Philippines - Legal Draft

SECTION 90 OF THE INCOME-TAX ACT, 1961

--- DOUBLE TAXATION AGREEMENT -- AGREEMENT FOR AVOIDANCE OF DOUBLE TAXATION AND

PREVENTION OF FISCAL EVASION WITH FOREIGN COUNTRIES -- WITH PHILIPPINESNotification

No. 10041 (F.NO. 501/7/74-FTD), dated 25-3-1996Whereas

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

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

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

entered into force on the 21st March, 1994, after the notification by both the

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

under their laws for bringing into force of the said Convention in accordance

with 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), the Central Government hereby directs that all the

provisions of the said Convention shall be given effect to in the Union of

India.CONVENTION

BETWEEN THE REPUBLIC OF INDIA AND THE REPUBLIC OF THE PHILIPPINES 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 the

Philippines,Desiring

to conclude a Convention for the avoidance of double taxation and the

prevention of fiscal evasion with respect to taxes on income,Have

agreed as follows:Article

1 -- PERSONAL SCOPE:This

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

Contracting States.Article

2 -- TAXES COVERED:1. This Convention shall

apply to taxes on income imposed on behalf of each Contracting State,

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

regarded as taxes on income all taxes imposed on total income or on elements of

income, including taxes on gains from the alienation of movable or immovable

property, and taxes on the total amounts of wages or salaries paid by

enterprises.3. The taxes to which

this Covention 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):(herein

referred to as " Indian tax ").a.b. in the Philippines:the

income taxes imposed by the Government of the Republic of the Philippines;(herein

referred to as " Philippine tax ").1.2.3.4. The Convention shall

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

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

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

authorities of the Contracting States shall notify each other of any

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

3--GENERAL DEFINITIONS:1. In this Convention,

unless 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 sovereign

rights, other rights and jurisdictions, according to the Indian law and in

accordance with international law/the U.N. Convention on the Law of the Sea;b. the term "

Philippines " means the Republic of the Philippines and when used in a

geographical sense means the national territory comprising the Republic of the

Philippines;c. the terms " a

Contracting State " and " the other Contracting State " mean

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

" means Indian tax or Philippine 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 and any other 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 term "

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 "

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

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

representative; and in the case of the Philippines, the Secretary of Finance or

his authorized representative;i. the term "

national " means any individual, possessing the citizenship of a

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

status from the laws in force in the Contracting State;j. the term "

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

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

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

application of the Convention by a Contracting State, any term not defined

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

has under the law of that State concerning the taxes to which the Convention

applies.Article

4 -- RESIDENT:1. For the purposes of

this Convention, 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, he shall be deemed to be a resident

of the State of which he is a national;d. if he is a national

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

Contracting States shall settle the question by mutual agreement.1.2.3. Where, by reason of

the provisions of paragraph 1, a person other than an individual is a resident

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

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

effective management cannot be determined, then the competent authorities shall

settle the question by mutual agreement.Article

5 -- PERMANENT ESTABLISHMENT:1. 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 place of

exploration of natural resources;h. a building site or

construction project or supervisory activities in connection therewith, where

such site, project or activity continues for a period of more than six months;i. a warehouse, in

relation to a person providing storage facilities for others.1.2.3. Notwithstanding the

preceding provisions of this Article, the term " permanent establishment

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

solely for the purpose of storage, display or delivery of goods or merchandise

belonging to the enterprise;b. the maintenance of a

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

purpose of storage, display or delivery;c. 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 carrying on, for the

enterprise, any other activity of a preparatory or auxiliary character;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.1.2.3.4. A person acting in a

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

(other than an agent of an independent status to whom paragraph 6 applies)

shall be deemed to be 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 those mentioned

in paragraph 3 of this Article; 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; oc. in so acting, he manufactures

or processes in that State for the enterprise goods or merchandise belonging to

the enterprise.1.2.3.4.5. An insurance

enterprise of a Contracting State shall, except in regard to reinsurance, be

deemed to have a permanent establishment in the other State if it collects

premiums in the territory of that State or insures risks situated therein

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

independent status.6. An enterprise shall

not be deemed to have a permanent establishment in a Contracting State merely

because it carries on business in that 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 the enterprise, he shall 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 arms-length condition.

