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The Government of Canada and the Government of the
Republic of India, desiring to conclude an Agreement
for the avoidance of double taxation and the prevention
of fiscal evasion with respect to taxes on income and on
capital, have agreed as follows:
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This Agreement shall apply to persons who are residents of
one or both of the Contracting States.
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1. This Agreement shall apply to taxes on income and on
capital imposed on behalf of each Contracting State, irrespective
of the manner in which they are levied.
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2. There shall be regarded as taxes on income and on capital
all taxes imposed on total income, on total capital, or on elements
of income or of capital, including taxes on gains from the
alienation of movable or immovable property.
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3. The existing taxes to which the Agreement shall apply are
in particular:
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(a) in the case of Canada:
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the taxes imposed under the Income Tax Act of Canada
(hereinafter referred to as ``Canadian tax'');
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(b) in the case of India:
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(i) the income tax including any surcharge thereon imposed
under the Income Tax Act,
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(ii) the wealth tax imposed under the Wealth Tax Act,
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(hereinafter referred to as ``Indian tax'').
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4. The Agreement shall apply also to any identical or
substantially similar taxes which are imposed by either
Contracting State after the date of signature of this Agreement in
addition to, or in place of, the existing taxes.
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5. At the end of each year, the Contracting States shall notify
each other of any significant changes which have been made in
their respective taxation laws which are the subject of this
Agreement.
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1. In this Agreement, unless the context otherwise requires:
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(a) the term ``Canada'', used in a geographical sense, means
the territory of Canada, including any area beyond the
territorial seas of Canada which, in accordance with
international law and the laws of Canada, is an area within
which Canada may exercise rights with respect to the seabed
and subsoil and their natural resources;
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(b) the term ``India'', used in a geographical sense, means the
territory of India, including any area beyond the territorial seas
of India which, in accordance with international law and the
laws of India, is an area within which India may exercise rights
with respect to the seabed and subsoil and their natural
resources;
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(c) the terms ``a Contracting State'' and ``the other Contracting
State'' mean, as the context requires, Canada or India;
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(d) the term ``person'' includes an individual, a partnership, a
company and any other entity (including a trust) which is
treated as a taxable unit under the taxation laws of a
Contracting State;
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(e) the term ``company'' means any body corporate or any
entity which is treated as a company or a body corporate under
the taxation laws of a Contracting State;
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(f) the terms ``enterprise of a Contracting State'' and
``enterprise of the other Contracting State'' mean respectively
an enterprise carried on by a resident of a Contracting State
and an enterprise carried on by a resident of the other
Contracting State;
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(g) the term ``competent authority'' means:
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(i) in the case of Canada, the Minister of National Revenue
or his authorized representative,
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(ii) in the case of India, the Central Government in the
Ministry of Finance (Department of Revenue) or its
authorized representative;
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(h) the term ``national'' means:
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(i) any individual possessing the nationality of a
Contracting State,
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(ii) any legal person, partnership and association deriving
its status as such from the law in force in a Contracting
State;
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(i) the term ``tax'' means Canadian tax or Indian tax, as the
context requires, but shall not include any amount payable in
respect of any default or omission in relation to the said taxes
or which represent a penalty imposed relating to those taxes;
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(j) the term ``international traffic'' means any voyage of a ship
or aircraft operated by an enterprise of a Contracting State,
except where the principal purpose of the voyage is to
transport passengers or goods between places in the other
Contracting State.
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2. As regards the application of the Agreement by a
Contracting State, any term not defined in this Agreement shall,
unless the context otherwise requires, have the meaning which it
has under the laws of that Contracting State relating to the taxes
which are the subject of the Agreement.
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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.
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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 in accordance with the following rules:
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(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 (hereinafter referred to as his centre of vital
interests);
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(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;
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(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;
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(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.
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3. Where by reason of the provisions of paragraph 1 a person
other than an individual is a resident of both Contracting States,
the competent authorities of the Contracting States shall by
mutual agreement endeavour to settle the question. In the
absence of such agreement, such person shall not be considered
to be a resident of either Contracting State for the purposes of
enjoying benefits under the Agreement.
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1. For the purposes of this Agreement, the term ``permanent
establishment'' means a fixed place of business through which
the business of an enterprise is wholly or partly carried on.
