Malta
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 MALTA
Notification
No. 9908 [F. NO. 503/1/89/FTD], dated 22-11-1995
Whereas
the annexed Agreement between the Government of the Republic of India and the
Republic of Malta for the avoidance of double taxation and the prevention of
fiscal evasion with respect to taxes on income has entered into force on 8th
February, 1995, 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 Agreement in accordance with paragraph 1 of
Article 29 of the said Agreement;
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 Agreement shall be given effect to in the Union of
India.
AGREEMENT
BETWEEN THE REPUBLIC OF INDIA AND MALTA FOR THE AVOIDANCE OF DOUBLE TAXATION
AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME THE
GOVERNMENT OF THE REPUBLIC OF INDIA AND THE GOVERNMENT OF MALTA
Desiring
to conclude an Agreement for the avoidance of double taxation and the
prevention of fiscal evasion with respect to taxes on income, have agreed as
follows:
CHAPTER
I
SCOPE
OF THE AGREEMENT
Article
1
PERSONAL
SCOPE:
This
Agreement shall apply to persons who are residents of one or both of the
Contracting States.
Article
2
TAXES
COVERED:
1. The existing taxes to
which this Agreement shall apply are:
a. in India:
the
income-tax including any surcharge thereon;
(hereinafter
referred to as " Indian tax ");
b. in Malta:
the
income-tax;
(hereinafter
referred to as " Malta tax ").
1.
2. This Agreement shall
also apply to any identical or substantially similar taxes which are imposed by
either Contracting State after the date of signature of the present Agreement
in addition to, or in place of, the taxes referred to in paragraph (1). The
competent authorities of the Contracting States shall notify each other of any
significant changes which are made in their respective taxation laws.
3. Notwithstanding the
other provisions of this Article, this Agreement shall not apply to tax paid or
payable in Malta in accordance with the provisions of sub-section (11) of
section 31. of the Income-tax Act (Cap. 123), concerning the chargeable income
of any person engaged in the production of petroleum produced in Malta, or any
substantially similar provision which is imposed after the date of signature of
this Agreement.
CHAPTER
II DEFINITIONS
Article
3
GENERAL
DEFINITIONS:
1. For the purposes of
this Agreement, unless the context otherwise requires:
a. the term " India
" means the territory of India and includes the territorial sea and
airspace 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 " Malta
" when used in a geographical sense, means the Island of Malta, the Island
of Gozo and the other Islands of the Maltese archipelago including the
territorial waters thereof, and any area outside the territorial sea of Malta
which, in accordance with international law, has been or may hereafter be
designated, under the law of Malta concerning the Continental Shelf, as an area
within when the rights of Malta with respect to the seabed and sub-soil and
their natural resources may be exercised;
c. the term "
company " means any body corporate or any entity which is treated as a
body corporate for tax purposes;
d. 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 Malta, the Minister responsible for finance
or his authorised representative;
e. the term " a
Contracting State " and " the other Contracting State " mean
India or Malta as the context requires;
f. 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;
f. (g) the term "
fiscal year " in relation to Indian tax means " previous year "
as defined in the Income-tax Act, 1961 (43 of 1961) and in relation to Malta
tax means the year immediately preceding the " year of assessment " as
defined in the Income-tax Act (Cap. 123);
g. 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;
h. the term " national
" means any individual possessing the nationality of a Contracting State
and any legal person, partnership or association deriving its status from the
laws in force in the Contracting State;
i. the term "
person " includes an individual, a company, a body of persons and any
other entity which is treated as a taxable unit under the taxation laws in
force in the respective Contracting States;
j. the term " tax
" means Indian tax or Malta tax, as the context requires, but shall not
include any amount which is payable in respect of any default or omission in
relation to the taxes to which this Agreement applies or which represents a
penalty imposed relating to those taxes.
1.
2. As regards the
application of the Agreement by a Contracting State, any term not defined therein
shall, unless the context otherwise requires, have the meaning which it has
under the law of that State concerning the taxes to which this Agreement
applies.
Article
4
RESIDENT:
1. For the purposes of
this Agreement, the term " resident of a Contracting State " means
any person who, under the laws of that State, is liable to tax therein by
reason of his domicile, residence, place of management or any other criterion
of a similar nature.