In such a case, the provisions of paragraph 4 shall apply.7. The fact that a

company which is a resident of a Contracting State controls or is controlled by

a company which is a resident of the other Contracting State, or which carries

on business in that other State (whether through a permanent establishment or

otherwise) shall not of itself constitute for either company a permanent

establishment of the other.Article

6 -- INCOME FROM IMMOVABLE PROPERTY:1. Income derived by a

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

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

in that other State.2. The term "

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

the Contracting State in which the property in question is situated. The term shall

in any case include property accessory to immovable property, livestock and

equipment used in agriculture and forestry, rights to which the provisions of

general law respecting landed property apply, usufruct of immovable property

and rights to variable or fixed payments as consideration for the working of,

or the right to work, mineral deposits, sources and other natural resources.

Ships, boats and aircraft shall not be regarded as immovable property.3. The provisions of

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

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

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

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

independent personal services.Article

7 -- BUSINESS PROFITS:1. 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 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.4. Insofar as it has

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

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

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

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

Convention, then the provisions of those articles shall not be affected by the

provisions of this article.Article

8 -- AIR TRANSPORT:1. Profits derived by an

enterprise of a Contracting State from the operation of aircraft in

international traffic shall be taxable in that State.2. Notwithstanding the

provisions of paragraph 1, profits from sources within a Contracting State

derived by an enterprise of the other Contracting State from the operation of

aircraft in international traffic may be taxed in the first-mentioned State in

accordance with its domestic law, but the tax so charged shall be reduced by

forty per cent. In no case, however, shall the tax so charged exceed the lowest

rate of Philippine tax that may be imposed on profits of the same kind derived

under similar circumstances by a resident of a third State.3. The provisions of

paragraphs 1 and 2 shall also apply to profits from the participation in a

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

9 -- SHIPPING:1. Profits derived by an

enterprise of a Contracting State from the operation of ships in international

traffic shall be taxable in that State.2. Notwithstanding the

provisions of paragraph 1, profits from sources within a Contracting State

derived by an enterprise of the other Contracting State from the operation of

ships in international traffic may be taxed in the first-mentioned State in

accordance with its domestic law, but the tax so charged shall be reduced by

forty per cent. In no case, however, shall the tax so charged exceed the lowest

rate of Philippine tax that may be imposed on profits of the same kind derived

under similar circumstances by a resident of a third State.3. The provisions of

paragraphs 1 and 2 shall also apply to profits from the participation in a

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

10 -- ASSOCIATED ENTERPRISES:1. Where:a. an enterprise of a Contracting

State participates directly or indirectly in the management, control or capital

of an enterprise of the other Contracting State, orb. the same persons

participate directly or indirectly in the management, control or capital of an

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

State, and in either case conditions are made or imposed between the two

enterprises in their commercial or financial relations which differ from those

which would be made between independent enterprises, then any profits which

would, but for those conditions, have accrued to one of the enterprises, but,

by reason of those conditions, have not so accrued, may be included in the

profits of that enterprise and taxed accordingly.1.2. 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 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 Contracting States shall,

if necessary, consult each other.Article

11 -- DIVIDENDS:1. Dividends paid by a

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

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

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

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

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

shall not exceed:a. 15 per cent of the

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

at least ten per cent of the shares of the company paying the dividends;b. 20 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 personal services from a fixed base situated therein, and the

holding in respect of which the dividends are paid is effectively connected

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

Article 7 or Article 15, as the case may be, shall apply. 5. Where a company

which is a resident of a Contracting State derives profits or income from the

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

dividends paid by the company except insofar as such dividends are paid to a

resident of that other State or insofar as the holding in respect of which the

dividends are paid is effectively connected with a permanent establishment or a

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

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

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

profits or income arising in such other State.Article

12 -- INTEREST:1. 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:a. 10% of the gross

amount of interest if the interest is received by a financial institution

(including insurance companies);b. the Philippines tax

on interest paid by a company which is a resident of the Philippines to a

resident of India in respect of public issues of bonds, debentures or similar

obligations shall not exceed 10 per cent of the gross amount of interest; andc. 15% of the gross

amount of interest in all other cases.1.2.3. Notwithstanding the

provisions of paragraph 2--a. interest arising in a

Contracting State shall be exempt from tax in that State, provided it is

derived and beneficially owned by:i.

the

Government a political sub-division or a local authority of the other

Contracting State; orii.

the

Central Bank of the other Contracting State;iii.