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2. The term ``permanent establishment'' shall include
especially:
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(a) a place of management;
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(f) a mine, an oil or gas well, a quarry or any other place of
extraction of natural resources;
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(g) a warehouse, in relation to a person providing storage
facilities for others;
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(h) a farm, plantation or other place where agriculture,
forestry, plantation or related activities are carried on;
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(i) a store or premises used as a sales outlet;
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(j) an installation or structure used for the exploration or
exploitation of natural resources, but only if so used for a
period of more than 120 days in any twelve-month period;
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(k) a building site or construction, installation 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) continue for a period of
more than 120 days in any twelve-month period;
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(l) the furnishing of services, other than included services as
defined in Article 12, within a Contracting State by an
enterprise through employees or other personnel, and only if:
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(i) activities of that nature continue within that State for a
period or periods aggregating more than 90 days within
any twelve-month period, or
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(ii) the services are performed within that State for a related
enterprise (within the meaning of paragraph 1 of Article 9).
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3. Notwithstanding the preceding provisions of this Article,
the term ``permanent establishment'' shall be deemed not to
include any one or more of the following:
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(a) the use of facilities solely for the purpose of storage,
display, or occasional delivery of goods or merchandise
belonging to the enterprise;
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(b) the maintenance of a stock of goods or merchandise
belonging to the enterprise solely for the purpose of storage,
display, or occasional delivery;
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(c) the maintenance of a stock of goods or merchandise
belonging to the enterprise solely for the purpose of
processing by another enterprise;
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(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;
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(e) the maintenance of a fixed place of business solely for the
purpose of advertising, for the supply of information, for
scientific research or for other activities which have a
preparatory or auxiliary character, for the enterprise.
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4. Notwithstanding the provisions of paragraphs 1 and 2,
where a person - other than an agent of an independent status
to whom paragraph 5 applies - is acting in a Contracting State
on behalf of an enterprise of the other Contracting State, that
enterprise shall be deemed to have a permanent establishment in
the first-mentioned State if:
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(a) he has and habitually exercises in the first-mentioned State
an authority to conclude contracts on behalf of the enterprise,
unless his activities are limited to those mentioned in
paragraph 3 which, if exercised through a fixed place of
business, would not make that fixed place of business a
permanent establishment under the provisions of that
paragraph;
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(b) 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, and some additional activities conducted in
that State on behalf of the enterprise have contributed to the
sale of the goods or merchandise; or
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(c) he habitually secures orders in the first-mentioned State,
wholly or almost wholly for the enterprise.
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5. An enterprise of a Contracting State shall not be deemed to
have a permanent establishment in the other Contracting State
merely because it carries on business in that other State through
a broker, general commission agent, or any other agent of an
independent status, provided that such persons are acting in the
ordinary course of their business. However, when the activities
of such an agent are devoted wholly or almost wholly on behalf
of that enterprise and the transactions between the agent and the
enterprise are not made under arm's length conditions, he shall
not be considered an agent of independent status within the
meaning of this paragraph.
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6. 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.
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1. Income from immovable property (including income from
agriculture or forestry) may be taxed in the Contracting State in
which such property is situated.
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2. For the purposes of this Agreement, the term ``immovable
property'' shall be defined in accordance with the law and usage
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 and aircraft
shall not be regarded as immovable property.
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3. The provisions of paragraph 1 shall apply to income derived
from the direct use, letting, or use in any other form of immovable
property.
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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.
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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 or has carried 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:
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(a) that permanent establishment; and
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(b) sales of goods and merchandise of the same or similar kind
as those sold, or from other business activities of the same or
similar kind as those effected, through that permanent
establishment.
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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. In any case, where the correct
amount of profits attributable to a permanent establishment is
incapable of determination or the ascertainment thereof presents
exceptional difficulties, the profits attributable to the permanent
establishment may be estimated on a reasonable basis provided
that the result shall be in accordance with the principles laid down
in this Article.