2. Where by reason of
the provisions of paragraph (1), an individual is a resident of both
Contracting States, then his status shall be determined as follows:
a. he shall be deemed to
be a resident of the Contracting 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 Contracting 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 no
permanent home available to him in either State, he shall be deemed to be a
resident of the Contracting 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 Contracting 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) of a person other than an individual is a
resident of both Contracting States, then it shall be deemed to be a resident
of the Contracting State in which its place of effective management is
situated.
Article
5
PERMANENT
ESTABLISHMENT:
1. For the purposes of
this Agreement, the term " Permanent establishment " means a fixed
place of business through which the business of the enterprise is wholly or
partly carried on.
2. The term "
permanent establishment " includes especially:
a. a place of
management;
b. a branch;
c. an office;
d. a factory;
e. a workshop;
f. a mine, an oil or gas
well, quarry or any other place of extraction of natural resources including an
offshore drilling site;
g. a building site or
construction or assembly project or supervisory activities in connection
therewith, where such site, project or activities (together with other such
sites, projects or activities, if any) continues for a period of more than six
months.
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. 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 for 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.
1.
2.
3.
4. A person engaged in a
Contracting State in exploration of the seabed and its sub-soil or in
exploitation of natural resources situated there as well as in activities which
are complementary or auxiliary to such activities, is deemed to exercise such
activities through a permanent establishment in that State.
5. An enterprise of a
Contracting State shall be deemed to have a permanent establishment in the
other Contracting State if:
a. substantial equipment
is in that other State being used or installed by, for or under contract with
the enterprise;
b. it carries on
supervisory activities in that State in connection with the use of equipment
referred to in sub-paragraph (a).
1.
2.
3.
4.
5.
6. Notwithstanding the
provisions of paragraphs (1) and (2) where a person --- other than an agent of
an independent status to whom paragraph (7) applies --- is acting on behalf of
an enterprise and has, and habitually exercises, in a Contracting State an
authority to conclude contracts in the name of the enterprise, that enterprise
shall be deemed to have a permanent establishment in that State in respect of
any activities which that person undertakes for the enterprise, unless the
activities of such person are limited to the purchase of goods or merchandise
for the enterprise.
7. An enterprise of a
Contracting State shall not be deemed to have a permanent establishment in the
other Contracting State merely because it carries on business in that other
State through a broker, general commission agent or any other agent of an
independent status, where 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
as agent of an independent status if the transactions between the agent and the
enterprise were not made under arm's length conditions.
8. The fact that a
company which is a resident of a Contracting State controls or is controlled by
a company which is a resident of the other Contracting State, or which carries
on business in that other State (whether through a permanent establishment or
otherwise), shall not of itself constitute either company a permanent
establishment of the other.
CHAPTER
III
TAXATION
OF INCOME
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 or to explore for, 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 directly or indirectly attributable to that
permanent establishment. The words " directly or indirectly " mean,
for the purposes of this Article, that where a permanent establishment takes an
active part in negotiating, concluding or fulfilling contracts entered into by
the enterprise, then, notwithstanding that other part of the enterprise have
also participated in those transactions, there shall be attributed to the permanent
establishment that proportion of profits of the enterprise arising out of those
contracts as the contribution of the permanent establishment to those
transactions bears to that of the enterprise as a whole.
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 or
with other associated enterprises with which it deals.
3. In the determination
of the profits of a permanent establishment, there shall be allowed as
deductions expenses of the enterprise, being expenses which are incurred for
the purposes of the permanent establishment (including executive and general
administrative expenses so incurred) and which would be deductible if the
permanent establishment were an independent entity which paid those expenses,
whether incurred in the Contracting State in which the permanent establishment
is situated or elsewhere in accordance with the provisions of and subject to
the limitation of the taxation laws of that State.
4. Nothing in this
Article shall affect the application of any law of a Contracting State relating
to the determination of the tax liability of a person, including the
determination of such liability by the exercise of discretion or the making of
an estimate by the competent authority of that State in cases in which, from
the information available to the competent authority of that State, it is not
possible or not practicable to ascertain the profits to be attributed to a
permanent establishment, provided that law shall be applied, so far as the
information available to the competent authority permits, consistently with the
principles of 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) The provisions of this
Article shall not affect the provisions of the law of a Contracting State regarding
the taxation of profits from the business of insurance.
