JUAN CARLOS I
KING OF SPAIN
Since on 8 February 1993 the Plenipotentiary of Spain signed in New Delhi, together with the Plenipotentiary of the Republic of India, both of whom were appointed in good and due form to that effect, the Convention between the Kingdom of Spain and the Republic of India to prevent double taxation and to prevent tax evasion in respect of income taxes and assets and protocol.
Having regard to and examined the thirty-one articles of the Convention and the protocol forming an integral part thereof,
Granted by the Cortes Generales the authorization provided for in article 94.1 of the Constitution,
I come to approve and ratify what is provided for in it, as I hereby approve and ratify it, promising to comply with it, to observe it and to ensure that it is implemented and observed in a timely manner in all its parts, to the end of which, for further validation and firmness, I command to issue an instrument of ratification signed by me, duly sealed and endorsed by the undersigned Minister for Foreign Affairs.
Done at Madrid at 25 October 1994.
JUAN CARLOS R.
The Minister for Foreign Affairs,
JAVIER SOLANA MADARIAGA
[heading] CONVENTION BETWEEN THE KINGDOM OF SPAIN AND THE REPUBLIC OF INDIA TO AVOID DOUBLE IMPOSITION AND PREVENT TAX EVASION ON RENT AND PATRIMONY TAX
The Government of the Kingdom of Spain and the Government of the Republic of India, wishing to conclude an agreement to prevent double taxation and to prevent tax evasion in respect of income and property taxes, have agreed as follows:
Article 1. Personal scope.
This Convention applies to persons resident in one or both Contracting States.
Article 2. Taxes covered.
1. This Convention applies to income and property taxes payable by each of the Contracting States, irrespective of the system of their levy.
2. Income and property taxes are those that tax all or any part of the income or property, including taxes on profits arising from the disposal of movable or immovable property, taxes on the amount of wages or salaries paid by enterprises, as well as taxes on capital gains.
3. The current taxes to which this Convention specifically applies are:
(a) In Spain:
(i) Personal Income Tax.
(ii) Corporate Tax.
(iii) Property tax (hereinafter referred to as the Spanish tax).
(b) In India:
(i) Income tax, including surcharges.
(ii) Complementary Tax; and
(iii) Property tax (hereinafter referred to as the Indian tax).
4. The Convention shall also apply to taxes of an identical or similar nature which are established after the date of signature of the Convention and which are added to or replaced by existing taxes. The competent authorities of the Contracting States shall communicate any substantive changes made to their respective tax laws.
Article 3. General definitions.
1. In this Convention, unless its context indicates a different interpretation:
(a) The term 'Spain' refers to the territory of Spain and includes the territorial sea and the airspace which covers it. The term also includes any other maritime area in which Spain has rights of sovereignty, other rights or jurisdiction, in accordance with Spanish law and in accordance with international law.
(b) The term ‘India’ refers to the territory of India and includes the territorial sea and the airspace it covers. The term also covers any other maritime area in which India has rights of sovereignty, other rights or jurisdiction, under Indian law and in accordance with international law.
(c) The terms ‘one Contracting State’ and ‘the other Contracting State’ mean Spain or India, depending on the context.
(d) The term ‘tax’ means ‘Spanish tax’ or ‘Indian tax’, depending on the context.
(e) The term ‘person’ means natural persons, companies, groups of persons and any other entity concerned as a unit for tax purposes under the tax legislation in force in the respective Contracting State.
(f) the term 'company' means any legal person or any entity having the status of a corporation or legal person under the tax law in force in the respective Contracting State.
(g) The terms ‘undertaking of one Contracting State’ and ‘undertaking of the other Contracting State’ mean, respectively, an undertaking operated by a resident of one Contracting State and an undertaking operated by a resident of the other Contracting State.
(h) The term ‘national’ means:
(i) Any natural person possessing the nationality of a contracting State.
(ii) any legal person, partnership or association established in accordance with the law in force in a Contracting State.
(i) “International traffic” means any transport by a ship or aircraft operated by an undertaking of a Contracting State, except where the operation of the ship or aircraft is limited to points situated in the other Contracting State.
(j) ‘competent authority’ means:
(i) With regard to Spain, the Minister of Economy and Finance or his authorized representative.
(ii) With regard to India, the Central Government in the Ministry of Finance (Department of Revenue) or its authorized representative.
2. For the purposes of the application of this Convention by a Contracting State, any expression not defined in this Convention shall have, unless its context indicates a different interpretation, the meaning attributed to it by the law of that Contracting State concerning the taxes which are the subject of the Convention.
Article 4. Resident.
1. For the purposes of this Convention the term ‘resident of a Contracting State’ means any person who, under the law of that State, is subject to taxation in that State by reason of his domicile, residence, place of address or any other criterion of a similar nature. However, this term does not include persons who are subject to taxation in that State solely on the income they obtain from sources located in that State or on the property situated therein.
2. Where, under the provisions of paragraph 1, a natural person is resident in both Contracting States, his or her situation shall be resolved as follows:
(a) Such person shall be considered a resident of the Contracting State where he or she has a permanent dwelling at his or her disposal. If you have permanent housing at your disposal in both Contracting States, you will be considered a resident of the State with which you have closer personal and economic relations (centre of vital interests).