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3. In the determination of the profits of a permanent
establishment, there shall be allowed those deductible expenses
which are incurred for the purposes of the business of the
permanent establishment including executive and general
administrative expenses, whether incurred in the State in which
the permanent establishment is situated or elsewhere as are in
accordance with the provisions of and subject to the limitations
of the taxation laws of that State. However, no such deduction
shall be allowed in respect of amounts, if any, paid (otherwise
than as a reimbursement of actual expenses) by the permanent
establishment to the head office of the enterprise or any of its
other offices, by way of royalties, fees or other similar payments
in return for the use of patents, know-how or other rights, or by
way of commission or other charges, for specific services
performed or for management, or, except in the case of a banking
enterprise, by way of interest on moneys lent to the permanent
establishment. Likewise, no account shall be taken in the
determination of the profits of a permanent establishment, for
amounts charged (otherwise than towards reimbursement of
actual expenses), by the permanent establishment to the head
office of the enterprise or any of its other offices, by way of
royalties, fees or other similar payments in return for the use of
patents, know-how or other rights, or by way of commission or
other charges for specific services performed or for management,
or, except in the case of a banking enterprise, by way of interest
on moneys lent to the head office of the enterprise or any of its
other offices.
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4. Subject to the provisions of paragraph 3, 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.
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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.
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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.
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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.
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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.
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2. Notwithstanding the provisions of paragraph 1 and of
Article 7, profits derived by an enterprise of a Contracting State
from a voyage of a ship or aircraft where the principal purpose of
the voyage is to transport passengers or property between places
in the other Contracting State may be taxed in that other State.
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3. 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 owners or lessees or charterers
of ships or aircraft including:
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(a) the sale of tickets for such transportation on behalf of other
enterprises;
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(b) other activity directly connected with such transportation;
and
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(c) the rental of ships or aircraft incidental to any activity
directly connected with such transportation.
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4. 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.
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5. The provisions of paragraphs 1 and 4 shall also apply to
profits from participation in a pool, a joint business, or an
international operating agency.
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6. For the purposes of this Article, interest on funds connected
with the operation of ships or aircraft in international traffic shall
be regarded as profits derived from the operation of such ships or
aircraft, and the provisions of Article 11 shall not apply in
relation to such interest.
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7. The provisions of this Article shall not apply to a drilling rig
or any vessel the principal function of which is the performance
of activities other than the transportation of goods or passengers.
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1. Where
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(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
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(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,
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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 income 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
income of that enterprise and taxed accordingly.
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2. Where a Contracting State includes in the income of an
enterprise of that State - and taxes accordingly - income on which
an enterprise of the other Contracting State has been charged to
tax in that other State and the income so included is income 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 that
income. 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.
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3. A Contracting State shall not change the income of an
enterprise in the circumstances referred to in paragraph 1 after the
expiry of the time limits provided in its national laws and, in any
case, after five years from the end of the year in which the income
which would be subject to such change would, but for the
conditions referred to in paragraph 1, have accrued to that
enterprise.
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4. The provisions of paragraphs 2 and 3 shall not apply in the
case of fraud, wilful default or neglect.
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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.
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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:
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(a) 15 per cent of the gross amount of the dividends if the
beneficial owner is a company which controls directly or
indirectly at least 10 per cent of the voting power in the
company paying the dividends;
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(b) 25 per cent of the gross amount of the dividends in all other
cases.
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3. The provisions of paragraphs 1 and 2 shall not affect the
taxation of the company on the profits out of which the dividends
are paid.
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4. 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 assimilated to income from shares by
the taxation law of the State of which the company making the
distribution is a resident.
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5. 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.
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6. 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.
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1. Interest arising in a Contracting State and paid to a resident
of the other Contracting State may be taxed in that other State.
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2. However, such interest may also be taxed in the Contracting
State in which it arises and according to the law of that State, but
if the recipient is the beneficial owner of the interest, the tax so
charged shall not exceed 15 per cent of the gross amount of the
interest.
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3. Notwithstanding the provisions of paragraph 2,
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(a) interest arising in a Contracting State and paid to a resident
of the other Contracting State shall be exempt from tax in the
first-mentioned State if:
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(i) the payer of the interest is the Government of that
Contracting State or of a political subdivision or local
authority thereof,
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(ii) the beneficial owner of the interest is the central bank of
the other Contracting State, or
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(iii) the interest is paid to an agency or instrumentality
(including a financial institution) which may be agreed
upon in letters exchanged between the competent
authorities of the Contracting States;
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(b) (i) interest arising in India and paid to a resident of
Canada shall be taxable only in Canada if it is paid in
respect of a loan made, guaranteed or insured, or a credit
extended, guaranteed or insured by the Export
Development Corporation, or
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(ii) interest arising in Canada 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 Export-Import Bank of India
(Exim Bank).
