise on behalf of the enterprise.5. An enterprise of a

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

other Contracting State if it furnishes services, including consultancy

services in that other Contracting State through employees or other

personnel----other than an agent of an independent status to whom the

provisions of paragraph 7 apply, -provided that activities of that nature

continue (for the same or a connected project) within the country for a period

or periods aggregating more than 91 days in any twelve month period.6. An insurance enterprise

of a Contracting State shall, except with regard to reinsurance, be deemed to

have a permanent establishment in the other Contracting State if it collects

premiums in that other State or insures risks situated therein through an

employee or through a representative who is not an agent of an independent

status within the meaning of paragraph 7.7. 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, he will not be considered

an agent of an independent status within the meaning of this paragraph.8. 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 foresty 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,

live-stock 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 that State unless

the enterprise carries on business in the other Contracting State through a

permanent establishment situated therein. If the enterprise carries on business

as aforesaid, the profits of the enterprise may be taxed in the other State but

only so much of them as is attributable to (a) that permanent establishment (b)

sales in that other State of goods or merchandise of the same or similar kind

as those sold through that permanent establishment.2. Subject to the provisions

of paragraph 3, where an enterprise of a Contracting State carries on business

in the other Contracting State through a permanent establishment situated

therein, there shall in each Contracting State be attributed to that permanent

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

distinct and separate enterprise engaged in the same or similar activities

under the same or similar conditions and dealing wholly independently with the

enterprise of which it is a permanent establishment.3. In determining the

profits of a permanent establishment, there shall be allowed as deductions

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

establishment including executive and general administrative expenses so incurred,

whether in the State in which the permanent establishment is situated or

elsewhere. 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 or other rights, or by way of commission, 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,

for amounts charged otherwise than in the determination of the profits of a

permanent establishment. Likewise, no account shall be taken 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 or other rights, or by way of

commission 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. In so far as it has

been customary in a contracting State to determine the profits to be attributed

to a permanent establishment on the basis of an apportionment of the total

profits of the enterprise to its various parts, nothing in paragraph 2 shall

preclude that Contracting State from determining the profits to be taxed by

such an apportionment as may be customary, the method of apportionment adopted

shall, however, be such that the result shall be in accordance with the

principles 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 of a Contracting State from the operation of ships or aircraft in

international traffic shall be taxable only in that State.2. The provisions of

paragraph 1 of this article shall also apply to profits from participation in a

pool, a joint business or an international operating agency.3. For the purposes of

this article, interest on funds 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 shall not

apply in relation to such interest.4. The term

"operation of ships or aircraft" shall mean business of

transportation of passengers, mail, livestock or goods carried on by the owners

or lessees or charterers of ships or aircraft, including the sale of tickets

for such transportation on behalf of other enterprises, the incidental lease of

ships or aircraft and any other activity directly connected with such

transportation.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.2. Where a Contracting

State includes in the profits of an enterprise of that State-and taxes

accordingly-profits on which an enterprise of the other Contracting State has

been charged to tax in that other State and the profits so included are profits

which would have accrued to the enterprise of the first-mentioned State if the

conditions made between the two enterprises had been those which would have

been made between the 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 the agreement and the competent authorities of the Contracting

States shall, if necessary, consult each other.ARTICLE

10Dividends1. Dividends paid by a

company, which is resident of 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 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 dividends if the beneficial owner is a company which owns at

least twenty five per cent of the shares of the company paying the dividends;b. 15 per cent of the

gross amount of the dividends in all other cases.This

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

profits out of which the dividends are paid.1.2.3. The term

"dividends" as used in this article means income from shares 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 personnel 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 of fixed base. In such case, the provisions

of article 7, or article 14, 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 or any agency or instrumentality (including a financial

institution) wholly owned by the other Contracting State or political

sub-division of 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.1.2.3.4. The term

"interest" as used in this article means income from debt-claim of

every kind (including interest on deferred payment sales), 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

paragraph 1 and 2 shall not apply if the beneficial owner of the interest,

being a resident of a Contracting State, carries on business in 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 provision of article 7

of article 14, 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 both the payer and the beneficial owner or between

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

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

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

relationship, the provisions of this article shall apply only to the last

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

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

to the other provisions of this Agreement.ARTICLE

12Royalties1. Royalties 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 may also be taxed in the Contracting State in which they arise, and

according to the laws of that State, but if the recipient is the beneficial

owner of the royalties, the tax so charged shall not exceed 15 per cent of the

gross amount of the royalties.3. The term

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

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

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

films or tapes used for radio or television broadcasting, any patent trademark,

design or model, plan, secret formula or process, or for the use of, or the

right to use, industrial, commercial or scientific equipment, or for

information concerning industrial, commercial or scientific experience.4. The provisions of

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

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

Contracting State in which the royalties arise through a permanent

establishment situated therein, or performs in that other State independent

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

in respect of which the royalties are paid is effectively connected with such

permanent establishment or fixed base. In such case, the provisions of article

7 or article 14, as the case may be shall apply.5. Royalties 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, 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 was

incurred, and such royalties 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.6. 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 royalties, having regard to the

use, right or information for which they are paid, exceeds the amount which

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

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

to the last-mentioned amount. In such case, the excess part of the payments

shall remain taxable according to the laws of each Contracting State, due

regard being had to the other provisions of this Agreement.ARTICLE

13Capital

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 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