(b) If the Contracting State in which that person has a centre of vital interests cannot be determined, or if he does not have permanent housing at his disposal in any of the States, he shall be considered a resident of the Contracting State in which he habitually lives.
(c) If he habitually lives in both Contracting States or does not live in either Contracting State, he or she shall be considered a resident of the State of which he or she is a national.
(d) If he is a national of either Contracting State or is not a national of either Contracting State, the competent authorities of the two Contracting States shall decide the case by mutual agreement.
3. Where under the provisions of paragraph 1 a person who is not a natural person is a resident of both Contracting States, he or she shall be considered a resident of the State in which his or her place of effective management is located.
Article 5. Permanent establishment.
1. For the purposes of this Agreement, the term ‘permanent establishment’ means a fixed place of business through which an undertaking carries out all or part of its activity.
2. The term ‘permanent establishment’ includes in particular:
(a) Management offices.
(b) Branches.
(c) Offices.
(d) Factories.
(e) Workshops.
(f) Mines, oil or gas wells, quarries or any other natural resource extraction site.
(g) A warehouse in relation to a person transferring storage facilities to third parties.
(h) A farm, plantation or other place where agricultural, forestry, cultivation or other related activities are carried out.
(i) A premises used as a sales office.
(j) An installation or structure used for the exploration or exploitation of natural resources, but only when used for a period exceeding three months.
(k) A work or construction, installation or assembly project, or monitoring activities relating thereto, where such works, projects or activities (together with other works, projects or activities, if any) last more than six months within any twelve-month period, or where the project or monitoring activity, being accessories to a sale of machinery or equipment, has a duration not exceeding six months and the amounts to be paid for them exceed 10 per 100 of the sale price of the machinery or equipment.
However, for the purposes of this paragraph, an undertaking shall be deemed to have a permanent establishment in a Contracting State and to carry out activities through that State if it provides services or facilities in connection with the prospecting, extraction or production of hydrocarbons in that State, or leases machinery or equipment used, or to be used, in such activities in that State where the duration of the activities exceeds thirty days in any twelve-month period.
3. Notwithstanding the previous provisions of this Article, it is considered that the term ‘permanent establishment’ does not include:
(a) The use of facilities for the sole purpose of storing or displaying goods or goods belonging to the undertaking.
(b) The maintenance of a warehouse of goods or goods belonging to the undertaking for the sole purpose of storing or displaying them.
(c) The maintenance of a deposit of goods or goods belonging to the undertaking for the sole purpose of processing by another undertaking.
(d) The maintenance of a fixed place of business for the sole purpose of purchasing goods or goods or collecting information for the enterprise.
(e) The maintenance of a fixed place of business for the sole purpose of advertising, providing information, conducting scientific research, or similar activities of a preparatory or auxiliary nature for the enterprise.
4. By way of derogation from paragraphs 1 and 2, where a person, other than an agent enjoying an independent status to which paragraph 5 applies, is acting in a Contracting State on behalf of an undertaking of the other Contracting State, that undertaking shall be deemed to have a permanent establishment in the State referred to above if:
(a) Such a person normally holds and exercises powers in that State to conclude contracts on behalf of the undertaking, unless his activities are limited to the purchase of goods or goods for the undertaking.
(b) The said person, without having such powers, maintains in the State mentioned above in the first place a deposit of goods or goods from which he regularly delivers on behalf of the undertaking.
5. An undertaking of one Contracting State shall not be considered to have a permanent establishment in the other Contracting State merely because it carries out its activities in that other State through a broker, a general commissioner or any other agent enjoying an independent status, provided that such persons act within the ordinary framework of their activity. However, where the activities of such agents are carried out exclusively, or almost exclusively, on behalf of that undertaking, or on behalf of that undertaking and other undertakings which control it, are controlled by it, or are subject to common control, such agents shall not be considered independent for the purposes of this paragraph.
6. The fact that a company resident of a Contracting State controls or is controlled by a company resident of the other Contracting State or that carries out activities in that other State (either through a permanent establishment or otherwise) does not in itself make any such company a permanent establishment of the other State.
Article 6. Income from immovable property.
1. The income that a resident of one Contracting State obtains from immovable property (including income from agricultural or forestry holdings) located in the other Contracting State may be taxed in that other State.
2. The term ‘real property’ shall have the meaning attributed to it by the law of the Contracting State in which the property in question is situated. In any event, this term includes accessories, the use of immovable property and the right to receive variable or fixed payments for the exploitation or concession of the exploitation of mineral deposits, sources and other natural resources. Ships, vessels and aircraft shall not be considered as immovable property.
3. The provisions of paragraph 1 apply to income derived from direct use, lease or shareholding, as well as any other form of exploitation of immovable property.
4. The provisions of paragraphs 1 and 3 also apply to income derived from the immovable property of an undertaking and from immovable property used for the provision of independent personal services.
Article 7. Business profits.
1. The profits of an undertaking in one Contracting State may be taxed only in that state, unless the undertaking carries out its business in the other Contracting State by means of a permanent establishment situated therein. If the company carries out its business in that way, the profits of the company may be taxed in the other State, but only in the part attributable to: (a) that permanent establishment; (b) sales of goods or goods identical or similar to those sold through that permanent establishment, carried out in that other State; or (c) other business activities of a nature identical or similar to those of the permanent establishment, carried out in that other State.