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4. The term ``interest'' as used in this Article means income
from debt-claims of every kind, whether or not secured by
mortgage, and in particular, income from government securities
and income from bonds or debentures, including premiums and
prizes attaching to such securities, bonds or debentures, as well
as income assimilated to income from money lent by the taxation
law of the State in which the income arises. However, the term
``interest'' does not include income dealt with in Article 8 or in
Article 10.
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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 14, as the case may be, shall
apply.
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6. Interest shall be deemed to arise in a Contracting State when
the payer is that State itself, a political subdivision, 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 State in which the permanent
establishment or fixed base is situated.
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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
law of each Contracting State, due regard being had to the other
provisions of this Agreement.
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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.
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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 beneficial owner of
the royalties or fees for included services is a resident of the other
Contracting State, the tax so charged shall not exceed:
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(a) in the case of royalties referred to in sub-paragraph (a) of
paragraph 3 and fees for included services as defined in this
Article (other than services described in sub-paragraph (b) of
this paragraph):
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(i) during the first five taxable years for which this
Agreement has effect,
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(A) 15 per cent of the gross amount of the royalties or
fees for included services as defined in this Article,
where the payer of the royalties or fees is the
Government of that Contracting State, a political
subdivision or a public sector company, and
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(B) 20 per cent of the gross amount of the royalties or
fees for included services in all other cases, and
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(ii) during the subsequent years, 15 per cent of the gross
amount of the royalties or fees for included services; and
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(b) in the case of royalties referred to in sub-paragraph (b) of
paragraph 3 and fees for included services as defined in this
Article that are ancillary and subsidiary to the enjoyment of
the property for which payment is received under paragraph
3(b) of this Article, 10 per cent of the gross amount of the
royalties or fees for included services.
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3. The term ``royalties'' as used in this Article means:
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(a) payment 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
information concerning industrial, commercial or scientific
experience, including gains derived from the alienation of any
such right or property which are contingent on the
productivity, use, or disposition thereof; and
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(b) payments of any kind received as consideration for the use
of, or the right to use, any industrial, commercial, or scientific
equipment, other than payments derived by an enterprise
described in paragraph 1 of Article 8 from activities described
in paragraph 3(c) or 4 of Article 8.
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4. For the purposes of this Article, ``fees for included services''
means payments of any kind to any person in consideration for
the rendering of any technical or consultancy services (including
through the provision of services of technical or other personnel)
if such services:
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(a) are ancillary and subsidiary to the application or
enjoyment of the right, property or information for which a
payment described in paragraph 3 is received; or
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(b) make available technical knowledge, experience, skill,
know-how, or processes or consist of the development and
transfer of a technical plan or technical design.
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5. Notwithstanding paragraph 4, ``fees for included services''
does not include amounts paid:
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(a) for services that are ancillary and subsidiary, as well as
inextricably and essentially linked, to the sale of property
other than a sale described in paragraph 3(a);
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(b) for services that are ancillary and subsidiary to the rental
of ships, aircraft, containers or other equipment used in
connection with the operation of ships or aircraft in
international traffic;
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(c) for teaching in or by educational institutions;
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(d) for services for the personal use of the individual or
individuals making the payment; or
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(e) to an employee of the person making the payments or to
any individual or firm of individuals (other than a company)
for professional services as defined in Article 14.
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6. 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 the fees for
included 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 right,
property or contract 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 a case the
provisions of Article 7 or Article 14, as the case may be, shall
apply.
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7. Royalties and fees for included services shall be deemed to
arise in a Contracting State when the payer is that State itself, a
political subdivision, a local authority or a resident of that State.
Where, however, the person paying the royalties or the fees for
included 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 obligation to pay the
royalties or the fees for included services was incurred, and such
royalties or fees for included services are borne by that permanent
establishment or fixed base, then such royalties or fees for
included services shall be deemed to arise in the Contracting
State in which the permanent establishment or fixed base is
situated.
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8. 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, information or services
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 that 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.
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1. Gains from the alienation of ships or aircraft operated in
international traffic by an enterprise of a Contracting State and
movable property pertaining to the operation of such ships or
aircraft shall be taxable only in that State.
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2. Gains from the alienation of any property, other than those
referred to in paragraph 1, may be taxed in both Contracting
States.