other

lending institutions as may be specified and agreed in letters exchanged

between the competent authorities of the Contracting States;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-claims of every

kind, including sales on credit of any industrial, commercial or scientific

equipment, whether or not secured by mortgage and whether or not carrying a

right to participate in the debtor's profits, and in particular, income from

Government securities and income from bonds or debentures, including premiums

and prizes attaching to such securities, bonds or debentures. Penalty charges

for late payment shall not be regarded as interest for the purpose of this

Article.5. The provisions of

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

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

Contracting State in which the interest arises, through a permanent

establishment situated therein, or performs in that other State independent

personal services from a fixed base situated therein, and the debt-claim in

respect of which the interest is paid is effectively connected with such permanent

establishment or fixed base. In such case, the provisions of Article 7 or

Article 15, as the case may be, shall apply.6. Interest shall be

deemed to arise in a Contracting State when the payer is that Contracting State

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

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

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

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

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

permanent establishment or fixed base, then such interest shall be deemed to

arise in the Contracting State in which the permanent establishment or fixed

base is situated.7. Where, by reason of a

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

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

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

upon by the payer and the beneficial owner in the absence of such relationship,

the provisions of this Article shall apply to the last mentioned amount. In

such case, the excess part of the payments shall remain taxable according to

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

provisions of this Convention.Article

13 -- ROYALTIES

:1. Royalties arising in

a Contracting State and paid to a resident of the other Contracting State may

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

royalties 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 provided that such royalties are payable:i.

in

the case of Philippines, by an enterprise which is registered with the Board of

Investment, andii.

in

the case of India, by an enterprise in pursuance of any collaboration agreement

approved by the Government of India.1.2.3. 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, trade mark, design or

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

industrial, commercial or scientific equipment, or for information concerning

industrial, commercial or scientific experience.4. The 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 15, 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

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 Convention.Article

14 -- CAPITAL GAINS:1. 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 of aircraft operated in international traffic or movable

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

only in the Contracting State of which the alienator is a resident.4. Gains from the

alienation of shares of a company, the property of which consists principally

of immovable property situated in a Contracting State, may be taxed in that

State. Gains from the alienation of interest in a partnership or a trust, the

property of which consists principally of immovable property situated in a

Contracting State, may be taxed in that State.5. Gains from the

alienation of any property other than that mentioned in paragraphs 1, 2, 3 and

4 shall be taxable only in the Contracting State of which the alienator is a

resident.Article

15 -- INDEPENDENT PERSONAL SERVICES:1. 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;

orb. the recipient is

present in the other State for a period or periods not exceeding in the

aggregate 183 days in the relevant " previous year " in the case of

Republic of India or " calendar year " in the case of Republic of the

Philippines.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

16 -- DEPENDENT PERSONAL SERVICES:1. Subject to the

provisions of Articles 17 (Directors' Fees), 18 (Entertainers and Athletes), 19

(Government Service), 20 (Non-Government Pensions and Annuities), 21 (Students

and Trainees) and 22 (Professors and Teachers), salaries, wages and other

similar remuneration derived by a resident of a Contracting State in respect of

an employment shall be taxable only in that State unless the employment is

exercised in the other Contracting State. If the employment is so exercised,

such remuneration as is derived therefrom may be taxed in that other State.2. Notwithstanding the

provisions of paragraph 1, remuneration derived by a resident of a Contracting

State in respect of an employment exercised in the other Contracting State

shall be taxable only in the firstmentioned State if:a. the recipient is

present in the other State for a period or periods not exceeding in the

aggregate 183 days in the relevant " previous year " in the case of

Republic of India or " Calendar year " in the case of the Republic of

the Philippines;b. the remuneration is

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

andc. the remuneration is

not 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

17 -- DIRECTORS' FEES:Directors'

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

capacity as a member of the Board of Directors of a company which is a resident

of the other Contracting State may be taxed in that other State.Article

18 -- ENTERTAINERS AND ATHLETES:1. Notwithstanding the

provisions of Articles 15 (Independent Personal Services) and 16 (Dependent

Personal Services), income derived by a resident of a Contracting State as an

entertainer such as theatre, motion picture, radio or television artiste or a

musician or as an athlete, from his personal activities as such exercised in

the other Contracting State may be taxed in that other State.2. While income in

respect of personal activities exercised by an entertainer or an athlete in his

capacity as such accrues not to the entertainer or athlete himself but to

another person, that income may, notwithstanding the provisions of Articles 7

(Business Profits), 15 (Independent Personal Services) and 16 (Dependent

Personal Services), be taxed in the Contracting State in which the activities

of the entertainer or athlete are exercised.3. Notwithstanding the

provisions of paragraph 1, income derived by an entertainer or an athlete who

is a resident of a Contracting State from his personal activities as such

exercised in the other Contracting State, shall be taxable only in the

first-mentioned Contracting State, if the activities in the other Contracting

State are exercised pursuant to a special programme between the Governments of

the two Contracting States for cultural exchange and are supported

substantially from the public funds of the first-mentioned Contracting State or

a political sub-division, or a local authority thereof or from the funds of a

statutory body, or a non-profit organisation which is certified as qualifying

under this provision by the competent authority of that State.4. Notwithstanding the