2. Without prejudice to paragraph 3, where an undertaking of a Contracting State carries out its business in the other Contracting State by means of a permanent establishment situated therein, in each Contracting State the profits it could have derived from being a separate undertaking carrying out the same or similar activities under the same or similar conditions shall be attributed to that establishment and shall deal entirely independently with the undertaking from which it is a permanent establishment.
3. In order to determine the benefit of the permanent establishment, the deduction of expenses incurred for the purposes of the permanent establishment, including management and general administrative expenses, research and development expenses, interest and other expenses of a similar nature incurred for the same purposes, shall be permitted, whether incurred in the State where the permanent establishment is located or elsewhere, in accordance with and within the limits provided for in the tax legislation of that State. However, payments (other than reimbursement of actual expenses) made by the permanent establishment to the head office of the undertaking or to one of its branches, in the form of royalties, fees or other similar payments, for the use of patents, technical information or other rights, or for commissions or other charges for the provision of specific services or for management services, or except in the case of a bank, as interest on amounts provided to the permanent establishment, shall not be deductible. Similarly, no account shall be taken in determining the benefit of the permanent establishment, the amounts (other than reimbursement of actual expenses) charged by the permanent establishment to the head office of the undertaking or to one of its branches for fees, fees or similar payments for the use of patents, technical information or other rights, or for commissions or other charges for the provision of specific services or for management services, or except in the case of a bank, for interest on amounts provided to the head office of the undertaking or to any of its branches.
4. No benefit shall be attributed to a permanent establishment merely because it buys goods or goods for the undertaking.
5. For the purposes of the preceding paragraphs, the profits attributable to the permanent establishment shall be calculated each year by the same method, unless there are valid and sufficient grounds for proceeding otherwise.
6. Where profits include income regulated separately in other articles of this Convention, the provisions of those articles shall not be affected by those of this Article.
Article 8. Air navigation.
1. The profits that a company of a Contracting State obtains from the operation of aircraft in international traffic can only be taxed in that State.
2. The provisions of paragraph 1 also apply to profits from participation in a pool in a joint venture or in an international operating body.
3. The term ‘aircraft operation’ refers to the air transport of passengers, correspondence, livestock or goods carried out by the owners, tenants or charterers of aircraft, including the sale of tickets for such transport on behalf of other undertakings, the occasional leasing of aircraft and any other activity directly related to such transport.
Article 9. Maritime navigation.
1. The profits that an undertaking of a Contracting State obtains from the operation of ships in international traffic can only be taxed in that State.
2. The provisions of paragraph 1 also apply to profits arising from participation in a pool, in a joint venture or in an international organisation engaged in the operation of vessels.
3. For the purposes of this article, the profits from the operation of ships include the benefits arising from the use, maintenance or lease of containers (including trucks and equipment necessary for the transport of containers), in connection with the transport of goods or goods in international traffic.
Article 10. Associated enterprises.
When:
(a) An undertaking of a Contracting State participates directly or indirectly in the direction, control or capital of an undertaking of the other Contracting State; or
(b) The same persons participate directly or indirectly in the direction, control or capital of an undertaking of a Contracting State and of an undertaking of the other Contracting State,
and, in either case, the two companies are, in their commercial or financial relations, bound by accepted or imposed conditions which differ from those to be agreed by independent undertakings, the profits that would have been obtained by one of the companies in the absence of these conditions, and which in fact have not occurred because of them, may be included in the profits of that undertaking and subject to taxation accordingly.
Article 11. Dividends.
1. Dividends paid by a company resident of one 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 in which the company paying the dividends resides and in accordance with the law of that State, but if the recipient of the dividends is its beneficial owner, the tax thus required may not exceed 15 per 100 of the gross amount of the dividends.
This paragraph does not affect the company's taxation of the profits from which dividends are paid.
3. The term ‘dividends’ used in this Article means the income from shares or other rights, except credit rights, which permit participation in profits, as well as the income from other social shares subject to the same tax regime as the income from shares under the legislation of the State in which the company distributing them resides.
4. The provisions of paragraphs 1 and 2 do not apply if the beneficial owner of the dividends, resident of one Contracting State, performs in the other Contracting State, of which the company paying the dividends is resident, an industrial or commercial activity through a permanent establishment situated therein, or provides independent personal services through a fixed base situated therein, and the share generated by the dividends is effectively linked to such permanent establishments or fixed base. In such cases, the provisions of article 7 or article 15, as appropriate, apply.
5. Where a company resident of one Contracting State obtains profits or income from the other Contracting State, that other State may not levy any tax on dividends paid by the company, except to the extent that such dividends are paid to a resident of that other State or the share generated by the dividends is effectively linked to a permanent establishment or a fixed base located in that other State, or subject the undistributed profits of the company to a tax on them, even if the dividends paid or the undistributed profits consist, in whole or in part, of profits or income from that other State.
Article 12. Interest.
