CONVENTION
BETWEEN THE REPUBLIC OF INDIA AND THE KINGDOM OF THE NETHERLANDS FOR THE
AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT
TO TAXES ON INCOME AND ON CAPITALNotification
No. G.S.R. 382(E), dated 27th March, 1989.Whereas
the annexed Convention between the Government of the Republic of India and the
Kingdom of the Netherlands for the avoidance of double taxation and the
prevention of fiscal evasion with respect to taxes on income and on capital has
come into force on 21st day of January, 1989, after the notification by both
the Contracting States to each other of the completion of procedures required
under their laws for bringing into force of the said Convention in accordance
with paragraph 1 of Article 29 of the said Convention;Now,
therefore, in exercise of the powers conferred by section 90 of the Income-tax
Act, 1961 (43 of 1961), section 24A of the Companies (Profits) Surtax Act, 1964
(7 of 1964), and section 44A of the Wealth-tax Act, 1957 (27 of 1957), the
Central Government hereby directs that all the provisions of the said
Convention shall be given effect to in the Union of India.ANNEXURECONVENTION
BETWEEN THE REPUBLIC OF INDIA AND THE KINGDOM OF THE NETHERLANDS FOR THE
AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT
TO TAXES ON INCOME AND ON CAPITALThe
Government of the Republic of India and the Government of the Kingdom of the
Netherlands.Desiring
to conclude a convention for the avoidance of double taxation and the
prevention of fiscal evasion with respect to taxes on income and on capital:Have
agreed as follows:CHAPTER
ISCOPE
OF THE CONVENTIONArticle
1PERSONAL
SCOPEThis
Convention shall apply to persons who are residents of one or both of the
States.Article
2TAXES
COVERED1. This Convention shall
apply to taxes on income and on capital imposed on behalf of one of the States
or of its political sub-divisions or local authorities, irrespective of the
manner in which they are levied.2. There shall be
regarded as taxes on income and on capital all taxes imposed on total income,
on total capital, or on elements of income or of capital, including taxes on
gains from the alienation of movable or immovable property, taxes on the total
amounts of wages or salaries paid by enterprises, as well as taxes on capital
appreciation.3. The existing taxes to
which the Convention shall apply are in particular:a. in the Netherlands:--de
inkomstenbelasting (income-tax),--de
loonbelasting (wages tax),--de
vennootschapsbelasting (company tax) including the Government share in the net
profits of the exploitation of natural resources levied pursuant to the Mining
Act of 1810 (Mijnwet 1810) with respect to concessions issued from 1967, or pursuant
to the Netherlands Continental Shelf Mining Act of 1965 (Mijnwet Continental
Plat, 1965),--de
dividendbelasting (dividend tax),--de
vermogensbelasting (capital tax),(hereinafter
referred to as the " Netherlands tax ");a.b. in India:--the
income-tax including any surcharge thereon,--the
surtax,--the
wealth-tax,(hereinafter
referred to as the " Indian tax ").1.2.3.4. The Convention shall
apply also to any identical or substantially similar taxes which are imposed
after the date of signature of the Convention in addition to, or in place of,
the existing taxes. The competent authorities of the States shall notify to
each other any substantial changes which have been made in their respective
taxation laws.CHAPTER
IIDEFINITIONSArticle
3GENERAL
DEFINITIONS1. For the purposes of
this Convention, unless the context otherwise requires:a. the term " State
" means the Netherlands or India, as the context requires, the term "
States " means the Netherlands and India;b. the term " the
Netherlands " means the part of the Kingdom of the Netherlands that is
situated in Europe and the part of the sea-bed and the sub-soil under the North
Sea, to the extent that that area in accordance with international law has been
or may hereafter be designated under the Netherlands laws as an area within
which the Netherlands may exercise certain rights with respect to the
exploration and exploitation of the natural resources of the sea-bed or its
sub-soil;c. the term " India
" means the territory of India and includes the territorial sea and the
air space above it, as well as any other maritime zone in which India has
sovereign rights, other rights and jurisdiction, according to the Indian law
and in accordance with international law;d. the term " tax
" means the Indian tax or the Netherlands 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 Convention applies or which
represents a penalty imposed relating to those taxes;e. the term "
person " includes an individual, a company, any other body of persons and
any other entity which is treated as a taxable unit, under the taxation laws in
force in the respective States;f. the term "
company " means any body corporate or any entity which is treated as a
company or a body corporate under the taxation laws in force in the respective
States;g. the terms "
enterprise of one of the States " and " enterprise of the other State
" mean respectively an enterprise carried on by a resident of a one of the
States and an enterprise carried on by a resident of the other State;h. the term "
international traffic " means any transport by a ship or aircraft operated
by an enterprise which has its place of effective management in one of the