provisions of paragraph 2 and Articles 7 (Business Profits), 15 (Independent

Personal Services), and 16 (Dependent Personal Services), where income in

respect of personal activities exercised by an entertainer or an athlete in his

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

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

other Contracting State if such activities are exercised by an entertainer or

athlete of that other Contracting State pursuant to a special programme between

the Governments of the two Contracting States for cultural exchange and are

supported substantially from the public funds of that other State, a political

sub-division or a local authority thereof or from the funds of a statutory

body, or a non-profit organisation which is certified as qualifying by the

competent authority of that other State of which he is a resident.Article

19 -- GOVERNMENT SERVICE:1.a. Remuneration, other

than a pension, paid by a Contracting State or a political sub-division or a

local authority thereof to an individual in respect of services rendered to

that State or sub-division or authority shall be taxable only in that State.b. However, such

remuneration shall be taxable only in the other Contracting State if the

services are rendered in that other State and the individual is a resident of

that State who: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. .a. Any pension paid by,

or out of funds created by a Contracting State or a political sub-division or a

local authority thereof to an individual in respect of services rendered to

that State or sub-division or authority shall be taxable only in that State.b. However, such pension

shall be taxable only in the other Contracting State if the individual is a

resident of, and a national of that other State.3. The Provisions of

Articles 16 (Dependent Personal Services), 17 (Directors' Fees) and 20

(Non-Government Pensions and Annuities) 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

20 -- NON-GOVERNMENT PENSIONS AND ANNUITIES:1. Any pension, other

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

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

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

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

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

services.3. The term "

annuity " means a stated sum payable periodically at stated times during

life or during a specified or ascertainable period of time, under an obligation

to make the payments in return for adequate and full consideration in money or

money's worth.Article

21 -- STUDENTS AND TRAINEES: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. 15,000 or its

equivalent in Philippine currency during any " previous year " in the

case of Republic of India or " calendar year " in the case of the

Republic of the Philippines, 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

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

Contracting State.3. The amounts referred

to in paragraphs 1 and 2 of this Article may be reviewed and agreed upon by the

competent authorities of both Contracting States from time to time.Article

22 -- PROFESSORS AND TEACHERS:1. A professor or

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

before visiting the other Contracting State for the purpose of teaching or

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

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

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

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

State.2. This Article shall

not apply to income from research if such research is undertaken primarily for

the private benefit of a specific person or persons.3. For the purposes of

this Article and Article 21, an individual shall be deemed to be a resident of

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

previous year " in the case of Republic of India or " calendar year

" in the case of the Republic of the Philippines, in which he visits the

other Contracting State or in the immediately preceding " previous year

" or the " year of income ".4. For the purposes of

paragraph 1, " approved institution " means an institution which has

been approved in this regard by the competent authority of the concerned

Contracting State.Article

23 -- OTHER INCOME:Items

of income of a resident of a Contracting State, wherever arising, not dealt

with in the foregoing Articles of this Convention shall be taxable only in that

State.Article

24 -- ELIMINATION OF DOUBLE TAXATION:1. 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 Convention.2. The amount of

Philippine tax payable, under the laws of the Philippines and in accordance

with the provisions of this Convention, whether directly or by deduction, by a

resident of India, in respect of profits or income arising in the Philippines,

which have been subjected to tax both in India and in the Philippines, 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 the Philippines. 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 "

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

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

exempted or reduced in accordance with this Convention and the special

incentive laws designed to promote economic development in the Philippines,

effective on the date of signature of this Convention, or which may be

introduced in the future in the Philippine taxation laws in modification of, or

in addition to, the existing laws.4. The amount of Indian

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

this Convention, whether directly or by deduction, by a resident of the

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

subjected to tax both in India and the Philippines, shall be allowed as a

credit against Philippine tax payable in respect of such profits or income

provided that such credit shall not exceed the Philippine tax (as computed

before allowing any such credit) which is appropriate to the profits or income

arising in India.5. For the purposes of

the credit referred to in paragraph 4, the term " Indian tax payable

" shall be deemed to include any amount which would have been payable as

Indian tax for any assessment year but for an exemption or reduction of tax

granted for that year or any part thereof by the special incentive measures

under the provisions of the Income-tax Act, 1961 (43 of 1961), which are

designed to promote economic development, or which may be introduced hereafter

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

economic development in India.Article

25 -- NON-DISCRIMINATION:1. 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

burden-some 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. Notwithstanding the

preceding provisions of this Article, either Contracting State may, in the

promotion of necessary industry or business, limit to its nationals the

enjoyment of tax incentives granted by it.6. In this Article, the

term " taxation " means taxes which are the subject of this

Convention.Article

26 -- MUTUAL AGREEMENT PROCEDURE:1. 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 the provisions of this