7. Where profits include
items of income which are dealt with separately in other Articles of this
Agreement, then the provisions of those Articles shall not be affected by the
provisions of this Article.
Article
8
SHIPPING
AND AIR TRANSPORT:
1. Profits derived by an
enterprise of a Contracting State from the operation by that enterprise of
ships or aircraft in international traffic shall be taxable only in that State.
2. For the purposes of
this Article, profits from the operation of ships or aircraft in international
traffic shall mean profits derived by an enterprise described in paragraph 1
from the transportation by sea or air respectively of passengers, mail,
livestock or goods carried on by the owners or lessees or charterers of ships
or aircraft including:
a. the sale of tickets
for such transportation on behalf of other enterprises;
b. other activity
directly connected with such transportation; and
c. the rental of ships
or aircraft incidental to any activity directly connected with such
transportation.
1.
2.
3. Profits of an
enterprise of a Contracting State described in paragraph (1) from the use,
maintenance, or rental of containers (including trailers, barges and related
equipment for the transport of containers) used in connection with the
operation of ships or aircraft in international traffic shall be taxable only
in that State.
4. The provisions of
paragraphs (1) and (3) shall also apply to profits from participation in a
pool, a joint business, or an international operating agency.
5. For the purposes of
this Article, interest on funds connected with the operation of ships or
aircraft in international traffic shall be regarded as profits derived from the
operation of such ships or aircraft, and the provisions of Article 11
(Interest) shall not apply in relation to such interest.
Article
9
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, or
b. 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. Nothing in this
Article shall affect the application of any law of a Contracting State relating
to the determination of such liability by the exercise of a discretion or the
making of an estimate by the competent authority of that State in cases which,
from the information available to the competent authority of that State, it is
not possible or not practicable to determine the income to be attributed to an
enterprise, provided that law shall be applied, so far as the information
available to the competent authority permits, consistently with the principles
of this Article.
3. 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 that 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 Agreement and the competent authorities of the Contracting
States shall if necessary consult each other.
Article
10
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:
a. where the dividends
are paid by a company resident of India to a resident of Malta who is the
beneficial owner thereof, the Indian tax so charged shall not exceed:
i.
10
per cent of the gross amount of the dividends if the beneficial owner is a
company which owns at least 25 per cent of the shares of the company paying the
dividends; and
ii.
15
per cent of the gross amount of the dividends in all other cases;
a.
b. where the dividends
are paid by a company which is a resident of Malta to a resident of India who
is the beneficial owner thereof Malta tax on the gross amount of the dividends
shall not exceed that chargeable on the profits out of which the dividends are
paid.
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, "
jouissance " shares or " jouissance " rights, mining shares,
founders' shares or other rights, not being debt-claims, participating in
profits, as well as income from other corporate rights which is subjected to
the same taxation treatment as income from shares by the laws of the State of
which the company making the distribution is a resident.
4. The provisions of
paragraphs (1) and (2) shall not apply if the beneficial owner of the
dividends, being a resident of a Contracting State, carries on business in the
other Contracting State of which the company paying the dividends is a
resident, through a permanent establishment situated therein, or performs in
that other State independent personal services from a fixed base situated
therein, and the holding in respect of which the dividends are paid is
effectively connected with such permanent establishment or fixed base. In such
a case the provisions of Article 7 or Article 15, as the case may be, shall
apply. (5) Where a company which is a resident of a Contracting State derives
profits or income from the other Contracting State, that other State may not
impose any tax on the dividends paid by the company except 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 or profits or income arising in such other State.
Article
11
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 be taxed in the Contracting State in which it arises and according
to the laws of that State, but if the recipient is the beneficial owner of the
interest, the tax so charged shall not exceed 10 per cent of the gross amount
of the interest.
3. Notwithstanding the
provisions of paragraph (2), interest arising in a Contracting State shall be
exempt from tax in that State if it is derived by the Government of the other
Contracting State or a local authority thereof or any agency or instrumentality
wholly owned and controlled by that Government or local authority.