States, except when the ship or aircraft is operated solely between places in
the other State.i. the term "
nationals " means:1. all individuals,
possessing the nationality of one of the States;2. all legal persons,
partnerships and associations deriving their status as such from the laws in
force in one of the States;a.b.c.d.e.f.g.h.i.j. the term "
competent authority " means:1. in the Netherlands,
the Minister of Finance or his authorised representative;2. in India, the Central
Government in the Ministry of Finance (Department of Revenue) or their
authorised representatives.1.2. As regards the
application of the Convention by one of the States any term not defined herein
shall, unless the context otherwise requires, have the meaning which it has
under the law of that State concerning the taxes to which the Convention
applies.Article
4RESIDENT1. For the purposes of
this Convention, the term " resident of one of the States " 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 States, then
his status shall be determined as follows:a. he shall be deemed to
be a resident of the State in which he has a permanent home available to him;
if he has a permanent home available to him in both States, he shall be deemed
to be a resident of the State with which his personal and economic relations
are closer (centre of vital interests);b. if the State in which
he has his centre of vital interests cannot be determined, or if he has not a
permanent home available to him in either State, he shall be deemed to be a
resident of the State in which he has an habitual abode;c. if he has an habitual
abode in both States or in neither of them, he shall be deemed to be a resident
of the State of which he is a national;d. if he is a national
of both States or of neither of them, the competent authorities of the States
shall settle the question by mutual agreement.1.2.3. Where by reason of
the provisions of paragraph 1 a person other than an individual is a resident
of both 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 Convention, 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; (f) a
mine, an oil or gas well, a quarry or any other place of extraction of natural
resources; (g) a warehouse in relation to a person providing storage facilities
for others; (h) a premises used as a sales outlet; (i) an installation or
structure used for the exploration of natural resources provided that the
activities continue for more than 183 days.1.2.3. A building site or
construction, installation or assembly project constitutes a permanent
establishment only where such site or project continues for a period of more
than six months.4. 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 other activities which had a
preparatory or auxiliary character, for the enterprise;f. the maintenance of a
fixed place of business solely for any combination of activities mentioned in
sub-paragraphs (a) to (e), provided that the overall activity of the fixed
place of business resulting from this combination is of a preparatory or auxiliary
character.1.2. Notwithstanding the
provisions of paragraphs 1 and 2, where a person --other than an agent of an
independent status to whom paragraph 6 applies--is acting in one of the States
on behalf of an enterprise of the other State, that enterprise shall be deemed
to have a permanent establishment in the first mentioned State, if--a. he has and habitually
exercises in that State an authority to conclude contracts on behalf of the
enterprise, unless his activities are limited to the purchase of goods or
merchandise for the enterprise; orb. 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.1.2.3. An enterprise of one
of the States shall not be deemed to have a permanent establishment in the
other State merely because it carries on business in that other State through a
broker, a 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 if it is shown that the
transactions between the agent and the enterprise were not made under at
arm's-length conditions.4. The fact that a
company which is a resident of one of the States controls or is controlled by a
company which is a resident of the other State, or which carries on business in
that other State (whether through a permanent establishment or otherwise),
shall not of itself constitute either company a permanent establishment of the
other.CHAPTER
IIITAXATION
OF INCOMEArticle
6 INCOME FROM IMMOVABLE PROPERTY1. Income derived by a
resident of one of the States from immovable property (including income from
agriculture or forestry) situated in the other 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 State in which the property in question is situated. The term shall in any
case include property accessory to immovable property, livestock and equipment
used in agriculture and forestry, rights to which the provisions of general law
respecting landed property apply, usufruct of immovable property and rights to
variable or fixed payments as consideration for the working of, or the right to
work, mineral deposits, sources and other natural resources; ships and aircraft
shall not be regarded as immovable property.3. The provisions of
paragraph 1 shall apply to income derived from the direct use, letting, or use
in any other form of immovable property.4. The provisions of
paragraphs 1 and 3 shall also apply to the income from immovable property of an
enterprise and to income from immovable property used for the performance of