Convention, he may, irrespective of the remedies provided by the domestic laws

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

State of which he is a resident or, if his case comes under paragraph 1 of

Article 25, to that of the Contracting 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 this

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 Contracting

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

the provisions of this Convention.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 this Convention. They may also consult together for the

elimination of double taxation in cases not provided for in this Convention

relating to the taxes which are the subject of this Convention.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 omission

consisting of representatives of the competent authorities of the Contracting

States.Article

27 -- EXCHANGE OF INFORMATION:1. The competent

authorities of the Contracting States shall exchange such information

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

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

covered by the Convention, insofar 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 a Contracting State shall be treated as

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

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

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

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

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

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

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. 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 paragraphs 1 and 2 be construed so as to impose on a Contracting

State the obligation:a. to carry out

administrative measures at variance with the laws or administrative practice of

that or of the other Contracting State;b. to supply information

or documents which are not obtainable under the laws or in the normal course of

the administration of that or of the other Contracting State;c. to supply information

or documents which would disclose any trade, business, industrial, commercial

or professional secret or trade process or information the disclosure of which

would be contrary to public policy.Article

28 -- DIPLOMATIC AGENTS AND CONSULAR OFFICERS:Nothing

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

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

of special agreements.Article

29 -- ENTRY INTO FORCE:Each

of the Contracting States shall notify to the other the completion of the

procedures required by its law for the bringing into force of this Convention.

This Convention shall enter into force on the date of the later of these

notifications and shall thereupon have effect:a. in India, in respect

of income arising in any previous year beginning on or after the first day of

April next following the calendar year in which the later of the notifications

is given;b. in the Philippines,

in respect of income arising in any year of income beginning on or after the

first day of January next following the calendar year in which the later of the

notifications is given.Article

30 -- TERMINATION:This

Convention shall remain in force indefinitely but either of the Contracting

States may, on or before the thirtieth day of June in any calendar year

beginning after the expiration of a period of five years from the date of its

entry into force, give the other Contracting State through diplomatic channels,

written notice of termination and, in such event, this Convention shall cease

to have effect:a. in India, in respect

of income arising in any previous year beginning on or after the 1st day of

April next following the calendar year in which the notice is given;b. in the Philippines,

in respect of income arising in any year of income beginning on or after the

1st day of January next following the calendar year in which the notice of

termination is given.IN

WITNESS WHEREOF

the undersigned, being duly authorised thereto, have signed the present

Convention.DONE in duplicate at

Manila this twelfth day of February one thousand and nine hundred and ninety in

Hindi and English languages, both the texts being equally authentic. In case of

divergence in interpretation, the English text shall prevail.PROTOCOL1. For purposes of

Article 1, nothing in this Convention shall be construed as preventing either

Contracting State from taxing its citizens, in accordance with its domestic

legislation, who may be residing in the other Contracting State. However, no

credit shall be given under this Convention for taxes paid/payable in pursuance

of such domestic legislation.2. For purposes of

paragraph 3 of Article 7, the deductions in respect of expenses incurred

outside the Contracting State shall be restricted as per the limitation on

allowance of such expenses provided in the domestic law of the concerned

Contracting State.3. For purposes of

paragraph 2 of Articles 8 and 9, the rate of tax prescribed therein is

understood to include the Branch Profit Remittance Tax as may be leviable by

either Contracting State.4. With reference to

Articles 8 and 9 if at any time after the date of signature of the Convention

the Philippines agrees to a lower or nil rate of tax with a third State the

Government of the Republic of the Philippines shall without undue delay inform

the Government of India through diplomatic channels and the two Governments

will undertake to review these Articles with a view to providing such lower or

nil rate to profits of the same kind derived under similar circumstances by

enterprises of both Contracting States.IN

WITNESS WHEREOF

the undersigned, being duly authorised thereto, have signed this Protocol.DONE in duplicate at

Manila this twelfth day of February one thousand nine hundred and ninety six in

Hindi and English languages, both the texts being equally authentic. In case of

divergence in interpretation, the English text shall prevail