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1. Income derived by an individual or a firm of individuals
(other than a company) who is 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. However,
in the following circumstances such income may be taxed in the
other Contracting State, that is to say:
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(a) if he has or had 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; or
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(b) if his stay in the other Contracting State is for a period or
periods amounting to or exceeding in the aggregate 183 days
in the relevant fiscal year; or
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(c) if the remuneration for the services in the other Contracting
State is either derived from residents of that other Contracting
State or is borne by a permanent establishment which a person
not resident in that other Contracting State has in that other
Contracting State and such remuneration exceeds two
thousand five hundred Canadian dollars ($2,500) or its
equivalent in Indian currency in the relevant fiscal year.
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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.
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1. Subject to the provisions of Articles 16, 18 and 19, 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.
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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:
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(a) the recipient is present in the other Contracting State for a
period or periods not exceeding in the aggregate 183 days in
the relevant fiscal year;
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(b) the remuneration is paid by, or on behalf of, an employer
who is not a resident of the other State; and
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(c) the remuneration is not borne by a permanent
establishment or a fixed base which the employer has in the
other State.
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3. Notwithstanding the preceding provisions of this Article,
remuneration 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 in that State.
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Directors' fees and other similar payments derived by a
resident of a Contracting State in his capacity as a member of the
board of directors or a similar organ of a company which is a
resident of the other Contracting State may be taxed in that other
State.
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1. Notwithstanding the provisions of Articles 7, 14 and 15,
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 an athlete, from his personal activities as
such exercised in the other Contracting State, may be taxed in that
other State.
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2. Where income in respect of personal activities exercised in
a Contracting State by an entertainer or an athlete accrues not to
the entertainer or athlete himself but to another person which
provides the activities in that State, that income may,
notwithstanding the provisions of Articles 7, 14 and 15, be taxed
in that Contracting State unless the entertainer, athlete, or other
person establishes that neither the entertainer or athlete nor
persons related thereto participate directly or indirectly in the
profits of that other person in any manner, including the receipt
of deferred remuneration, bonuses, fees, dividends, partnership
distributions, or other distributions.
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3. The provisions of paragraphs 1 and 2 shall not apply if the
visit to a Contracting State of the entertainer or the athlete is
directly or indirectly supported, wholly or substantially, from the
public funds of the other Contracting State, including any
political subdivision, local authority or statutory body of that
other State.
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1. Pensions arising in a Contracting State shall be taxable only
in that State.
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2. Pensions shall be deemed to arise in a Contracting State
when the payer is that State itself, a political subdivision, a local
authority or a resident of that State.
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1. (a) Salaries, wages and similar remuneration, other than a
pension, paid by a Contracting State or a political subdivision
or a local authority thereof to an individual in respect of
services rendered to that State or subdivision or authority, in
any other State (including the other Contracting State) shall be
taxable only in the first-mentioned State.
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(b) However, such salaries, wages or similar 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 other State who:
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(i) is a national of that other State; or
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(ii) did not become a resident of that other State solely for
the purpose of rendering the services.
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2. The provisions of paragraph 1 shall not apply to salaries,
wages and similar remuneration in respect of services rendered
in connection with a business carried on by a Contracting State
or a political subdivision or a local authority thereof.
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Payments which a student, apprentice or business trainee 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 solely for the purpose of his education or
training receives for the purpose of his maintenance, education
or training shall not be taxed in the first-mentioned State,
provided that such payments are made to him from sources
outside that State.
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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.
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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.
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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, and arising in the other Contracting
State, may be taxed in that other State. However, in the case of
income derived from an estate or a trust (other than a trust to
which contributions were deductible for tax purposes), the tax so
charged shall, provided that the income is taxable in the
Contracting State in which the beneficiary is a resident, not
exceed 15 per cent of the gross amount of the income.
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1. Capital represented by ships and aircraft operated by a
resident of a Contracting State in international traffic and by
movable property pertaining to the operation of such ships and
aircraft shall be taxable only in that State.
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2. All other elements of capital of a resident of a Contracting
State may be taxed in both Contracting States.
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1. The laws in force in either of the Contracting States will
continue to govern the taxation of income in the respective
Contracting States except where provisions to the contrary are
made in this Agreement.