independent personal services.Article
7BUSINESS
PROFITS1. The profits of an
enterprise of one of the States shall be taxable only in that State unless the
enterprise carries on business in the other 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 that permanent establishment.2. Subject to the
provisions of paragraph 3, where an enterprise of one of the States carries on
business in the other State through a permanent establishment situated therein,
there shall in each 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 the basis of an
apportionment of the total profits of the enterprise to its various parts,
provided, however, that the result shall be in accordance with the principles
contained in this Article.3.a. In determining the
profits of a permanent establishment, there shall be allowed as deductions,
expenses which are incurred for the purposes of the permanent establishment, including
executive and general administrative expenses 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. Provided that where the law of the State in which the permanent
establishment is situated imposes a restriction on the amount of the executive
and general administrative expenses which may be allowed, and that restriction
is relaxed or overridden by any Convention between that State and a third State
which enters into force after the date of entry into force of this Convention,
the competent authority of that State shall notify the competent authority of
the other State of the terms of the corresponding paragraph in the Convention
with that third State immediately after the entry into force of that Convention
and, if the competent authority of the other State so requests, the provisions
of this sub-paragraph shall be amended by protocol to reflect such terms.b. 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 monies lent to the permanent establishment. Likewise, no account shall be
taken in the determination of the profits of a permanent establishment, for
amounts charged (otherwise than towards reimbursement of actual expenses) by
the permanent establishment to the head office of the enterprise or any of its
other offices, by way of royalties, fees, or other similar payments in return
for the use of patents 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 monies lent to the head office of the enterprise or any
of its other offices.1.2.3.4. No profits shall be
attributed to a permanent establishment by reason of the mere purchase by that
permanent establishment of goods or merchandise for the enterprise.5. For the purposes of
the preceding paragraphs, the profits to be attributed to the permanent
establishment shall be determined by the same method year by year unless there
is good and sufficient reason to the contrary.6. Where profits include
items of income which are dealt with separately in other articles of this
Convention, then the provisions of those articles shall not be affected by the
provisions of this article.Article
8AIR
TRANSPORT1. Profits from the
operation of aircraft in international traffic shall be taxable only in the
State in which the place of effective management of the enterprise is situated.2. For the purposes of
this Article:a. profits from the
operation in international traffic of aircraft include profits derived from the
rental on a bareboat basis of aircraft if operated in international traffic if
such rental profits are incidental to the profits described in paragraph 1;b. interest on 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 11 shall not apply in relation to such interest.1.2.3. The provisions of
paragraph 1 shall also apply to profits from the participation in a pool, a
joint business or an international operating agency.Article
8ASHIPPING1. Profits from the
operation of ships in international traffic shall be taxable only in the State
in which the place of effective management of the enterprise is situated.2. However, if the
operation of a ship in the other State is more than casual, such profits may
also be taxed in that other State and according to the laws of that State, but
only so much of them as is derived from that other State and provided that the
profits are in respect of any one or more of the first ten fiscal years for
which the Convention has effect.For
the purposes of this paragraph:a. profits derived from
the other State means profits from the carriage of passengers or freight
embarked in that other State;b. the amount of such
profits shall not exceed 5 per cent. of the sums receivable in respect of such
carriage;c. the rate of tax
chargeable on such profits shall be 50 per cent. of the rate of tax on those
profits which would have been chargeable in the absence of this Convention.1.2.3. If the place of
effective management of a shipping enterprise is aboard a ship, then it shall
be deemed to be situated in the State in which the home harbour of the ship is
situated, or, if there is no such home harbour, in the State of which the
operator of the ships is a resident.4. For the purposes of
this Article:a. interest on funds
connected with the operation of ships in international traffic shall be
regarded as profits from the operation of such ships and the provisions of
Article 11 shall not apply in relation to such interest; andb. profits from the
operation of ships include:i.
profits
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;ii.