4. The term "
interest " as used in this Article means income from debt-claims of every
kind, whether or not secured by mortgage and whether or not carrying a right to
participate in the debtor's profits, and in particular, income from Government
securities and income from bonds or debentures, including premiums and prizes
attaching to such securities, bonds or debentures.
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 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 resident of a
Contracting State or not, has in a Contracting State a permanent establishment
or fixed base in connection with which the indebtedness on which the interest
is paid was incurred, and such interest shall be deemed to arise in the State
in which the permanent establishment of 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 only to the
last-mentioned amount. In such case, the excess part of the payments shall
remain taxable according to the laws of each Contracting State, due regard being
had to the other provisions of this Agreement.
Article
12
ROYALTIES
AND FEES FOR INCLUDED SERVICES:
1. Royalties and fees
for included 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 included services may also be taxed in the Contracting
State in which they arise and according to the laws of that State, but if the
recipient is the beneficial owner of the royalties or fees for included services
the tax so charged shall not exceed 15 per cent of the gross amount of the
royalties or fees for included services.
3. The term "
royalties " in this Article means payments or credits, whether periodical
or not, and however described or computed, to the extent to which they are made
as consideration for:
a. the use of, or the
right to use any copyright, patent, design or model, plan, secret formula or
process, trademark or other like property or right;
b. the use of, or the
right to use, any industrial, commercial or scientific equipment;
c. the supply of
scientific, technical, industrial or commercial knowledge or information;
d. the use of, or the
right to use:
i.
motion
picture films;
ii.
films
or video tapes for use in connection with television; or
iii.
tapes
for use in connection with radio broadcasting; or
a.
b.
c.
d.
e. total or partial
forbearance in respect of the use or supply of any property or right referred
to in this paragraph.
1.
2.
3.
4. The term " fees
for included services " in this Article means payments or credits, whether
periodical or not, and however described or computed, to the extent to which
they are made as consideration for:
a. the supply of any
assistance that is ancillary and subsidiary to, and is furnished as a means of
enabling the application or enjoyment of, any such property or right as is
mentioned in sub-paragraph (a) of paragraph (3), or any such equipment as is
mentioned in sub-paragraph (b) of paragraph (3), or any such knowledge or
information as is mentioned in sub-paragraph (c) of paragraph (3);
b. rendering of any
technical or consultancy services (including the provision of technical or
other personnel) if such services make available technical knowledge,
(experience, skill, know-how or process or consist of the development and
transfer of a technical plan or technical design.
1.
2.
3.
4.
5. The provisions of
paragraphs (1) and (2) shall not apply if the beneficial owner of the royalties
or fees for included services, being a resident of a Contracting State, carries
on business in the other Contracting State in which the royalties or fees for
included services arise, through a permanent establishment situated therein, or
performs in that other State independent personal services from fixed base
situated therein, and the right or property in respect of which the royalties or
fees for included services are paid is effectively connected with such
permanent establishment or fixed base. In such case, the provisions of Article
7 or Article 15, as the case may be, shall apply.
6. Royalties and fees
for included 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 included services, whether he is a resident of a Contracting State or not,
has in a Contracting State a permanent establishment or fixed base in
connection with which the liability to pay the royalties or fees for included
services was incurred, and such royalties or fees for included services 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.
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 royalties or fees for included
services having regard to the use, right or information for which they are
paid, exceeds the amount which would have been agreed upon by the payer and the
beneficial owner in the absence of such relationship, the provisions of this
Article shall apply only to the last-mentioned amount. In such case, the excess
part of the payments shall remain taxable according to the laws of each
Contracting State, due regard being had to the other provisions of this
Agreement.
Article
13
TECHNICAL
FEES:
1. Technical fees
arising in a Contracting State which are derived by a resident of the other
Contracting State may be taxed in that other State.
2. However, such
technical fees 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 technical fees, the tax so charged shall not exceed 10 per cent of
the gross amount of the technical fees.
3. The term
"technical fees" as used in this Article means payments of any kind
to any person, other than to an employee of the person making the payments, in
consideration for any services of a technical, managerial or consultancy
nature.
4. The provisions of paragraphs
(1) and (2) shall not apply if the beneficial owner of the technical fees,
being a resident of a Contracting State, carries on business in the other
Contracting State in which the technical fees arise through a permanent
establishment situated therein, or performs in that other State independent
personal services, and the technical fees are effectively connected with such
permanent establishment or such services. In such case, the provisions of
Article 7 or Article 15, as the case may be, shall apply.