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2. In the case of Canada, double taxation shall be avoided as
follows:
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(a) Subject to the existing provisions of the law of Canada
regarding the deduction from tax payable in Canada of tax
paid in a territory outside Canada and to any subsequent
modification of those provisions - which shall not affect the
general principle hereof - and unless a greater deduction or
relief is provided under the laws of Canada, tax payable in
India on profits, income or gains arising in India shall be
deducted from any Canadian tax payable in respect of such
profits, income or gains.
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(b) Subject to the existing provisions of the law of Canada
regarding the determination of the exempt surplus of a foreign
affiliate and to any subsequent modification of those
provisions - which shall not affect the general principle
hereof - for the purpose of computing Canadian tax, a
company which is a resident of Canada shall be allowed to
deduct in computing its taxable income any dividend received
by it out of the exempt surplus of a foreign affiliate which is
a resident of India.
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(c) Where a resident of Canada owns capital which, in
accordance with the provisions of the Agreement may be
taxed in India, Canada shall allow as a deduction from the tax
on capital of that resident an amount equal to the capital tax
paid in India. Such deduction shall not, however, exceed that
part of the capital tax (as computed before the deduction is
given) which is attributable to the capital which may be taxed
in India.
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(d) Where in accordance with any provision of the Agreement
income derived or capital owned by a resident of Canada is
exempt from tax in Canada, Canada may nevertheless, in
calculating the amount of tax on the remaining income or
capital of such resident, take into account the exempted
income or capital.
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3. In the case of India, double taxation shall be avoided as
follows:
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(a) The amount of Canadian tax paid, under the laws of
Canada and in accordance with the provisions of the
Agreement, whether directly or by deduction, by a resident of
India, in respect of income from sources within Canada which
has been subjected to tax both in India and Canada shall be
allowed as a credit against the Indian tax payable in respect of
such income but in an amount not exceeding that proportion
of Indian tax which such income bears to the entire income
chargeable to Indian tax.
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(b) Where a resident of India owns capital, which, in
accordance with the provisions of the Agreement, may be
taxed in Canada, India shall allow as a deduction from the tax
on the capital of that resident an amount equal to the capital tax
paid in Canada. Such deduction shall not, however, exceed
that part of the capital tax (as computed before the deduction
is given) which is attributable to the capital which may be
taxed in Canada.
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Provided that income which in accordance with the provisions of
the Agreement is not to be subjected to tax may be taken into
account in calculating the rate of tax imposed.
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4. For the purposes of paragraph 2(a), the term ``tax payable
in India'' shall, with respect to a company which is a resident of
Canada, be deemed to include any amount which would have
been payable as Indian tax but for a deduction allowed in
computing the taxable income or an exemption or reduction of
tax granted for that year under:
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(a) sections 10(15)(iv), 10A, 32A (but not the part dealing
with ships and aircraft), 80HH, 80HHD and 80IA (but not the
part dealing with ships) of the Income Tax Act, 1961, as
amended, so far as they were in force on and have not been
modified since the date of signature of the Agreement, or have
been modified only in minor respects so as not to affect their
general character; or
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(b) any other provision which may subsequently be made
granting an exemption or reduction from tax which is agreed
by the competent authorities of the Contracting States to be of
a substantially similar character, if it has not been modified
thereafter or has been modified only in minor respects so as
not to affect its general character.
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Provided that relief from Canadian tax shall not be given by
virtue of this paragraph in respect of income from any source if
the income relates to a period starting more than ten fiscal years
after the exemption from, or reduction of, Indian tax is first
granted to the resident of Canada, in respect of that source.
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5. For the purposes of this Article, profits, income or gains of
a resident of a Contracting State which are taxed in the other
Contracting State in accordance with the Agreement shall be
deemed to arise from sources in that other State.
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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.
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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.
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3. Nothing in this Article shall be construed as obliging a
Contracting State to grant to residents of the other Contracting
State any personal allowances, reliefs and reductions for taxation
purposes on account of civil status or family responsibilities
which it grants to its own residents.
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4. (a) Nothing in this Agreement shall be construed as
preventing Canada from imposing on the earnings of a
company, which is a resident of India, attributable to a
permanent establishment in Canada, a tax in addition to the tax
which would be chargeable on the earnings of a company
which is a national of Canada, provided that any additional tax
so imposed shall not exceed the rate specified in subparagraph
2(a) of Article 10 of the amount of such earnings which have
not been subjected to such additional tax in previous taxation
years. For the purpose of this provision, the term ``earnings''
means the profits attributable to a permanent establishment in
Canada in a year and previous years after deducting therefrom
all taxes, other than the additional tax referred to herein,
imposed on such profits by Canada.