profits
from the rental on a full or bareboat basis of ships if operated in international
traffic.Provided
that such profits are incidental to the profits described in paragraph 1.1.2.3.4.5. The provisions of
this Article shall also apply to profits from the participation in a pool, a
joint business or an international operating agency.Article
9ASSOCIATED
ENTERPRISES1. Where:a. an enterprise of one
of the States participates directly or indirectly in the management, control or
capital of an enterprise of the other State, orb. the same persons
participate directly or indirectly in the management, control or capital of an
enterprise of one of the States, and an enterprise of the other State,and
in either case conditions are made or imposed between the two enterprises in
their commercial or financial relations which differ from those which would be
made between independent enterprises, then any profits which would, but for
those conditions, have accrued to one of the enterprises, but, by reason of
those conditions, have not so accrued, may be included in the profits of that
enterprise and taxed accordingly.1.2. Where one of the
States includes in the profits of an enterprise of that State--and taxes
accordingly--profits on which an enterprise of the other 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 independent enterprises, then that other State shall make an
appropriate adjustment to the amount of the tax charged therein on those
profits. In determining such adjustment, due regard shall be had to the other
provisions of this Convention and the competent authorities of the States shall
if necessary consult each other.Article
10DIVIDENDS1. Dividends paid by a
company which is resident of one of the States to a resident of the other State
may be taxed in that other State.2. However, such
dividends may also be taxed in the State of which the company paying the
dividends is a resident and according to the laws of that State, but if the
recipient is the beneficial owner of the dividends, the tax so charged shall
not exceed 15 per cent. of the gross amount of the dividends.3. The competent
authorities of the States shall by mutual agreement settle the mode of
application of paragraph 2.4. The provisions of
paragraph 2 shall not affect the taxation of the company in respect of the
profits out of which the dividends are paid.5. The term "
dividends " as used in this Article means income from shares, "
jouissance " shares or " jouissance " rights, mining shares,
founders' shares or other rights participating in profits, as well as income
from debt-claims participating in profits and 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.6. The provisions of
paragraphs 1 and 2 shall not apply if the beneficial owner of the dividends,
being a resident of one of the States, carries on business in the other State
of which the company paying the dividends is a resident, through a permanent
establishment situated therein or performs in that other State independent
personal services from a fixed base situated therein, and the holding in
respect of which the dividends are paid is effectively connected with such
permanent establishment or fixed base. In such case, the provisions of Article
7, or Article 14, as the case may be, shall apply.7. Where a company which
is a resident of one of the States derives profits or income from the other
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 in 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
11INTEREST1. Interest arising in
one of the States and paid to a resident of the other State may be taxed in
that other State.2. However, such
interest may also be taxed in the 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:a. 10 per cent. of the
gross amount of the interest on loans made or guaranteed by a bank or other
financial institution carrying on bona fide banking or financing business or by
an enterprise which holds directly or indirectly at least 10 per cent. of the
capital of the company paying the interest;b. 15 per cent. of the
gross amount of the interest in all other cases.1.2.3. Notwithstanding the
provisions of paragraph 2:a. the Government of one
of the States shall be exempt from tax in the other State in respect of
interest derived directly or indirectly by that Government from that other
State;b. interest arising in
one of the States and paid in respect of a loan guaranteed or insured by the
Government of the other State shall be exempt from tax in the first-mentioned
State.1.2.3.4. For the purposes of
paragraph 3, the term " Government " means:a. in the case of the
Netherlands, the Government of the Kingdom of the Netherlands and shall
include:--the
local authorities;--the
Netherlands Bank (Central Bank);--Such
institutions, the capital of which is wholly owned by the Government of the
Kingdom of the Netherlands or the local authorities;--the
Netherlands Financierings Maatshappji voor Ontwikkelingslanden N. V.
(Netherlands finance company for developing countries) and the Netherlands
Investerings bank voor Ontwikkelingslanden N. V. (Netherlands investment bank
for developing countries);--all
other institutions as may be agreed from time to time between the competent
authorities of the States;a.b. in the case of India,
the Government of India and shall include:--a
political sub-division;--a
local authority;--the
Reserve Bank of India (Central Bank);--the
Export-Import Bank of India;--such
institutions, the capital of which is wholly owned by the Government of India
or a political sub-division or a local authority;--all
other institutions as may be agreed from time to time between the competent
authorities of the States.1.2.3.4.5. The competent
authorities of the States shall by mutual agreement settle the mode of
application of paragraph 2.1.2.3.4.5.6. The term "
interest " as used in this Article means income from debt-claims of every
kind, whether or not secured by mortgage, but 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.7. The provisions of
paragraphs 1, 2 and 3 shall not apply if the beneficial owner of the interest,