1. Interest from one Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.
2. However, such interest may also be taxed in the Contracting State from which it comes and in accordance with the law of that State, but if the recipient of the interest is its beneficial owner, the tax thus required may not exceed 15 per cent of the gross amount of interest.
3. By way of derogation from paragraph 2:
(a) Interest from a Contracting State is exempt from taxation in that State where its beneficial owner and beneficial owner is:
(i) The Government, a political subdivision or a local entity of the other contracting State; or
(ii) The Central Bank of the other Contracting State.
(b) Interest from a Contracting State is exempt from taxation in that State to the extent that it is authorized by the Government of that State where its recipient and beneficial owner is a person (other than those referred to in point (a)); resident of the other Contracting State, provided that the transaction giving rise to the debit has been authorized for that purpose by the Government of the Contracting State referred to first.
4. The term ‘interest’ used in this Article means income from claims of any kind, with or without a mortgage guarantee or a benefit-sharing clause of the debtor, and in particular income from public funds and bonds or bonds, including premiums and lots attached to such securities. Penalties for late payment are not considered as interest for the purposes of this article.
5. The provisions of paragraphs 1 and 2 do not apply if the beneficial owner of the interest, resident of one Contracting State, carries out in the other Contracting State, from which the interest is derived, an industrial or commercial activity through a fixed base situated there, and the credit generated by the interest is effectively linked to those permanent establishment or fixed base. In such cases, the provisions of article 7 or article 15, as appropriate, apply.
6. Interest is considered to come from a Contracting State when the debtor is the State itself, a political subdivision, a local entity or a resident of that State. However, where the debtor of interest, whether or not resident of a Contracting State, has in a Contracting State a permanent establishment or a fixed basis in respect of which the debt giving rise to the payment of the interest and bearing the burden of the interest has been incurred, the interest shall be deemed to have come from the Contracting State where the permanent establishment or fixed base is situated.
7. Where, by reason of the special relations between the debtor and the beneficial owner of the interest, or of which both have with third parties, the amount of interest paid, taking into account the claim for which it is paid, exceeds that agreed by the debtor and the creditor in the absence of such relations, the provisions of this article shall apply only to the latter amount. In such a case, the excess may be imposed in accordance with the law of each Contracting State, taking into account the other provisions of this Convention.
Article 13. Fees and payments for technical services.
1. Fees and payments for technical services from one Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.
2. However, such fees and payments for technical services may also be subject to taxation in the Contracting State from which they come and in accordance with the law of that State, but if the recipient is a beneficial owner the tax thus required may not exceed:
(i) in the case of fees relating to the use, or concession of use, of industrial, commercial or scientific equipment of 10 per 100 of the gross amount of the fees.
(ii) in the case of payments for technical services and other fees, 20 per cent of the gross amount of payments and royalties.
3. The term ‘royalties’ used in this Article means the amounts of any kind paid for the use or granting of copyright on a literary, artistic or scientific work, including cinematographic films and films or tapes for radio or television, a patent, trademark or trade mark, design, plan, formula or secret procedure, as well as for the use or granting of use of industrial, commercial or scientific equipment, or for information relating to industrial, commercial or scientific experience.
4. The term ‘technical service payments’ used in this Article means the amounts of any kind paid to a person, other than those paid to the payer's own employees and those paid to natural persons for the independent personal services referred to in Article 15, in exchange for technical or consultancy services, including the provision of technical or other personnel services.
5. The provisions of paragraphs 1 and 2 do not apply if the beneficial owner of the fees or payments for technical services, resident of a Contracting State, carries out in the other Contracting State, from which the fees or payments for technical services come, an industrial or commercial activity through a permanent establishment located in that other State, or provides independent personal services through a fixed base situated therein, and the right, ownership or contract for which the fees or payments for services are satisfied are effectively linked to such permanent establishments or fixed base. In such cases, the provisions of article 7 or article 15, as appropriate, apply.
6. Fees and payments for technical services are considered to come from a Contracting State when the debtor is the State itself, a political subdivision, a local entity or a resident of that State. However, where the debtor of fees or payments for technical services, whether or not resident of a Contracting State, has in a Contracting State a permanent establishment or a fixed basis for which the obligation to pay fees or payments for technical services has been incurred, and such permanent establishment or fixed base bears the burden of such charges, they shall be deemed to be from the Contracting State where the permanent establishment or fixed base is situated.
7. Where, on account of the special relations between the debtor and the beneficial owner, or of those between them and third parties, the amount of fees or payments for technical services exceeds that agreed in the absence of such relationships, the provisions of this article shall apply only to the latter amount. In such a case, the excess may be imposed in accordance with the law of each Contracting State, taking into account the other provisions of this Convention.
Article 14. Capital gains.
1. Profits that a resident of one Contracting State obtains from the disposal of immovable property, as defined in article 6, located in the other Contracting State, may be taxed in that other State.
2. Gains from the disposal of movable property forming part of the assets of a permanent establishment held by an undertaking of one Contracting State in the other Contracting State, or movable property belonging to a fixed basis held by a resident of one Contracting State in the other Contracting State for the provision of independent personal services, including gains from the disposal of that permanent establishment (only or with the enterprise as a whole) or from that fixed basis, may be taxed in that other State.