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The provisions of this subparagraph shall also apply with
respect to earnings from the disposition of immovable
property situated in Canada by a company carrying on a trade
in immovable property without a permanent establishment in
Canada but only insofar as these earnings may be taxed in
Canada under the provisions of Article 6 or paragraph 1 of
Article 13.
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(b) A company which is a resident of Canada may be subject
to tax in India at a rate higher than that applicable to Indian
domestic companies. The difference in tax rate shall not,
however, exceed 15 percentage points.
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5. 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 State to any taxation or any
requirement connected therewith which is other or more
burdensome than the taxation and connected requirements to
which other similar enterprises of the first-mentioned State, the
capital of which is wholly or partly owned or controlled, directly
or indirectly, by one or more residents of a third State, are or may
be subjected.
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6. In this Article, the term ``taxation'' means taxes which are
the subject of this Agreement.
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1. Where a resident of a Contracting State 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 in writing to
the competent authority of the Contracting State of which he is
a resident. The case must be presented within two years from the
first notification of the action which gives rise to taxation not in
accordance with the Agreement.
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2. The competent authority referred to in paragraph 1 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 Agreement.
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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.
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4. The competent authorities of the Contracting States may
consult together for the elimination of double taxation in cases
not provided for in the Agreement.
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1. The competent authorities of the Contracting States shall
exchange such information as is necessary for the carrying out of
this Agreement or of the domestic laws of the Contracting States
(including the provisions thereof dealing with the prevention of
fiscal evasion or fraud) concerning taxes covered by the
Agreement insofar as the taxation thereunder is not contrary to
the Agreement. The exchange of information is not restricted by
Article 1. 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 and shall be disclosed only
to persons or authorities (including courts and administrative
bodies) involved in the assessment or collection of, the
enforcement in respect of, or the determination of appeals in
relation to, the taxes covered by the Agreement. Such persons or
authorities shall use the information only for such purposes.
They may disclose the information in public court proceedings
or in judicial decisions.
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2. In no case shall the provisions of paragraph 1 be construed
so as to impose on a Contracting State the obligation:
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(a) to carry out administrative measures at variance with the
laws and the administrative practice of that or of the other
Contracting State;
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(b) to supply information which is not obtainable under the
laws or in the normal course of the administration of that or of
the other Contracting State;
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(c) to supply information which would disclose any trade,
business, industrial, commercial or professional secret or trade
process, or information, the disclosure of which would be
contrary to public policy (ordre public).
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3. If information is requested by a Contracting State in
accordance with the provisions of this Article, the other
Contracting State shall endeavour to obtain the information to
which the request relates in the same way as if its own taxation
was involved notwithstanding the fact that the other State does
not, at that time, need such information. If specifically requested
by the competent authority of a Contracting State, the competent
authority of the other Contracting State shall endeavour to
provide information under this Article in the form requested,
such as depositions of witnesses and copies of unedited original
documents (including books, papers, statements, records,
accounts or writings), to the same extent such depositions and
documents can be obtained under the laws and administrative
practices of that other State with respect to its own taxes.
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Nothing in this Agreement shall affect the fiscal privileges of
diplomatic agents or consular officers under the general rules of
international law or under the provisions of special agreements.
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1. The provisions of this Agreement shall not be construed to
restrict in any manner any exclusion, exemption, deduction,
credit or other allowance now or hereafter accorded by the laws
of a Contracting State in the determination of the tax imposed by
that State.
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2. The competent authorities of the Contracting States may
communicate with each other directly for the purpose of
applying the Agreement.
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3. With respect to paragraph 3 of Article XXII of the General
Agreement on Trade in Services, the Contracting States agree
that, notwithstanding that paragraph, any dispute between them
as to whether a measure relating to a tax to which any provision
of this Agreement applies falls within the scope of this
Agreement may be brought before the Council for Trade in
Services, as provided by that paragraph, only with the consent of
both Contracting States.
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1. The Governments of the Contracting States shall notify
each other that the constitutional requirements for the entry into
force of this Agreement have been complied with.