5. Technical fees 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 statutory body thereof, or a
resident of that State. Where, however, the person paying the technical fees,
whether he is a resident of a Contracting State or not, has in a Contracting
State a permanent establishment in connection with which the obligation to pay
the technical fees was incurred, and such technical fees are borne by that
permanent establishment, then such technical fees shall be deemed to arise in
the Contracting State in which the permanent establishment is situated.
6. Where, by reason of a
special relationship between the payer and the recipient or between both of
them and some other person, the amount of the technical fees paid exceeds, for
whatever reason, 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 law of each
Contracting State due regard being had to the other provisions of this
Agreement.
Article
14
ALIENATION
OF PROPERTY:
1. Income from gains
from the alienation of immovable property, as defined in paragraph (2) of
Article 6, may be taxed in the Contracting State in which such property is
situated.
2. Income from gains
from the alienation of shares or comparable interests in a company, the assets
of which consist wholly or principally of immovable property, may be taxed in
the Contracting State in which the assets or the principal assets of the
company are situated.
3. Income from 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
income or gains arising from the alienation of such a permanent establishment
(alone or together with the whole enterprise) or of such fixed base, may be
taxed in the other State.
4. Income from gains
from the alienation of ships or aircraft operated in international traffic or
movable property pertaining to the operation of such ships or aircraft shall be
taxable only in the Contracting State of which the alienator is a resident.
4. (5) Income from gains
from the alienation of shares other than those mentioned in paragraph (2) in a
company which is a resident of a Contracting State may be taxed in that State.
5. Income from gains
from the alienation of any property other than that referred to in paragraphs
(1), (2),(3),(4) and (5) 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
activities of an independent character shall be taxable only in that State.
However, such income may be taxed in the other Contracting State in the
following circumstances:
a. if he has a fixed
based regularly available to him in the other Contracting State for the purpose
of performing his activities in which case only so much of the income as is
attributable to that fixed base may be taxed in that other Contracting State;
or
b. if his stay in the
other Contracting State is for a period or periods amounting to or exceeding in
the aggregate 90 days during any fiscal year.
1.
2. The term
"professional services" includes especially 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, 19, 20 and 21, salaries, wages and other similar
remuneration derived by a resident of a Contracting State in respect of an employment
shall be taxable only in that State unless the employment is exercised in the
other Contracting State. If the employment is so exercised, such remuneration
as is derived there from may be taxed in that other State.
2. Notwithstanding the
provisions of paragraph (1), remuneration derived by a resident of a
Contracting State in respect of an employment exercised in the other
Contracting State shall be taxable only in the first-mentioned State if:
a. the recipient is
present in the other State for a period or periods not exceeding in the
aggregate 183 days in the fiscal year concerned, and
b. the remuneration is
paid by, or on behalf of, an employer who is not a resident of the other State,
and
c. 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 may be taxed only in that
State.
Article
17
DIRECTORS'
FEES:
Directors'
fees and similar payments derived by a resident of one of the Contracting
States in his capacity as a member of the board of directors, or other
comparable body however described, of a company which is a resident of the
other Contracting State, may be taxed in that other State.
Article
18
INCOME
EARNED BY ARTISTES & ATHLETES:
1. Notwithstanding the
provisions of Articles 15 and 16, income derived by a resident of a Contracting
State as an entertainer such as a theatre, motion picture, radio or television
artiste or a musician or as an athlete from his personal activities as such
exercised in the other Contracting State, may be taxed in that other
Contracting State.
2. Where 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,
15 and 16, 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 supported wholly or substantially from the public funds of the
first-mentioned Contracting State, including any of its political sub-divisions
or local authorities.
4. Notwithstanding the
provisions of paragraph (2) and Articles 7, 15 and 16, 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 that other person is supported wholly or substantially
from the public funds of that other State, including any of its political
sub-divisions or local authorities.
Article
19
PENSIONS:
1. Subject to the
provisions of paragraph (2) of Article 20, pensions and other similar
remuneration paid to a resident of a Contracting State in consideration of past
employment shall be taxable only in that State.
