Swiss Federal Council Legal Draft Template

Notification

No. G. S. R. 74(E), dated 7th February, 2001.Whereas

the annexed protocol amending the Agreement' between the Government of the

Republic of India and the Government of the Swiss Federal Council for the

Avoidance of Double Taxation with respect to taxes on income has come into

force on 20th December, 2000, the date of the later of the notifications by

both the Contracting States to each other, under article 16 of the protocol

amending the agreement, of the satisfaction of all the legal requirements and

procedures for giving effect to the said protocol;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 protocol amending the agreement, shall be given effect

to in the Union of India.ANNEXUREPROTOCOLAMENDING

THE AGREEMENT BETWEEN THE REPUBLIC OF INDIA AND THE SWISS CONFEDERATION FOR THE

AVOIDANCE OF DOUBLE TAXATION WITH RESPECT TO TAXES ON INCOMETHE

GOVERNMENT OF THE REPUBLIC OF INDIA AND THE SWISS FEDERAL COUNCIL.Desiring

to amend the Agreement between the Republic of India and the Swiss

Confederation for the avoidance of double taxation with respect to taxes on

income, signed at New Delhi on 2nd November, 1994 (hereinafter referred to as

"the Agreement"), have agreed as follows:Article

1Sub-paragraph

(a) of paragraph 1 of article 3 of the agreement shall be replaced by the

following:a.

'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 jurisdictions, according

to the Indian law and in accordance with international law, including the UN

Convention on the law of the sea.'Article

1. The first sentence of

sub-paragraph (1) of paragraph 2 of article 5 of the agreement shall be

replaced by the following:a. 'the furnishing of

technical services, other than services as defined in article 12, within a

Contracting State by an enterprise through employees or other personnel, but

only if:...'1.2. In paragraph 3 of

article 5 of the agreement the following sub-paragraph shall be inserted after

sub-paragraph (e): '(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 auxilliary character.'3. The following

paragraph shall be inserted after paragraph 3 of article 5 of the agreement:4. 'Notwithstanding the

preceding provisions of this article, an insurance enterprise of a Contracting

State shall, except in regard to re-insurance, be deemed to have a permanent

establishment in the other Contracting State if it collects premiums in the

territory of that other State or insures risks situated therein through a

person other than an agent of an independent status to whom paragraph 6

applies.'5. The existing

paragraphs 4 to 6 of article 5 of the agreement shall become paragraphs 5 to 7.6. In the first sentence

of paragraph 5 of article 5 of the agreement the words '... other than an agent

of an independent status to whom para graph 5 applies...' shall be replaced by

the words '... other than an agent of an independent status to whom paragraph 6

applies... "Article

3Paragraph

1 of article 6 of the agreement shall be replaced by the following:1.

'Income

from immovable property may also be Contracting State in which such property is

situated.'Article

4Paragraph

1 of article 8 of the agreement shall be replaced by the following:1.

'Profits

derived by an enterprise of a Contracting State from the operation of aircraft

in international traffic shall be taxable only in that State.'Article

1. '1. Article 9 of the

agreement shall become paragraph 1 of article 9.2. The following

paragraph shall be inserted after paragraph 1 of article 9 of the agreement:'Where

a Contracting State includes in the profits of an enterprise of that

State---and taxes accordingly---profits on which an enterprise of the other

Contracting State has been charged to tax in that other State and the profits

so included are profits which would have accrued to the enterprise of the

first-mentioned State if the conditions made between the two enterprises had

been those which would have been made between 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 adjustments, due regard

shall be had to the other provisions of this agreement and the competent

authorities of the Contracting States shall, if necessary consult each other.'Article

1. The first sentence of

paragraph 2 of article 10 of the Agreement shall be replaced by the following: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 beneficial owner of the dividends is a resident of the other Contracting

State, the tax so charged shall not exceed 10 per cent. of the gross amount of

the dividends.'Paragraph

4 of article 10 of the agreement shall be replaced by the following:'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 14, as the case may be, shall apply.'3.

In

paragraph 5 of article 10 of the agreement the words 'or a fixed base' shall be

inserted after the term 'permanent establishment'.Article

1. Paragraph 2 of

article 11 of the agreement shall be replaced by the following:1.2. ' 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 beneficial owner of the

interest is a resident of the other Contracting State, the tax so charged shall

not exceed 10 per cent. of the gross amount of the interest.'Paragraph

3 of article 11 of the agreement shall be deleted.The

existing paragraph 4 of article 11 of the agreement shall become paragraph 3.Sub-paragraph

(a) of paragraph 3 of article 11 of the agreement shall be replaced by the

following:1.2.3. Notwithstanding the

provisions of paragraph 2:1.2.3.4. interest arising in

Switzerland and paid to a resident of India shall be taxable only in India if

it is paid in respect of a loan made, guaranteed or insured, or a credit

extended, guaranteed or insured by the Government, a political sub-division, a

statutory body or a local authority of India or the Export-Import Bank of

India, the Reserve Bank of India, the Industrial Finance Corporation of India,

the Industrial Development Bank of India, the National Housing Bank, the Small

Industries Development Bank of India or by any institution specified and agreed

in letters exchanged between the competent authorities of the Contracting

States.'The

existing paragraphs 5 to 8 of article 11 of the agreement shall become paragraphs