being a resident of one of the States, carries on business in the other 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 a case, the provisions of Article 7 or Article 14, as the
case may be, shall apply.8. Interest shall be
deemed to arise in one of the States when the payer is that State itself, a
political sub-division, a local authority or a resident of that State. Where,
however, the person paying the interest, whether he is a resident of one of the
States or not, has in one of the States 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 State in which
the permanent establishment or fixed base is situated.9. Where, by reason of a
special relationship between the payer and the beneficial owner or between both
of them and some other person, the amount of the interest, having regard to the
debt-claim for which it is paid, exceeds the amount which would have been
agreed upon by the payer and the beneficial owner in the absence of such
relationship, the provisions of this Article shall apply only to the last-mentioned
amount. In such a case, the excess part of the payments shall remain taxable
according to the laws of each State, due regard being had to the other
provisions of this Convention.Article
12ROYALTIES,
FEES FOR TECHNICAL SERVICES AND PAYMENTS FOR THE USE OF EQUIPMENT1. Royalties, fees for
technical services and payments for the use of equipment arising in one of the
States and paid to a resident of the other State may be taxed in that other
State.2. However, such
royalties, fees and payments may also be taxed in the State in which they arise
and according to the laws of that State, but if the recipient is the beneficial
owner of these categories of income, the tax so charged shall not exceed 20 per
cent. of the gross amount of the royalties, of the fees and payments.3. The competent
authorities of the States shall by mutual agreement settle the mode of
application of paragraph 2.4. 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 motion picture films and works on film
or video tape for use in connection with television, any patent, trade mark,
design or model, plan, secret formula or process, or for information concerning
industrial, commercial or scientific experience.5. The term " fees
for technical services " as used in this Article means payments of any
kind to any person, other than payments to an employee of the person making the
payments and to any individual for independent personal services mentioned in
Article 14, in consideration for services of a managerial, technical or
consultancy nature.6. The term "
payments for the use of equipment " as used in this Article means payments
of any kind received as a consideration for the use of, or the right to use
industrial, commercial or scientific equipment.7. The provisions of
paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties,
fees for technical services or the payments for the use of equipment, being a
resident of one of the States, carries on business in the other State in which
the royalties, fees for technical services or the payments for the use of
equipment arise, through a permanent establishment situated therein, or performs
in that other State independent personal services from a fixed base situated
therein, and the royalties, fees for technical services or the payments for the
use of equipment are effectively connected with such permanent establishment or
fixed base. In such case, the provisions of arrticle 7 or article 14, as the
case may be, shall apply.8. Royalties, fees for
technical services or payments for the use of equipment shall be deemed to
arise in one of the States 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, fees for technical services or the payments for the use
of equipment, whether he is a resident of one of the States or not, has in one
of the States a permanent establishment or a fixed base in connection with
which the contract under which the royalties, fees for technical services or
the payments for the use of equipment are paid was concluded, and such
royalties, fees for technical services or payments for the use of equipment are
borne by such permanent establishment or fixed base, then such royalties, fees
for technical services or payments for the use of equipment shall be deemed to
arise in the State in which the permanent establishment or fixed base is
situated.9. 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, fees for technical
services or the payments for the use of equipment, having regard to the
royalties, technical services or the use of equipment, 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 payment shall remain taxable according to the laws of each State,
due regard being had to the other provisions of this Convention.Article
13CAPITAL
GAINS1. Gains derived by a
resident of one of the States from the alienation of immovable property
referred to in Article 6 and situated in the other 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 one of the States has in the other State
or of movable property pertaining to a fixed base available to a resident of
one of the States in the other State for the purpose of performing independent
personal services, including such gains from the alienation of such permanent
establishment (alone or 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 State in which the place of effective management of the
enterprise is situated. For the purposes of this paragraph, the provisions of
paragraph 3 of Article 8A shall apply.4. Gains derived by a
resident of one of the States from the alienation of shares (other than shares
quoted on an approved stock exchange) forming part of a substantial interest in
the capital stock of a company which is a resident of the other State, the
value of which shares is derived principally from immovable property situated
in that other State other than property in which the business of the company
was carried on, may be taxed in that other State. A substantial interest exists
when the resident owns 25 per cent. or more of the shares of the capital stock
of a company.5. Gains from the
alienation of any property other than that referred to in paragraphs 1, 2, 3
and 4, shall be taxable only in the State of which the alienator is a resident.