3. Profits arising from the alienation of ships or aircraft operated in international traffic, or movable property affected by the operation of such vessels or aircraft, may only be taxed in the Contracting State of which the transferor is resident.
4. Profits from the disposal of shares of a company whose assets consist mainly, directly or indirectly, of immovable property situated in a Contracting State may be taxed in that State.
5. Profits arising from the disposal of shares of a company resident in a Contracting State forming part of a holding of at least 10 per cent in that State may be taxed in that State.
6. Profits arising from the disposal of goods other than those referred to in paragraphs 1, 2, 3, 4 and 5 of this Article may be taxed only in the Contracting State of which the transferor is resident.
Article 15. Independent personal services.
1. Income obtained by a resident of a Contracting State for the provision of professional services or the pursuit of similar independent activities may be taxed only in that State, except in the following circumstances where such income may also be taxed in the other Contracting State:
(a) If that person normally has in the other Contracting State a fixed basis for the pursuit of his activities; in that case, only that part of the income attributable to that fixed base may be taxed in that other State; or
(b) If it remains in total in the other Contracting State, for one or more periods, at least one hundred and eighty-three days in the tax period concerned; in that case, only that part of the income attributable to the activities carried out in that other State may be taxed in that other State.
2. The term ‘professional services’ includes independent scientific, literary, artistic, educational or pedagogical activities, as well as independent activities of doctors, surgeons, lawyers, engineers, architects, dentists and accountants.
Article 16. Dependent personal services.
1. Without prejudice to Articles 17, 18, 19, 20, 21 and 22, similar salaries, wages and salaries, obtained by a resident of a Contracting State on the basis of employment, may only be taxed in that State unless the employment is exercised in the other Contracting State. If the employment is thus exercised, the corresponding remuneration may be subject to taxation in that other State.
2. By way of derogation from paragraph 1, remuneration obtained by a resident of a Contracting State on the basis of employment in the other Contracting State may be taxed only in the State referred to above if:
(a) The recipient does not remain in total in the other State, in one or more periods, more than one hundred and eighty-three days during the tax period under consideration.
(b) Remuneration is paid by, or on behalf of, an employer who is not a resident of the other State.
(c) Remuneration is not borne by a permanent establishment or a fixed basis which the employer has in the other State.
3. Notwithstanding the preceding provisions of this Article, remunerations earned on account of employment on board a ship or aircraft operated by an undertaking of a Contracting State in international traffic may be subject to taxation in that State.
Article 17. Directors’ fees.
Participations, attendance allowances and other similar remunerations obtained by a resident of a Contracting State as a member of a Board of Directors or a supervisory body of a company resident of the other Contracting State may be subject to taxation in that other State.
Article 18. Entertainers and sportspersons.
1. Notwithstanding the provisions of Articles 15 and 16, any income earned by a resident of a Contracting State as a spectacle professional, theatre, cinema, radio and television actor, or musician, or as an athlete, arising from the exercise of his personal activity in that capacity in the other Contracting State, may be subject to taxation in that other State.
2. Notwithstanding the provisions of Articles 7, 15 and 16, where income derived from personal activities carried out by an artist or sportsman, in that capacity, is attributed, not to the artist or sportsman himself but to another person, such income may be taxed in the Contracting State in which the activities of the artist or sportsman are carried out.
3. By way of derogation from paragraphs 1 and 2, any income which an artist or sportsman resident of a Contracting State obtains from the exercise of his personal activity in that capacity in the other Contracting State may be taxed in the State referred to above in the first place only if the activities in the other Contracting State are financed, in whole or in part, from public funds of the Contracting State referred to in the first instance or from its political subdivisions or local entities.
Article 19. Pensions.
Without prejudice to Article 20(2), pensions and similar remuneration paid to a resident of a Contracting State on account of previous employment may only be taxed in that State.
Article 20. Public benefits and pensions.
1. (A) Remuneration, excluding pensions, paid by a Contracting State or one of its local subdivisions or entities or a natural person, for services rendered to that State or to that State, subdivision or entity, may be subject to taxation only in that State.
(B) However, such remuneration may be subject to taxation in the other Contracting State only if the services are provided in that State and the natural person is a resident of that State who:
(i) possesses the nationality of that State; or
(ii) It has not acquired the resident status of that State solely for the purpose of providing the services.
2. (A) Pensions paid by a Contracting State or by one of its political subdivisions or local entities, either directly or from funds made up of them, to a natural person on account of services rendered to that State or to that subdivision or entity, may only be subject to taxation in that State.
(B) However, such pensions may only be taxed in the other Contracting State if the beneficiary is a resident and a national of that other State.
3. The provisions of Articles 16, 17 and 19 apply to remuneration and pensions paid for services rendered in the context of an industrial or commercial activity carried out by a Contracting State or one of its political subdivisions or local authorities.
Article 21. Students.
The amounts received to cover the costs of maintenance, study or practical training, a student or a person in training who is, or was, immediately before arriving in a Contracting State, resident of the other Contracting State, and who is in the State referred to first for the sole purpose of continuing his studies or training, may not be subject to taxation in that State provided they come from sources outside that State.
Article 22. Quantities received by teachers, teaching professionals and university researchers.
