The specific inclusion of an installation or structure used for the exploration of natural resources as a permanent establishment in the earlier treaty is not contained in the new treaty.
An insurance enterprise of a Contracting State shall, except in regard to re-insurance, be deemed to have a permanent establishment in the other Contracting State if it collects premiums in the territory of that other State or insures risks situated therein through a person other than an agent of an independent status.
In case of exclusions to permanent establishment, the specific reference to „maintenance of a fixed place of business solely for the purpose of advertising, for the supply of information, for scientific research‟ has been deleted and has been replaced by a maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, any other activity of a preparatory or auxiliary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
Article 7 - Business profits:
Backdrop
India had signed an agreement with Norway for the avoidance of double taxation and the prevention of fiscal evasion on 31 December 1986. The said agreement has been terminated and the Government of India has entered into a new agreement with the Government of Norway, which was signed on 2 February 2011. The new agreement will apply to income derived or capital owned on or after 1 April 2012 in case of India and on or after 1 January, 2012 in case of Norway.
Key changes in tax treaty
Article 3 – General Definition:
The definition of „person‟ now includes „body of persons‟
Definition of the term „Enterprise‟ has been provided to state that an „enterprise‟ applies to the carrying on of any business.
Article 4 – Resident:
The term „resident of a Contracting State‟ does not include any person who is liable to tax in that State in respect only of income from sources in that State.
In the case of income derived or paid by a partnership, estate, or trust, the term, would be considered as „resident of a Contracting State‟ only to the extent that the income derived by such partnership, estate, or trust is subject to tax in that State as the income of a resident, either in its hands or in the hands of its partners or beneficiaries.
Article 5 - Permanent establishment:
„a premises used as a sales outlet or for receiving or soliciting orders‟ has been replaced by the term „sale outlet‟
The force of attraction rule in relation to taxation of sales of same or similar kind or other business activities included in the earlier treaty is not contained in the new treaty.
Article 8 - Shipping and air transport:
The earlier treaty had two different articles relating to „Air Transport‟ and „Shipping‟. The same have been clubbed in the new treaty.
Under the new treaty profits derived by: (i) an enterprise of a Contracting State from the operation of ships in international traffic; and (ii) a transportation enterprise which is a resident of a Contracting State from the use, maintenance or rental of containers shall be taxable only in that State. Earlier, 50% of the tax imposed under the internal law of the Contracting State was payable in relation to such activities and the profits subjected to tax in India were capped at 7.5% of the outbound freight income.
The term „operation of aircraft‟ is not defined in the new treaty. The definition in the earlier treaty included the sale of tickets for such transportation on behalf of other enterprises, the incidental lease of aircraft or any other activity directly connected with such transportation.
Interest income earlier qualifying for the treaty benefit in case of operation of aircraft now also qualifies in case of operation from shipping.
Article 9 - Associated enterprise:
The new treaty contains a provision for corresponding adjustments to be made in the other Contracting State.
Article 10 and 11 - Dividends and Interest:
The rate of tax on dividends in the source State has been reduced to 10%. Earlier, dividends with a shareholding of 25% or more attracted tax @ 15% and a 25% rate in other cases.
The rate of tax on interest in the source State has been reduced from 15% to 10%.
Article 12 - Royalties and fees for technical services:
The rate of tax on royalties and technical services arising in the source State has been specified as 10%.
Article 16 - Directors Fees:
The article has been amended by excluding the reference to „remuneration of top level managerial officials‟.
Article 25 - Non-discrimination:
It has been provided that the non-discrimination clause shall not be construed as preventing the source State from charging the profits of a permanent establishment which a company of the residence State has in the source State at a rate of tax which is not more than 10% higher than that imposed on the profits of a similar company of the source State.
Article 27 and 28 - Exchange of information and assistance in collection of taxes:
The new article provides that a Contracting State shall not decline to supply information solely because the information is held by a bank, other financial institution, nominee or person acting in an agency or a fiduciary capacity or because it relates to ownership interests in a person.
The articles relating to assistance in collection of taxes has been redrafted; the new article provides that the competent authorities may by mutual agreement settle the mode of application of the article.
Article 29 – Limitation of benefits:
A new article has been inserted which restricts the benefits under the tax treaty if the primary purpose, or one of the primary purposes, was to obtain the benefits of the tax treaty that would otherwise not have been available.