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2. The Agreement shall enter into force upon the date of the
later of the notifications referred to in paragraph 1 and its
provisions shall have effect:
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(i) in respect of tax withheld at the source on amounts paid
or credited to non-residents on or after the first day of
January in the calendar year next following that in which
the Agreement enters into force, and
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(ii) in respect of other Canadian tax for taxation years
beginning on or after the first day of January in the calendar
year next following that in which the Agreement enters into
force;
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(i) in respect of income arising in any taxable year
beginning on or after the first day of April in the calendar
year next following that in which the Agreement enters into
force, and
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(ii) in respect of capital which is held at the end of any fiscal
year beginning on or after the first day of April in the
calendar year next following that in which the Agreement
enters into force.
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3. The provisions of the Agreement between the Government
of India and the Government of Canada for the avoidance of
double taxation and the prevention of fiscal evasion with respect
to taxes on income signed at New Delhi on the 30th day of
October, 1985 (hereinafter referred to as ``the 1985 Agreement'')
shall cease to have effect with respect to taxes to which this
Agreement applies in accordance with the provisions of
paragraph 2.
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4. The 1985 Agreement shall terminate on the last day on
which it has effect in accordance with the foregoing provisions
of this Article.
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This Agreement shall continue in effect indefinitely but either
Contracting State may, on or before June 30 in any calendar year
after the expiry of five years from the year in which it enters into
force, give notice of termination to the other Contracting State
and in such event, the Agreement shall cease to have effect:
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(i) in respect of tax withheld at the source on amounts paid
or credited to non-residents on or after the first day of
January in the next following calendar year, and
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(ii) in respect of other Canadian tax for taxation years
beginning on or after the first day of January in the next
following calendar year;
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(i) in respect of income arising in any taxable year
beginning on or after the first day of April in the next
following calendar year, and
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(ii) in respect of capital which is held at the end of any fiscal
year beginning on or after the first day of April in the next
following calendar year.
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IN WITNESS WHEREOF the undersigned, duly authorized
to that effect, have signed this Agreement.
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DONE in duplicate at Delhi, this 11th day of January 1996, in
the English, French and Hindi languages, each version being
equally authentic.
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FOR THE GOVERNMENT OF CANADA:
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Roy MacLaren
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FOR THE GOVERNMENT OF THE REPUBLIC OF INDIA:
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Manmohan Singh
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At the signing of the Agreement between the Government of
Canada and the Government of the Republic of India for the
Avoidance of Double Taxation and the Prevention of Fiscal
Evasion with respect to Taxes on Income and on Capital, the
undersigned have agreed upon the following provisions which
shall be an integral part of the Agreement:
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1. It is understood that the term ``fiscal year'' in relation to
Indian tax, means ``previous year'' as defined in the Income Tax
Act, 1961.
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2. It is understood that the provisions of paragraph 1 of Article
6 also apply to income, other than capital gains, derived from the
alienation of immovable property.
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3. It is understood that where an enterprise of a Contracting
State has a permanent establishment in the other Contracting
State in accordance with the provisions of paragraphs 2(j), 2(k)
or 2(l) of Article 5, and the time period referred to in that
paragraph extends over two taxable years, a permanent
establishment shall not be deemed to exist in a year, if any, in
which the use, site, project or activity, as the case may be,
continues for a period or periods aggregating less than 30 days
in that taxable year. A permanent establishment will exist in the
other taxable year, and the enterprise will be subject to tax in that
other Contracting State in accordance with the provisions of
Article 7, but only on income arising during that other taxable
year.
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4. With reference to Article 13, it is understood that the term
``alienation'' includes a ``transfer'' within the meaning of Indian
taxation laws.
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5. It is understood that nothing in the Agreement shall be
construed as preventing a Contracting State from imposing a tax
on amounts included in the income of a resident of that
Contracting State with respect to a partnership, trust, or
controlled foreign affiliate, in which he has an interest.
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IN WITNESS WHEREOF the undersigned, duly authorized
to that effect, have signed this Protocol.
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DONE in duplicate at Delhi, this 11th day of January 1996, in
the English, French and Hindi languages, each version being
equally authentic.
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FOR THE GOVERNMENT OF CANADA:
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Roy MacLaren
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FOR THE GOVERNMENT OF THE REPUBLIC OF INDIA:
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Manmohan Singh
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