1. A teacher or an educational professional who is or has been a resident of a Contracting State immediately before travelling to the other Contracting State for the purpose of teaching, research or both at a university, university college, school or other similar institution, officially recognized in that other State, shall be exempt from taxation in that latter State, for a period not exceeding two years from the date of his arrival at that State, in respect of the remuneration he receives for such activities.
2. The provisions of this article do not apply to income derived from research when it is undertaken, not in the general interest, but primarily for the particular benefit of a particular person or persons.
Article 23. Other income.
1. Without prejudice to paragraph 2, the income of a resident of a Contracting State, whatever its source, not expressly referred to in the previous articles of this Convention may be taxed only in that Contracting State.
2. Paragraph 1 does not apply to income, excluding income derived from property defined as immovable in Article 6(2), where the beneficiary of such income, resident in a Contracting State, performs in the other Contracting State by means of a permanent establishment situated in that other State or provides independent personal services by means of a fixed base equally situated therein, and the right or ownership for which the income is paid is effectively linked to such permanent establishment or fixed base. In such cases, the provisions of article 7 or article 15, as appropriate, apply.
3. By way of derogation from paragraphs 1 and 2, the income of a resident of a Contracting State not mentioned in the previous articles of this Convention, and from the other Contracting State, may be taxed in that other State.
Article 24. Capital.
1. Property consisting of immovable property covered by Article 6, which has a resident of one Contracting State and which is situated in the other Contracting State, may be taxed in that other State.
2. Property consisting of movable property forming part of the assets of a permanent establishment held by an undertaking of one Contracting State in the other Contracting State, or of movable property belonging to a fixed basis held by a resident of one Contracting State in the other Contracting State for the provision of independent personal services, may be taxed in that other State.
3. Assets made up of ships or aircraft operated in international traffic, as well as movable property affected by the operation of such vessels or aircraft, may only be taxed in the Contracting State of which the undertaking operating such vessels, aircraft or property is resident.
4. Assets consisting of shares of a company whose assets are composed mainly, directly or indirectly, of immovable property situated in a Contracting State may be taxed in that State.
5. The assets of a company resident in a Contracting State representing at least 10 per cent of the company's capital may be taxed in that Contracting State.
6. Other assets of a resident of a Contracting State may be subject to taxation only in that State.
Article 25. Elimination of double taxation.
1. The legislation in force for the Contracting States shall continue to govern the taxation of income and property in the respective State unless expressly provided otherwise in this Convention.
2. As regards India, double taxation shall be avoided as follows:
(A) Where a resident of India obtains income or possesses assets which, in accordance with the provisions of this Agreement, may be taxed in Spain, India shall deduct:
(i) the amount of the income tax levied on that resident shall be equal to the income tax paid in Spain, either directly or by withholding tax; and
(ii) The amount of the tax levied on the assets of that resident is equal to the tax on the assets paid in Spain.
However, in either case, such deduction may not exceed the part of the income or property tax, calculated before the corresponding deduction, as the case may be, to the income or assets that may be taxed in Spain.
(B) Where a resident of India obtains income or possesses assets which, in accordance with the provisions of this Agreement, may only be taxed in Spain, India may include such income or assets in the taxable amount but shall deduct from income or property tax that part of the position on the income or on the corresponding assets, as the case may be, to the income obtained or to the property held in Spain.
3. With regard to Spain, without prejudice to its domestic legislation, double taxation shall be avoided as follows:
(A) Where a resident of Spain obtains income or possesses assets which, in accordance with the provisions of this Agreement, may be taxed in India, Spain shall deduct:
(i) Tax on the income of that resident shall be equal to income tax paid in India;
(ii) Tax on the assets of such resident shall be equal to the property tax paid in India.
(B) In the case of dividends paid by a company resident in India to a company resident in Spain which holds at least 25 per cent of the capital of the company that pays the dividends, the part of the income tax paid by the company in India in respect of the profits from which such dividends are paid shall be taken into account for the determination of the deduction (in addition to the deduction provided for in point A) provided that the amount of the tax is included in the tax base of the Spanish tax.
However, in either case this deduction may not exceed the part of the income or property tax, calculated before the corresponding deduction, as the case may be, to the income or assets that may be taxed in India.
(C) Where, in accordance with any provision of the Convention, the income received by a resident of Spain or the assets he holds are exempt from taxation in Spain, Spain may, however, take into account the income or assets exempted in calculating the amount of the tax on the rest of the income or assets of that resident.
4. For the purposes of applying the deduction provided for in paragraph 3, the term ‘income tax paid in India’ shall include the total amount that should have been paid for the Indian tax in the tax period, in accordance with Indian law and the provisions of this Convention, if a tax exemption or reduction has not been recognised in respect of the same tax period under:
(i) Articles 10 (4), 10 (15) (iv), 10A, 10B, 32A, 32AB, 80HH, 80HHC and 80I of the Income Tax Act, 1961 (43 of 1961), provided that they are in force on the date of signature of this Convention and are not amended, or only in minor respects not affecting its general character; or
(ii) Any other provision which may henceforth be established recognizing a deduction in taxable income, or an exemption or reduction in the tax quota, which the competent authorities of the Contracting States agree to consider to be of a similar nature, as long as it is not or is not modified in minor respects which do not affect its general character.