However, gains from the alienation of shares issued by a company resident in
the other State which shares form part of at least a 10 per cent. interest in
the capital stock of that company, may be taxed in that other State if the
alienation takes place to a resident of that other State. However, such gains
shall remain taxable only in the State of which the alienator is a resident if
such gains are realized in the course of a corporate organization,
re-organization, amalgamation, division or similar transaction, and the buyer
of the seller owns at least 10 per cent. of the capital of the other.6. The provisions of
paragraph 3 shall not affect the right of each of the States to levy according
to its own law a tax on gains from the alienation of the shares or "
jouissance " rights in a company, the capital of which is wholly or partly
divided into shares and which under the laws of that State is a resident of
that State, derived by an individual who is a resident of the other State and
has been a resident of the first-mentioned State in the course of the last five
years preceding the alienation of the shares or " jouissance "
rights.Article
14INDEPENDENT
PERSONAL SERVICES1. Income derived by a
resident of one of the States in respect of professional services or other
activities of an independent character shall be taxable only in that State
except in the following circumstances, when such income may also be taxed in
the other State:a. if he has a fixed
base regularly available to him in the other 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. if his stay in the
other State is for a period or periods amounting to or exceeding in the
aggregate 183 days in the fiscal year concerned; 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 especially independent scientific,
literary, artistic, educational or teaching activities, as well as the
independent activities of physicians, lawyers, engineers, architects, dentists
and accountants.Article
15DEPENDENT
PERSONAL SERVICES1. Subject to the
provisions of Articles 16, 18, 19, 20 and 21, salaries, wages and other similar
remuneration derived by a resident of one of the States in respect of an
employment shall be taxable only in that State unless the employment is
exercised in the other 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 one of the
States in respect of an employment exercised in the other State shall be
taxable only in the first-mentioned State if:a. the recipient is
present in the other State for a period or periods not exceeding in the
aggregate 183 days in the fiscal year concerned; 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 by a resident of one
of the States in respect of an employment exercised aboard a ship or aircraft
operated in international traffic shall be taxable only in that State.Article
16DIRECTORS'
FEESDirectors'
fees or other remuneration derived by a resident of one of the States in his
capacity as a member of the Board of Directors, a " best ruder " or a
" commissaries " of a company which is a resident of the other States
may be taxed in that other State.Article
17ARTISTES
AND ATHLETES1. Notwithstanding the
provisions of Articles 14 and 15, income derived by a resident of a one of the
States 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 State, may be taxed in that other State.2. Where income in
respect of personal activities exercised by in entertainer or an athlete in his
capacity as such accrues not to the entertainer or athlete himself but to
another person, that income may, notwithstanding the provisions of Articles 7,
14 and 15, be taxed in the State in which the activities of the entertainer or
athlete are exercised.3. Notwithstanding the
provisions of paragraphs 1 and 2, income derived by an entertainer or an
athlete who is a resident of one of the States from his personal activities as
such exercised in the other State, shall be taxable only in the first-mentioned
State, if the activities in the other State are supported wholly or
substantially from the public funds of the first-mentioned State, including any
of its political sub-divisions or local authorities, and such activities are
exercised under the terms of a bilateral cultural Agreement between the two
States.Article
18PENSIONS
AND ANNUITIES1. Subject to the
provisions of paragraph 2 of Article 19, pensions and other similar
remuneration paid to a resident of one of the States in consideration of past
employment as well as any annuity paid to such a resident shall be taxable only
in that State.2. However, where such
remuneration is not of a periodical nature and it is paid in consideration of
past employment in the other State, it may be taxed in that other State.3. Any pension paid out
under the provisions of a social security system of one of the States to a
resident of the other State may be taxed in the first- mentioned State.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
19GOVERNMENT
SERVICE1.a. Remuneration, other
than a pension, paid by one of the States 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 may be taxed in that State.b. However, such
remuneration shall be taxable only in the other State if the services are
rendered in that State and the individual is a resident of that State who:i.
is
a national of that State, orii.
did
not become a resident of that State solely for the purpose of rendering the
services.1.2.a. Any pension paid by,
or out of funds created by, one of the States 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 may be taxed in that State.b. However, such pension
shall be taxable only in the other State if the individual is a resident of,
and a national of, that State.1.2.3. The provisions of
Articles 15, 16 and 18 shall apply to remuneration and pensions in respect of
services rendered in connection with a business carried on by one of the States
or a political sub-division or a local authority thereof.Article
20PROFESSORS,
TEACHERS AND RESEARCH SCHOLARS1. A professor or
teacher who is or was a resident of one of the States immediately before
visiting the other State for the purpose of teaching or engaging in research,
or both, at a university, college, school or other approved institution in that