2. Notwithstanding the
provisions of paragraph (1), pensions and other payments made under the social
security legislation of a Contracting State shall be taxable only in that
State.
Article
20
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 State and the individual is a resident of that
State who:
i.
is
a national of that State; or
ii.
did
not become a resident of that State solely for the purposes 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 State.
1.
2.
3. The provisions of
Articles 16, 17 and 19 shall apply to remuneration and pensions in respect of
services rendered in connection with any business carried on by a Contracting
State or a political sub-division or a local authority thereof.
Article
21
REMUNERATION
RECEIVED BY TEACHERS:
1. Remuneration which a professor
or teacher who is or was immediately before visiting a Contracting State a
resident of the other Contracting State and who is present in the
first-mentioned State for a period not exceeding two years for the purpose of
carrying out advanced study or research or for teaching at a university,
college, school or other educational institution receives for such work shall
not be taxed in that State, provided that such remuneration is derived by him
from outside that 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.
Article
22
PAYMENTS
RECEIVED BY STUDENTS AND TRAINEES:
An
individual who is a resident of a Contracting State immediately before making a
visit to the other Contracting State and is temporarily present in the other
State solely--
1. As a student at a
recognised university, college, school or other similar recognised educational
institution in that other State; or
2. as a business or
technical apprentice; or
3. as a recipient of a
grant, allowance or award for the primary purpose of study, research or
training from the Government of either State or from a scientific, educational,
religious, or charitable organisation or under a technical assistance programme
entered into by the Government of either State, shall be exempt from tax in
that other State on:
a. all remittances from
abroad for the purposes of his maintenance, education, study, research or
training;
b. the amount of such
grant, allowance or award; and
c. any remuneration not
exceeding an amount equivalent to US $ 3,000 during any fiscal year in respect
of services in that other State provided the services are performed in
connection with his study, research or training or are necessary for the purpose
of his maintenance.
Article
23
OTHER
INCOME:
1. Items of income of a
resident of a Contracting State, wherever arising, not dealt with in 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 15, as the case may be,
shall apply.
3. Notwithstanding the
provisions of paragraphs (1) and (2) items of income of a resident of a
Contracting State not dealt with in the foregoing articles of this Convention
and arising in the other Contracting State may also be taxed in that other
State.
CHAPTER
IV
ELIMINATION
OF DOUBLE TAXATION
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 express provision to
the contrary is made in this Agreement.
2. In the case of India,
double taxation shall be eliminated as follows:
Where
a resident of India derives income which, in accordance with the provisions of
this Agreement, may be taxed in Malta, India shall allow as a deduction from
the tax on the income of that resident an amount equal to the income-tax paid
in Malta whether directly or by deduction. Such deduction in either case shall
not, however, exceed that part of the income-tax (as computed before the
deduction is given) which is attributable, as the case may be, to the income
which may be taxed in Malta.
1.
2.
3. For the purposes of
paragraph (2), the term "income-tax paid in Malta" shall be deemed to
include the amount of Malta tax which would, under the laws of Malta and in
accordance with this Agreement, have been payable on any income derived from
sources in Malta had the income not been taxed at a reduced rate or exempted
from Malta tax in accordance with:
a. the Aids to
Industries Ordinance, 1959 and the Industrial Development Act, 1988 in so far
as they were in force on, and have not been modified since, the date of
signature of this Agreement or have been modified only in minor respects so as
not to affect their general character; or
b. any other provisions
in the Income-tax Act (Cap. 123) or in any other legislation which may
subsequently be introduced in Malta in modification of, or in addition to, the
existing special incentive laws so far as they are agreed by the competent
authorities of the Contracting States to be of a substantially similar
character.
1.
2.
3.
4. In the case of Malta,
double taxation shall be eliminated as follows:
Subject
to the provisions of the law of Malta regarding the allowance of a credit
against Malta tax in respect of foreign tax, where, in accordance with the
provisions of this Agreement, there is included in a Malta assessment income
from sources within India the Indian tax on such income shall be allowed as a
credit against the relative Malta tax payable thereon.
1.
2.
3.
4.