5. The provisions of paragraph 4 shall apply during the first ten years of the operation of this Convention. However, the competent authorities of the Contracting States may consult with each other in order to agree on the extension of that period.
Article 26. Non-discrimination.
1. Nationals of one Contracting State shall not be subject in the other Contracting State to any taxes or obligations relating thereto which are not or are more burdensome than those to which nationals of that other State who are in the same circumstances and fulfil the same conditions are or may be subject.
2. Permanent establishments held by an undertaking of one Contracting State in the other Contracting State shall not be subject to taxation in that other State in a less favourable manner than undertakings of that other State carrying out the same activities in the same circumstances or meeting the same conditions.
3. Undertakings of a Contracting State whose capital is wholly or partly directly or indirectly detained or controlled by one or more residents of the other Contracting State shall not be subject in the State referred to above to any tax or obligation relating thereto which is not or is more burdensome than those to which other similar undertakings of the State referred to in the first instance are or may be subject.
4. Unless the provisions of Article 10, Article 12(7) or Article 13(7) apply, interest, royalties and other expenses paid by an undertaking of a Contracting State to a resident of the other Contracting State are deductible in order to determine the profits subject to taxation of that undertaking under the same conditions as if they had been paid to a resident of the State referred to first. Similarly, the debts of an undertaking of a Contracting State are deductible for the determination of the taxable assets of that undertaking under the same conditions as if they had been contracted with a resident of the State mentioned first.
Article 27. Mutual agreement procedure.
1. Where a resident of a Contracting State considers that the measures taken by one or both Contracting States imply or may entail for him an imposition which is not in conformity with the provisions of this Convention, he may, without prejudice to the remedies provided for by the domestic law of those States, submit his case to the competent authority of the Contracting State of which he is resident, or if Article 26 (1) applies, to that of the Contracting State of which he is a national. The case must arise within three years of the first notification of the measure involving an imposition not in accordance with the provisions of the Convention.
2. The competent authority shall, if it finds the complaint well founded and if it is not in a position to adopt a satisfactory solution, make every effort to resolve the matter through an amicable agreement with the competent authority of the other Contracting State in order to avoid an imposition which does not comply with this Convention. The agreement shall apply irrespective of the time limits provided for by the domestic law of the Contracting States.
3. The competent authorities of the Contracting States shall endeavour to resolve difficulties or to dispel doubts arising from the interpretation or application of the Convention by means of an amicable agreement.
They may also be consulted to avoid double taxation in cases not covered by the Convention. The competent authorities shall also develop, by mutual agreement, appropriate measures, methods and techniques in order to facilitate the exchange of information provided for in Article 28 of this Convention.
4. The competent authorities of the Contracting States may communicate directly in order to reach agreement within the meaning of the preceding paragraphs. Where it is considered that the agreement may be facilitated by personal contacts, such contacts may take place within a Commission composed of representatives of the competent authorities of the Contracting States.
Article 28. Exchange of information.
1. The competent authorities of the Contracting States shall exchange the necessary information (including copies of documents where necessary) to implement the provisions of this Convention, or in the domestic law of the Contracting States concerning taxes covered by the Convention to the extent that the taxation required under the Convention is not contrary to the Convention, in particular to prevent tax evasion or evasion and avoidance of taxes. The exchange of information is not limited by Article 1. Information received by a Contracting State shall be kept secret in the same manner as information obtained under the domestic law of that State. However, when the information was considered secret by the transmitting State, it shall only be communicated to the persons or authorities (including the courts and administrative bodies) responsible for the management or collection of taxes covered by the Convention of declaratory or executive procedures relating to such taxes or for the resolution of appeals relating thereto. Such persons or authorities shall use the information only for these purposes, but may disclose it in public hearings of the courts or in court judgements.
2. The provisions of paragraph 1 may in no case be interpreted as obliging a Contracting State to:
(a) Take administrative measures contrary to its legislation or administrative practice or those of the other Contracting State;
(b) Provide information that cannot be obtained on the basis of its own legislation or in the exercise of its normal administrative practice or that of the other Contracting State;
(c) Provide information revealing a commercial, industrial or professional secret or a commercial procedure, or information whose communication is contrary to public policy.
Article 29. Diplomatic and consular officials.
The provisions of this Convention do not affect the tax privileges enjoyed by diplomatic agents or consular officials, in accordance with the general principles of international law or under special agreements.
Article 30. Entry into force.
1. This Convention shall be ratified, and the instruments of ratification shall be exchanged as soon as possible.
2. The Convention shall enter into force at the time of the exchange of instruments of ratification, and its provisions shall have effect:
(A) In Spain: For income or property taxes for tax periods beginning on 1 January of the calendar year following the entry into force of the Convention.
(B) In India:
(i) In respect of income earned in tax periods beginning on 1 April of the calendar year following the entry into force of the Convention.
(ii) In respect of assets held on the last day of the tax periods beginning on or after 1 April of the calendar year following the entry into force of the Convention.
Article 31. Termination.