other State shall be taxable only in the first-mentioned 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
paragraph 1, " approved institution " means an institution which has
been approved in this regard by the competent authority of the State concerned.Article
21STUDENTS
AND APPRENTICES1. A student or business
apprentice who is or was a resident of one of the States immediately before
visiting the other 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. 5,000 guilders
or its equivalent in Indian currency during any fiscal year, provided that such
employment is directly related to his studies or is undertaken for the purpose
of his maintenance.1.2. The 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
five consecutive years from the date of his first arrival in that other State.CHAPTER
IVTAXATION
ON CAPITALArticle
22CAPITAL1. Capital represented
by immovable property referred to in Article 6, owned by a resident of one of
the States and situated in the other 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 one of the States has in the other State
or by movable property pertaining to a fixed base available to a resident of
one of the States in the other State for the purpose of performing independent
personal services, may be taxed in that other State.3. Capital represented
by ships and aircraft operated in international traffic and movable property
pertaining to the operation of such ships and aircraft shall be taxable only in
the State in which the place of effective management of the enterprise is
situated. For the purposes of this paragraph, the provisions of paragraph 3 of
Article 8A shall apply.4. All other elements of
capital of a resident of one of the States shall be taxable only in that State.CHAPTER
VELIMINATION
OF DOUBLE TAXATIONArticle
23ELIMINATION
OF DOUBLE TAXATION1. The Netherlands, when
imposing tax on its residents, may include in the basis upon which such taxes
are imposed the items of income or capital which, according to the provisions
of this Convention, may be taxed in India.2. However, where a
resident of the Netherlands derives items of income or owns items of capital
which, according to Article 6, Article 7, paragraph 6 of Article 10, paragraph
7 of Article 11, paragraph 7 of Article 12, paragraphs 1, 2, 4 and 5 of Article
13, Article 14, paragraph 1 of Article 15, Article 16, paragraph 3 of Article
18, Article 19 and paragraphs 1 and 2 of Article 22 of this Convention may be
taxed in India and are included in the basis referred to in paragraph 1, the
Netherlands shall exempt such items of income or capital by allowing a
reduction in its tax. These reductions shall be computed in conformity with the
provisions of the Netherlands law for the avoidance of double taxation. For
that purpose, the said items of income or capital shall be deemed to be
included in the total amount of the items of income or capital which are
exempted from the Netherlands tax under those provisions.3. Further, the
Netherlands shall allow a deduction from the Netherlands tax so computed for
items of income which, according to paragraph 2 of Article 8A, paragraph 2 of
Article 10, paragraph 2 of Article 11, paragraph 2 of Article 12, Article 17
and paragraph 2 of Article 18 of this Convention may be taxed in India to the
extent that these items are included in the basis referred to in paragraph 1.
The amount of this deduction shall be equal to the tax paid in India on these
items of income, but shall not exceed the amount of the reduction which would
be allowed if the items of income so included were the sole items of income
which are exempted from the Netherlands tax under the provisions of the
Netherlands tax for the avoidance of double taxation.Where,
by reason of special relief given under the provisions of Indian law for the
purpose of encouraging investment in India, the Indian tax actually levied on
interest arising in India is lower than the tax India may levy according to
sub-paragraphs (a) and (b) of paragraph 2 of Article 11, then the amount of the
tax paid in India on such interest shall be deemed to have been paid at the
rates of tax mentioned in the said provisions. However, if the general tax
rates under the Indian law applicable to the aforementioned interest are
reduced below those mentioned in the foregoing sentence, these lower rates
shall apply for the purposes of that sentence. The provisions of the two
foregoing sentences shall apply only for a period of ten years after the date
on which the Convention became effective. This period may be extended by mutual
agreement between the competent authorities.4.
In
India, double taxation shall be eliminated as follows:Where
a resident of India derives income or owns capital which, in accordance with
the provisions of this Convention, may be taxed in the Netherlands, India shall
allow as a deduction from the tax on the income of that resident an amount
equal to the income-tax paid in the Netherlands, whether directly or by
deduction; and as a deduction from the tax on the capital of that resident, an
amount equal to the capital tax paid in the Netherlands. Such deduction in
either case shall not, however, exceed that part of the income-tax or capital
tax (as computed before the deduction is given) which is attributable, as the
case may be, to the income or the capital which may be taxed in the
Netherlands. Further, where such resident is a company by which surtax is
payable in India, the deduction in respect of income-tax paid in the
Netherlands shall be allowed in the first instance from income-tax payable by the
company in India and as to the balance, if any, from surtax payable by it in
India:Provided
that income which in accordance with the provisions of this Convention is not
to be subjected to tax may be taken into account in calculating the rate of tax
to be imposed.For
the purposes of this paragraph in determining the taxes on income paid to the
Netherlands, the investment premiums and bonuses and disinvestment payments as
meant in the Netherlands Investment Account Law (" Wet
investeringsrekening ") shall not be taken into account. For the purposes
of this paragraph, the taxes referred to in paragraphs 3 (a) and 4 of Article
2, other than the capital tax, shall be considered as taxes on income.5.