14Independent

Personal Services1. Income derived by a

resident of a Contracting State in respect of professional services or other

independent activities of a similar character shall be taxable only in that

State except in the following circumstances when such income may also be taxed

in the other Contracting State:a. if he has a fixed

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

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

attributable to that fixed base may be taxed in that other Contracting State;Ora.b. if his stay in the

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

the aggregate 91 days in any twelve month period; 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.1.2. 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

15Dependent

Personal Services1. Subject to the

provisions of articles 16, l7, 18, 19, 20 and 21, 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 there from 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 any twelve month period, 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.1.2.3. 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 shall be taxable only in that

State.ARTICLE

16Directors'

FeesDirectors'

fees and similar payments derived by a resident of a Contracting State in his

capacity as a member of the Board of Directors (by whatever name called) of a

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

State.ARTICLE

17Entertainer

and Athletes1. Notwithstanding the

provisions of article 14 and 15, income derived by a resident of a Contracting

Stale as an entertainer such as a 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 article 7,

14 and 15, be taxed in the Contracting State in which the activities of the

entertainer of 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 in the first-mentioned

Contracting State if:a. 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, orb. the activities in the

other Contracting State are in pursuance of a special programme for cultural

exchange agreed upon between the Governments of the two Contracting States.4. Notwithstanding the

provisions of paragraph 2 and articles 7, 14 and 15, 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 entratainer or athlete

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

Contracting State of:a. 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, orb. the activities are

exercised by an individual, being a resident of the other Contracting State, in

pursuance of a special programme for cultural exchange agreed upon between the

Governments of the two Contracting States and that other person to whom income

therefrom accrues is a resident of the other Contracting State.ARTICLE

18Remuneration

and Pensions in Respect of Government Service1. 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.

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:a. is a national of that

State; orb. did not become a

resident of that State solely for the purpose of rendering the services.1.2. 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.

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 15, 16 and 17 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

19Non-Government

Pensions and Annuities1. Any pension, other

than a pension referred to in Article 18, 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. Notwithstanding the

provisions of paragraph 1, pensions paid out of a pension fund approved by the

Government of a Contracting State (or its authorised Agency) to a resident of

the other Contracting State is consideration of past employment may be taxed in

the first-mentioned State.3. 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.4. 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

20Students

and Apprentices.1. A student or business

apprentice who is or was a resident of one of the Contracting States

immediately before visiting the other Contracting State and who is present in

that other State solely for the purpose of his education or training, shall be

exempt from tax in that 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.20,000 or

Rs.2,000,000 during any twelve month period, as the case may be, provided that

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

purpose of his maintenance.1.2. The benefits of the

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 five

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

State.ARTICLE

21Professors,

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 of 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 20, an individual shall be deemed to be a resident of

a Contracting State if he is resident in that Contracting State in the year of

income, in which he visits the other Contracting State or in the immediately

preceding 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

22Other

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 14, 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

23Elimination

of Double Taxation1. The laws in force in

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

income in the respective Contracting States except where provisions to the

contrary are made in this Agreement.2. The amount of

Indonesian tax payable, under the laws of Indonesia and in accordance with the

provisions of this Agreement, whether directly or by deduction, by a resident

of India, in respect of profits or income arising in Indonesia, which have been

subjected to tax both in India and in Indonesia, shall be allowed as a credit

against the Indian tax payable in respect of such profits or income provided

that such credit shall not exceed the Indian tax (as computed before allowing

any such credit) which is appropriate to the profits or income arising in

Indonesia. Further, where such resident is a company by which surtax is payable

in India, the credit aforesaid shall be allowed in the first instance against

income-tax payable by the company in India and as to the balance, if any, against

surtax payable by it in India.3. The term

"Indonesian tax payable" shall be deemed to include the amount of

Indonesian tax which would have been paid if the Indonesian tax had not been

exempted or reduced in accordance with the special incentive measures under

Article 33 of Law No. 7 of 1983 (Undang-undang Pajak Penghuasilan 1984) which

are designed to promote economic development in Indonesia, effective on the

date of signature of this Agreement, or which may be introduced in the future

in modification of, or in addition to, the existing provisions for promoting

economic development in Indonesia, and such other incentive measures which may

be agreed upon from time to time by the Contracting States.4. The amount of Indian

tax payable under the laws of India and in accordance with the provisions of

this Agreement, whether directly or by deduction, by a resident of Indonesia,

in respect of profits or income arising in India, which has been subjected to

tax both in India and in Indonesia, shall be allowed as a credit against

Indonesian tax payable in respect of such profits or income provided that such

credit shall not exceed the Indonesian tax (as computed before allowing any

such credit) which is appropriate to the profits or income arising in India.5. The term "Indian

tax payable" shall be deemed to include the amount of Indian tax which

would have been paid if the Indian tax had not been exempted or reduced in

accordance with the special incentive measures under the provisions of the

Indian Income-Tax Act, 1961 (43 of 1961), which are designed to promote

economic development in India, effective on the date of signature of this

Agreement, or which may be introduced in the future in modification of, or in

addition to, the existing provisions for promoting economic development in

India, and such other incentive measures which may be agreed upon from time to

time by the Contracting States.ARTICLE

24Non-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.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

25Mutual

Agreement Procedure1. Where a person

considers that the actions of one or both of the Contracting States result or

will result for him in taxation not in accordance with 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 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

26Exchange

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

the 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 request with

reference to particular cases or both. The competent authorities of the

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

or documents which shall be furnished on a routine basis.3. In no case shall the

provisions of 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 profess