1. This Convention shall remain in force indefinitely, but Contracting States may notify the other State of the denunciation of the Convention by diplomatic letter until 30 June of any calendar year beginning after the end of the five-year period from the date of its entry into force. In such a case, the Convention shall cease to have effect:
(a) With regard to Spain, in respect of taxes relating to tax periods beginning on or after 1 January of the calendar year following that in which the complaint is notified;
(b) As regards India, for income earned in tax periods beginning on 1 April of the calendar year following that in which the complaint is notified and for property held on the last day of the tax periods beginning on 1 April following the calendar year in which the complaint is notified.
In faith, the signatories, duly authorized to do so, have signed this Convention.
Done in duplicate in New Delhi on 8 February 1993, in the Spanish, Hindi and English languages, the three texts being equally reliable. In the event of divergences between the texts, the English text shall prevail.
For the Government of the Kingdom of Spain,
For the Government of the Republic of India,
JAVIER SOLANA MADRARIAGA,
MANMOHAN SINGH,
Minister for Foreign Affairs
Minister of Finance
[heading] PROTOCOL
At the time of signing the Agreement between the Government of the Kingdom of Spain and the Government of the Republic of India to Prevent Double Taxation and Tax Evasion in Income and Property Taxes, the signatories have agreed on the following provisions which will form an integral part of the Convention.
1. In relation to Article 3(1)(d) (general definitions), the term ‘tax’ is understood to not include the amounts due as a result of fraud or omission in the taxes to which this Convention applies or which constitute a sanction in respect thereof.
2. In relation to Article 5(2)(g) (permanent establishment), it is understood that this clause refers to a warehouse in which a space under lease is transferred to third parties.
3. With regard to Article 7(1)(b) and (c) (business profits), it is understood that where doubts arise as to whether the goods or goods sold are similar to those sold through the permanent establishment or if other business activities are similar in nature to those carried out by the permanent establishment, the competent authorities may consult with a view to resolving the matter by amicable agreement.
4. With regard to Article 7(3) (business benefits), it is understood that if substantial changes are made to the tax laws of the Contracting States as regards the limits imposed on the deductibility of expenditure incurred for the purpose of permanent establishment, the competent authorities of the Contracting States may consult on the desirability of amending the provisions of that paragraph.
5. In relation to Article 8 (air navigation) and Article 9 (sea navigation), it is understood that the interest of funds linked to the operation of ships or aircraft in international traffic shall be regarded as profits arising from the operation of ships or aircraft, as appropriate, without the provisions of Article 12 (interests) applying to such interests.
6. Article 11(2) (dividends) does not apply, in the case of Spain, to income distributed or not, imputed to the members of the companies and entities referred to in Article 12.2 of Law 44/1978 of 8 September, and Article 19 of Law 61/1978 of 27 December, as long as these income is not subject to Spanish Company Tax. Such income shall be taxed in Spain in accordance with the provisions of its domestic law.
7. The competent authorities shall initiate the necessary procedures to review the provisions of Article 13 (royalties and payments for technical services) after a period of five years from its entry into force. However, if in any agreement or agreement between India and a third OECD Member State which enters into force after 1 January 1990, India shall limit its taxation at source on fees or payments for technical services to a lower percentage or to a lesser extent than the percentage or scope provided for in this Convention in respect of such income, the percentage or scope provided for in that Convention or Agreement shall also apply under this Convention, with effect from the date of entry into force of this Convention or the Indian Convention or Agreement concerned, if the latter enters into force later.
8. With regard to Article 26(2) (non-discrimination), it is understood that the provisions of this subparagraph shall not prevent a Contracting State from taxing the profits of a permanent establishment held by an undertaking of the other Contracting State in the State referred to above, at a rate higher than that applicable to the profits of a similar undertaking of the latter State, nor shall they be deemed to be contrary to Article 7(3) (business profits) of this Convention.
It is also understood that a permanent establishment held by an undertaking of one Contracting State in the other Contracting State shall in no case be subject to taxation on less favourable terms than those applicable to a permanent establishment of an undertaking of a third State carrying out the same activities under the Double Taxation Convention concluded between the other Contracting State and that third State.
9. By way of derogation from Article 26(4) (non-discrimination), it is understood that, in the case of India, amounts paid in respect of interest, royalties and payments for technical services by an Indian company to a resident of Spain shall not be deductible for the calculation of the taxable profit of that company unless the tax payable on such payments has been entered or retained at the source under Indian law and the provisions of this Convention.
10. For the purposes of this Convention the term ‘tax period’ means, in the case of India, the ‘previous year’, as defined in the Income Tax Act (Income-tax Act, 1961).
In faith, the signatories, duly authorized to do so, have signed this Protocol.
Done in duplicate in New Delhi on 8 February 1993 in the Spanish, Hindu and English languages, the three texts being equally reliable. In the event of divergences between the texts, the English text shall prevail.
For the Government of the Kingdom of Spain,
For the Government of the Republic of India,
JAVIER SOLANA MADRARIAGA,
MANMOHAN SINGH,
Minister for Foreign Affairs
Minister of Finance
This Convention entered into force on 12 January 1995, the date on which the exchange of instruments of ratification took place in New Delhi, as provided for in Article 30 thereof.
What is made public for general knowledge.
[ignore]Madrid, January 24, 1995.—The Technical Secretary General of the Ministry of Foreign Affairs, Antonio Bellver Manrique.