Where
a resident of one of the States derives gains which may be taxed in the other
State in accordance with paragraph 6 of Article 13, that other State shall
allow a deduction from its tax on such gains to an amount equal to the tax
levied in the first-mentioned State on the said gains.CHAPTER
VISPECIAL
PROVISIONSArticle
24NON-DISCRIMINATION1. Nationals of one of
the States shall not be subjected in the other 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. These provisions shall,
notwithstanding the provisions of Article 1, also apply to persons who are not
residents of one or both of the States.2. Except where the
provisions of paragraph 3 of Article 7 apply, the taxation on a permanent
establishment which an enterprise of one of the States has in the other 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.3. The provisions of
paragraph 2 shall not be construed as obliging one of the States to grant to
residents of the other State any personal allowances, reliefs and reductions
for taxation purposes on account of civil status or family responsibilities
which it grants to its own residents.4. Except where the
provisions of paragraph 1 of Article 9, paragraph 9 of Article 11, or paragraph
9 of Article 12, apply, interest, royalties and other disbursements paid by an
enterprise of one of the States to a resident of the other State shall, for the
purpose of determining the taxable profits of such enterprise, be deductible
under the same conditions as if they had been paid to a resident of the
first-mentioned State. Similarly, any debts of an enterprise of one of the States
to a resident of the other State shall, for the purpose of determining the
taxable capital of such enterprise, be deductible under the same conditions as
if they had been contracted to a resident of the first-mentioned State.5. Enterprises of one of
the States, the capital of which is wholly or partly owned or controlled,
directly or indirectly, by one or more residents of the other State, shall not
be subjected in the first-mentioned 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 the
first-mentioned State are or may be subjected.Article
25MUTUAL
AGREEMENT PROCEDURE1. Where a person
considers that the actions of one or both of the States result or will result
for him in taxation not in accordance with the provisions of this Convention,
he may, irrespective of the remedies provided by the domestic law of those
States, present his case to the competent authority of the State of which he is
a resident or if his case comes under paragraph 1 of Article 24, to that of the
State of which he is a national. The case must be presented within three years
from the first notification of the action resulting in taxation not in accordance
with the provisions of the Convention.2. The competent
authority shall endeavour, if the objection appears to it to be justified and
if it is not itself able to arrive at a satisfactory solution, to resolve the
case by mutual agreement with the competent authority of the other State, with
a view to the avoidance of taxation which is not in accordance with the
Convention. Any agreement reached shall be implemented notwithstanding any time
limits in the domestic law of the States.3. The competent
authorities of the States shall endeavour to resolve by mutual agreement any
difficulties or doubts arising as to the interpretation or application of the
Convention. They may also consult together for the elimination of double
taxation in cases not provided for in the Convention.4. The competent
authorities of the 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 two States.Article
26EXCHANGE
OF INFORMATION1. The competent
authorities of the States shall exchange such information as is necessary for
carrying out the provisions of the Convention or of the domestic laws of the
States concerning taxes covered by the Convention, in so far as the taxation
thereunder is not contrary to the Convention, in particular for the prevention
of fraud or evasion of such taxes. Any information received by one of the
States shall be treated as secret in the same manner as information obtained
under the domestic laws of that State and shall be disclosed only to persons or
authorities (including courts and administrative courts or bodies) involved in
the assessment or collection of, the enforcement in respect of, or the
determination of appeals in relation to, the taxes which are the subject of the
Convention. Such persons or authorities shall use the information only for such
purposes but may disclose the information in public court proceedings or in
judicial decisions.2. In no case shall the
provisions of paragraph 1 be construed so as to impose on one of the States the
obligation:a. to carry out
administrative measures at variance with the laws and administrative practices
of that or of the other State;b. to supply information
which is not obtainable under the laws or in the normal course of the
administration of that or of the other State;c. to supply information
which would disclose any trade, business, industrial, commercial or
professional secret or trade process or information, the disclosure of which
would be contrary to public policy (ordre public).Article
27DIPLOMATIC
AGENTS AND CONSULAR OFFICERS1. Nothing in this
Convention shall affect the fiscal privileges of diplomatic agents or consular
officers under the general rules of international law or under the provisions
of special agreements.2. For the purposes of
the Convention an individual, who is a member of a diplomatic or consular
mission of one of the States in the other State or in a third State and who is
a national of the sending State, shall be deemed to be a resident of the
sending State if he is subjected therein to the same obligations in respect of
taxes on income or on capital as are residents of that State.3. International
organisations, organs and officials thereof and members of a diplomatic or
consular mission of a third State, being present in one of the States, are not
entitled, in the other State, to the reductions or exemptions from tax provided
for in Articles 10, 11 and 12 in respect of the items of income dealt with in
these Articles and arising in that other State, if such items of income are not
subject to a tax on income in the first-mentioned State.Article
28TERRITORIAL
EXTENSION1.
This
Convention may be extended, either in its entirety or with any necessary
modifications, to either or both of the countries of Aruba or the Netherlands
Antilles, if the country concerned imposes taxes substantially similar in
character