5. For the purposes of
the deduction referred to in paragraph (4), the term "Indian tax on such
income" shall be deemed to include any amount which would have been
payable as Indian tax under the laws of India and in accordance with this
Agreement for any year but for an exemption from, or reduction of, tax granted
for that year under:
a. Sections 10(4),
10(4B), 10(6)(viia), 10(15)(iv), 10A, 10B, 80(1A), 80HHC, 80HHD, 80HHE of the
Income-tax Act, 1961 (43 of 1961), so far as they were in force on, and have
not been modified since, the date of the signature of this Agreement, or have
been modified only in minor respects so as not to affect their general
character; or
b. any other provisions
which may be enacted hereafter granting a deduction in computing the taxable
income or an exemption or reduction from tax which the competent authorities of
the Contracting States agree to be for the purposes of the economic development
of India, if it has not been modified thereafter or has been modified only in
minor respects so as not to affect its general character
1.
2.
3.
4.
5.
6. Where the Agreement
provides that income arising in a Contracting State shall be relieved from tax
in that State, either in full or in part, and, under the law in force in the
other Contracting State, such income is subject to tax by reference to the
amount thereof which is remitted to or received in that other State and not by
reference to the full amount thereof, then the relief to be allowed in the
first-mentioned State shall apply only to so much of the income as is remitted
to or received in the other State.
7. Income which, in
accordance with the provisions of this Agreement, is not to be subjected to tax
in a Contracting State, may be taken into account for calculating the rate of
tax to be imposed in that Contracting State.
CHAPTER
V
SPECIAL
PROVISIONS
Article
25
NON-DISCRIMINATION:
1. Nationals of a
Contracting State shall not be subjected in the other Contracting State to any
taxation or any requirement connected therewith which is other or more
burdensome than the taxation and connected requirements to which nationals of
that other State in the same circumstances are or may be subjected. 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.
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 or under the same conditions. This
provision shall not be construed as preventing a Contracting State from charging
the profits of a permanent establishment which an enterprise 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 enterprise of the
first-mentioned Contracting State, nor as being in conflict with the provisions
of paragraph (3) of Article 7 of this Agreement.
3. Except where the
provisions of paragraph (1) of Article 9, paragraph (7) of Article 11, or
paragraph (6) of Article 12 apply, interest, royalties and fees for included
services 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.
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 requirements 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. Nothing in this
Article shall be construed as obliging a Contracting State to grant to
individuals who are resident of the other Contracting State any personal
allowances, reliefs and reductions for tax purposes on account of civil status,
family responsibilities or any other personal circumstances which it grants to
its own residents.
6. In this Article, the
term "taxation" means taxes which are the subject of this Agreement.
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
Agreement, he may, irrespective of the remedies provided by the domestic law 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 the
Agreement.
2. The competent
authority shall endeavour, if the objection appears to it to be justified and
if it is not itself able to arrive at an appropriate solution, to resolve the
case by mutual agreement with the competent authority of the other Contracting
State, with a view to the avoidance of taxation not in accordance with the
Agreement. Any agreement reached shall be implemented notwithstanding any time
limits in the national laws of the Contracting States.
3. The competent
authorities of the Contracting States shall Endeavour to resolve by mutual
agreement any difficulties or doubts arising as to the interpretation or
application of the Agreement. They may also consult together for the
elimination of double taxation in cases not provided for in the Agreement.
4. The competent
authorities of the Contracting States may communicate with each other directly
for the purpose of reaching an agreement in the sense of the preceding
paragraphs. When it seems advisable in order to reach agreement to have an oral
exchange of opinions, such exchange may take place through a commission
consisting of representatives of the competent authorities of the Contracting
States.
Article
27
EXCHANGE
OF INFORMATION:
1.
The
competent authorities of the Contracting States shall exchange such information
as is necessary for carrying out the provisions of this Agreement or of the
domestic laws of the Contracting States concerning taxes covered by the
Agreement insofar as the taxation there under is not contrary to the Agreement
in particular for the prevention of fraud or evasion of such taxes. Any
information received by a Contracting State shall be treated as secret in the
same manner as information obtained under the domestic laws of that State.
However, if the information is originally regarded as secret in the
transmitting State, it shall be disclosed only to persons or authorities
(including courts and administrative bodies) involved in the assessment or
collection of, the enforcement