Source: India-Norway tax treaty (Notification No. 24/2012 dated 19 June 2012
An insurance enterprise of a Contracting State shall, except in regard to re-insurance, be deemed to have a permanent establishment in the other Contracting State if it collects premiums in the territory of that other State or insures risks situated therein through a person other than an agent of an independent status.
In case of exclusions to permanent establishment, the specific reference to „maintenance of a fixed place of business solely for the purpose of advertising, for the supply of information, for scientific research‟ has been deleted and has been replaced by a 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
Article 7 - Business profits:
Backdrop
India had signed an agreement with Norway for the avoidance of double taxation and the prevention of fiscal evasion on 31 December 1986. The said agreement has been terminated and the Government of India has entered into a new agreement with the Government of Norway, which was signed on 2 February 2011. The new agreement will apply to income derived or capital owned on or after 1 April 2012 in case of India and on or after 1 January, 2012 in case of Norway.
Key changes in tax treaty
Article 3 – General Definition:
The definition of „person‟ now includes „body of persons‟
Definition of the term „Enterprise‟ has been provided to state that an „enterprise‟ applies to the carrying on of any business.
Article 4 – Resident:
The term „resident of a Contracting State‟ does not include any person who is liable to tax in that State in respect only of income from sources in that State.
In the case of income derived or paid by a partnership, estate, or trust, the term, would be considered as „resident of a Contracting State‟ only to the extent that the income derived by such partnership, estate, or trust is subject to tax in that State as the income of a resident, either in its hands or in the hands of its partners or beneficiaries.
Article 5 - Permanent establishment:
„a premises used as a sales outlet or for receiving or soliciting orders‟ has been replaced by the term „sale outlet‟
The force of attraction rule in relation to taxation of sales of same or similar kind or other business activities included in the earlier treaty is not contained in the new treaty.
Article 8 - Shipping and air transport:
The earlier treaty had two different articles relating to „Air Transport‟ and „Shipping‟. The same have been clubbed in the new treaty.
Under the new treaty profits derived by: (i) an enterprise of a Contracting State from the operation of ships in international traffic; and (ii) a transportation enterprise which is a resident of a Contracting State from the use, maintenance or rental of containers shall be taxable only in that State. Earlier, 50% of the tax imposed under the internal law of the Contracting State was payable in relation to such activities and the profits subjected to tax in India were capped at 7.5% of the outbound freight income.
The term „operation of aircraft‟ is not defined in the new treaty. The definition in the earlier treaty included the sale of tickets for such transportation on behalf of other enterprises, the incidental lease of aircraft or any other activity directly connected with such transportation.
Interest income earlier qualifying for the treaty benefit in case of operation of aircraft now also qualifies in case of operation from shipping.
Article 9 - Associated enterprise:
The new treaty contains a provision for corresponding adjustments to be made in the other Contracting State.
Article 10 and 11 - Dividends and Interest:
The rate of tax on dividends in the source State has been reduced to 10%. Earlier, dividends with a shareholding of 25% or more attracted tax @ 15% and a 25% rate in other cases.
The rate of tax on interest in the source State has been reduced from 15% to 10%.
Article 12 - Royalties and fees for technical services:
The rate of tax on royalties and technical services arising in the source State has been specified as 10%.
Article 16 - Directors Fees:
The article has been amended by excluding the reference to „remuneration of top level managerial officials‟.
Article 25 - Non-discrimination:
It has been provided that the non-discrimination clause shall not be construed as preventing the source State from charging the profits of a permanent establishment which a company of the residence State has in the source State at a rate of tax which is not more than 10% higher than that imposed on the profits of a similar company of the source State.
Article 27 and 28 - Exchange of information and assistance in collection of taxes:
The new article provides that a Contracting State shall not decline to supply information solely because the information is held by a bank, other financial institution, nominee or person acting in an agency or a fiduciary capacity or because it relates to ownership interests in a person.
The articles relating to assistance in collection of taxes has been redrafted; the new article provides that the competent authorities may by mutual agreement settle the mode of application of the article.
Article 29 – Limitation of benefits:
A new article has been inserted which restricts the benefits under the tax treaty if the primary purpose, or one of the primary purposes, was to obtain the benefits of the tax treaty that would otherwise not have been available.
Source: India-Norway tax treaty (Notification No. 24/2012 dated 19 June 2012
No comments:
Post a Comment