4 to 7.Paragraphs

5 and 6 of article 11 of the agreement shall be replaced by the following:1.2.3.4.5. '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 a case the provisions of article

7 or article 14, as the case may be, shall apply.6. Interest shall be

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

The

heading and paragraphs 1 to 7 of article 12 of the agreement shall be replaced

by the following:Article

12 ROYALTIES AND FEES FOR TECHNICAL SERVICES1. Royalties and fees

for technical services arising in a Contracting State and paid to a resident of

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

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

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

beneficial owner of the royalties or fees for technical services is a resident

of the other Contracting State, the tax so charged shall not exceed 10 per

cent. of the gross amount of the royalties or the fees for technical services.3. The term

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

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

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

work on film, tape or other means of reproduction for use in connection with

radio or television broadcasting, any patent trademark, design or model, plan,

secret formula or process, or for the use of, or the right to use, any industrial,

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

commercial or scientific experience.4. For purposes of this

article the term "fees for technical services" means payments of any

kind to any person in consideration for the rendering of any managerial,

technical or consultancy services, including the provision of services by

technical or other personnel.5. Notwithstanding

paragraph 4, "fees for technical services" does not include amounts

paid:a. for teaching in or by

educational institutions;b. for services covered

by article 14 or article 15, as the case may be.1.2.3.4.5.6. The provisions of

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

fees for technical services, being a resident of a Contracting State, carries

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

technical services arise, through a permanent establishment situated therein,

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

situated therein, and the contract in respect of which the royalties or fees

for technical services are paid is effectively connected with such permanent

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

article 14, as the case may be, shall apply.7. Royalties and fees

for technical services shall be deemed to arise in a Contracting State when the

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

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

for technical services, whether he is a resident of a Contracting State or not,

has in a contracting State a permanent establishment or a fixed base in

connection with which the liability to pay the royalties or fees for technical

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

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

fees for technical services shall be deemed to arise in the State in which the

permanent establishment or fixed base is situated.'2.3.4.5.6.7.8. In paragraph 8 of

article 12 of the agreement the term 'included services' shall be replaced by

the term 'technical services'.Article

Paragraph

2 of article 13 of the agreement shall be replaced by the following:'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 with the

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

State.'1.2. Paragraph 5 of

article 13 shall be replaced by the following:'Gains

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

company which is a resident of a Contracting State:a. shall be taxable only

in the Contracting State of which the alienator is a resident;b. notwithstanding the

provision of sub-paragraph (a), India may tax gains from the alienation of

shares in a company which is a resident of India.In

this case the provisions of sub-paragraph (b) of paragraph 1, of article 23

shall apply.'Article

The

following article 14 relating to independent personal services shall be

inserted after article 13 relating to capital gains:Article

14 INDEPENDENT PERSONAL SERVICES1. Income derived by a

resident of a Contracting State 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 Contracting State---a. if he has a fixed

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

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

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

other State is for a period or periods aggregating 183 days or more in any 12

month period commencing or ending 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.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,

surgeons, dentists and accountants.'1.2. The existing article

14 shall be renumbered as article 15 and replaced by the following article:Article

15 DEPENDENT 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 a Contracting State in respect of an

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

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

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

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

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

shall be taxable only in the first-mentioned State if:a. the recipient is

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

aggregate 183 days in any 12 month period commencing or ending 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.Notwithstanding

the preceding provisions of this article, remuneration derived in respect of an

employment exercised abroad a ship or aircraft operated in international

traffic, by an enterprise of a Contracting State may be taxed in that State.'1.2.3. Articles 15 to 20 of

the agreement shall become articles 16 to 21.Article

11The

following article shall be inserted after article 21 of the agreement:Article

22 OTHER INCOME1. Items of income of a

resident of a Contracting State, wherever arising, not dealt within the

foregoing articles of this agreement shall be taxable only in that State.2. The provisions of

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

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

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

other Contracting State through a permanent establishment situated therein, or

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

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

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

In such case the provisions of article 7 or article 14, as the case may be,

shall apply.3. Notwithstanding the

provisions of paragraph 1, if a resident of a Contracting State derives income

from sources within the other Contracting State in the form of lotteries,

crossword puzzles, races including horse races, card games and other games of

any sort or gambling or betting of any form or nature whatsoever, such income

may be taxed in that other Contracting State.'Article

1. Article 21 of the

agreement shall become article 23.2. In sub-paragraph (a)

of paragraph 2 of renumbered article 23 of the agreement the reference made to

sub-paragraph (d) shall be deleted.3. In sub-paragraph (b)

of paragraph 2 of renumbered article 23 of the agreement, the term 'included

services' shall be replaced by the term 'technical services'.4. Sub-paragraph (c) of

paragraph 2 of renumbered article 23 of the agreement shall be deleted.5. Sub-paragraph (d) of

paragraph 2 of renumbered article 23 of the agreement shall be replaced by the

following:'(c)

Where a resident of Switzerland derives interest dealt with in sections 10(4),

10(4B), 10(15)(iv) and 80L of the Indian Income-tax Act of 1961 (43 of 1961),

and referred to in sub-paragraph (d) of paragraph 3 of article 11, Switzerland

shall allow, upon request, a relief to such resident of an amount equal to 10

per cent. of the gross amount of the interest.'Article

1. Article 22 of the

agreement shall become article 24.2. Paragraph 1 of

renumbered article 24 of the agreement shall be replaced by the following:'Nationals

of a Contracting State shall not be subjected in the other Contracting State to

any taxation or any requirement connected therewith which is other or more

burdensome than the taxation and connected requirements to which nationals of

that other State in the same circumstances and under the same conditions are or

may be subjected. This provision shall, notwithstanding the provisions of

article 1, also apply to persons who are not residents of one or both of the

Contracting States.'1.2.3. The following

paragraph shall be inserted after paragraph 2 of renumbered article 24 of the

agreement:'Except

where the provisions of article 9, paragraph 7 of article 11, or paragraph 8 of

article 12, apply, interest, royalties and other disbursements paid by an

enterprise of a Contracting State to a resident of the other Contracting 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.'1.2.3.4. The existing

paragraphs 3 and 4 of renumbered article 24 of the agreement shall become

paragraphs 4 and 5.Article

14Articles

23 to 27 of the agreement shall become articles 25 to 29.Article

15A. In the first

sub-paragraph of paragraph 1 of the protocol to the agreement the words '... in

paragraph 2, sub-paragraph (a) of article 12' shall be replaced by the

words'... in paragraph 2 of article 12.'.B. In the third

sub-paragraph of paragraph 1 of the Protocol to the Agreement the words 'with

respect to paragraph 4 of article 5...' shall be replaced by the words 'with

respect to paragraph 5 of article 5...'.C. In the protocol to

the agreement the following paragraph shall be inserted after paragraph 2:'With

reference to paragraph 2 of article 9.----It is understood that Switzerland

shall only make an appropriate adjustment after consultation with the competent

authority of India and after reaching an agreement on the adjustments of

profits in both Contracting State.'A.B.C.D. The existing

paragraph 3 of the protocol to the agreement shall be replaced by the

following:'With

reference to articles 10, 11 and 12.---If after the signature of the protocol

of 16th February, 2000, under any Convention, Agreement or Protocol between

India and a third State which is a member of the OECD India should limit its

taxation at source on dividends, interest, royalties or fees for technical

services to a rate lower or a scope more restricted than the rate or scope

provided for in this agreement on the said items of income, then, Switzerland

and India shall enter into negotiations without undue delay in order to provide

the same treatment to Switzerland as that provided to the third State.'A.B.C.D.E. In the Protocol to

the agreement the following paragraph shall be inserted after paragraph 4:

"5. With reference to sub-paragraph (b) of paragraph 5 of article 13.---It

is understood that if at a later stage Switzerland shall introduce a capital

gains tax on the alienation of shares of a Swiss company other than shares of a

company mentioned in paragraph 4, paragraph 5 of article 13 shall be replaced

by the following:"Gains

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

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

State".In

this case sub-paragraph (b) of paragraph 1 of article 23 of the agreement shall

be deleted.'A.B.C.D.E.F. The existing

paragraph 4 of the protocol to the agreement shall become paragraph 6.G. In the protocol to

the agreement the following paragraph shall be inserted after paragraph 6:'With

reference to paragraph 4 of article 24.---It is understood that this provision

shall not be construed as preventing a Contracting State from charging the

profits of a permanent establishment which a company of the other Contracting

State has in the first mentioned State at a rate of tax which is higher than

that imposed on the profits of a similar company of the first-mentioned

Contracting State nor as being in conflict with the provisions of paragraph 3

of article 7 of this agreement.'A.B.C.D.E.F.G.H. The existing

paragraph 5 of the protocol to the agreement shall become paragraph 8 and its

heading shall be replaced by the following:'With

reference to article 25'.Article

1. The Governments of

the Contracting States shall notify each other through diplomatic channels that

all legal requirements and procedures for giving effect to this protocol have

been satisfied.2. The protocol, which

shall form an integral part of the agreement, shall enter into force on the

date of the later of the notifications referred to in paragraph I and its

provisions shall have effect:a. in India, in respect

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

April next following the calendar year in which the protocol entered into

force; andb. in Switzerland, in

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

day of January next following the calendar year in which the protocol entered

into force.In

witness whereof

the undersigned, duly authorised thereto by their respective Governments, have

signed this protocol.Done

in

duplicate at New Delhi this 16th day of February, 2000, in German, Hindi and

English languages, all the texts being equally authentic, In case of divergence

of interpretation the English text shall prevail.For

the Government of the Republic of India........................................(Yashwant

Sinha)For

the Swiss Federal Council.......................................(Pascal

Couchepin)[Notification

No. 35/F. No. 501/7/73-FTD]