HowtoReadaTaxTreaty-13 9 2013

How to read
A Tax Treaty
By CA Sushil Lakhani
ICAI - Live Webcast

By the Committee on International Taxation of ICAI
on Friday 13th September, 2013
at 6.00 pm to 7.30 pm
Agenda:
Following DTAAs of India:
United Kingdom(UK)
Netherland
Singapore
Mauritius
UAE
How To Read A Tax Treaty - By CA
13/09/2013 Sushil Lakhani 2
Note:
For convenience of understanding of

the Articles, India has been treated
as the source country in the
following slides.
The treaties would equally apply if

the other country would have been
the source country.
DTAA with
United Kingdom
(UK)
4
Treaty with United
kingdom
Relevant Dates:
Signed on January 25th, 1993

Date of notification in the official gazette:
February 11, 1994
Date of coming into force April 1, 1994
i.e. A.Y. 1995-96
Protocol signed on January 25 th, 1993
(Old Protocol)
Protocol signed on October 30 th, 2012
coming into force from April 1, 2013 i.e.
A.Y. 2014-15 (New Protocol)
Treaty with United
kingdom
Article 1: Scope of the Treaty
The Convention shall apply to

persons who are residents of India
and/or United Kingdom (UK)
Indiais defined in Article 3(1)(b) to

mean the Republic of India
UK is defined in Article 3(1)(a) to

mean Great Britain and
Northern Ireland
13/09/2013
Sushil Lakhani 6
Treaty with United
kingdom
Article 1 (contd.): Territorial

Extension of India/ UK
This Convention extends to the territory of India/UK,
including its territorial sea, and to those areas of the
exclusive economic zones or the continental shelf
adjacent to the outer limit of the territorial sea of
India which it has, in accordance with international
law, sovereign rights for the purpose of exploration
and exploitation of the natural resources of such
areas, and references in this Convention to India
shall be construed accordingly.
The territory of India has not been extended to
include the airspace above it?? (contrast with DTAA s
with other countries eg. Singapore, Netherlands etc)
Treaty with United
kingdom
Article 2: Taxes Covered

In India, income tax include surcharge thereon
In UK, corporation and petroleum tax are also covered
under the Convention.
Compare the same with India-Norway, India-Hungary
or India-Germany tax treaties.
In Norway: Nine types of taxes are covered; E.g.
Municipal tax on income, National contribution to Tax
Equalisation Fund, Seamens tax, etc.
In Hungary: Seven types of taxes are covered; E.g.
income-tax on household and auxiliary farms, Town
and community contributions, levy on dividends and
profit distributions of commercial companies, etc.
In Germany: Trade Tax is covered
Treaty with United
kingdom
Article 3: General Definitions
Tax excludes amount paid in

relation to any default, omission or
penalty in relation to the taxes.
Fiscal year defined for India to

mean as previous year as per Income
Tax Act & for UK to mean as a year
beginning with April 6 in one year and
ending with April 5 in the following year.
Treaty with United
kingdom
Article 3: General Definitions
Prior to amendment the definition read as under:
The term person includes an individual, a company and any

other entity which is treated as a taxable unit under the taxation
laws in force in the respective Contracting States, but, subject to
paragraph 2 of this Article, does not include a partnership;
Para 2 of the Article states that a partnership which is treated

as a taxable unit under the Income-tax Act, 1961 ofIndiashall be
treated as a person for the purposes of this Convention. (Refer
Linklaters LLP vs. ITP (40 SOT 51) (TMum))
After the amendment vide the New Protocol, the definition

of person has been amended to read as under:
The term "person" includes an individual, a company, a body of

persons and any other entity which is treated as a taxable unit
under
13/09/2013
the taxation laws inLakhani
Sushil force in the respective Contracting 10
Treaty with United
kingdom
Article 4: Fiscal
domicile(resident)
Prior to the amendment the Para 1 of the Article read as under:
Resident of a Contracting State means any person who, under the law of that State,
is liable to taxation therein by reason of his domicile, residence, place of management
or any other criterion of a similar nature.
The Para 1 of this Article has been replaced w.e.f. April 1, 2013.
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,
place of incorporation, or any other criterion of a similar nature, provided, however,
that:
a) This term does not include any person who is liable to tax in that State in respect only of income
from sources in that State; and
b) In the case of income derived or paid by a partnership, estate, or trust, this term
applies 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.
(Note: This definition has been brought in line with US Treaty. Difference between
liable to tax Vs. subject to tax)
Treaty with United
kingdom
Article 4: Fiscal
Domicile(contd)
Tie-Breaker Tests:
Where an Individual is a resident of both India and

UK, then following would be considered sequentially
for the determination of the country of residence:
Permanent home available to the individual
Centre of vital interests
Country of habitual abode
Country of which he is a national
Mutual Agreement between the countries.
Person other than an Individual deemed to be a
resident of the Country where the effective place of
management is situated.
Treaty with United
kingdom
Article 5: Permanent
Establishment
Means a fixed place of business of an enterprise through
which it is wholly or partly carried out.
Permanent establishment incudes:
a) to e) and h)standard as per OECD Model
f) Premises used as a sales outlet or for receiving or soliciting
orders
g) a warehouse in relation to a person providing storage facilities
for others;
i) an installation or structure used for the exploration or
exploitation of natural resources;
j) Where charges payable for the project or supervisory
activity exceed 10% of the sales price of the machinery or
equipment and such activities continue for a period not
exceeding 6 months (to be read with the Protocol(old))

Treaty with United
kingdom
Establishment
Protocol in relation to sub-paragraph (j) of
Article 5:
For determining whether a building site or construction,

installation or assembly project or supervisory activity in
connection therewith has continued for a period of more
than 6 months, a contracting state shall:
i. Take no account of time spent by employees on other sites
having no connection with the current site.
ii. Apply more than 6 months test to each site which has no
connection with any other site, and
iii. regard a building site as a single site, even if several contracts
have been entered into for work being done, provided it forms
a coherent whole, both geographically & commercially
Treaty with United
kingdom
Establishment
Service PE of an Indian Enterprise in UK
k) the furnishing of services including managerial services,
other than those taxable under Article 13 (Royalties and
fees for technical services), within UK by an enterprise
through employees or other personnel, but only if:
i. activities of that nature continue within UK for a period or
periods aggregating more than 90 days within any twelve-
month period; or
ii. services are performed within UK for an enterprise within the
meaning of Article 10(1) (Associated Enterprise) and continue
for a period or periods aggregating more than 30 days within
any twelve-month period. ( contrast with US Treaty where
one day presence triggers Service PE in case of related
enterprises)

Treaty with United
kingdom
Establishment
3.Exclusions from PEauxiliary and preparatory
activitiesin line with UN Model :
storage of stock of goods for delivery triggers PE;
4.Dependent Agency PE of Indian Enterprise in

UK( in line with Indian Income Tax Act,1961)
A person acting in UK for or on behalf of an
enterprise of India other than an agent of an
independent status to whom paragraph (5) applies,
shall be deemed to be a PE of the Indian enterprise
in UK if:
(contd)
Treaty with United
kingdom
Establishment
a) he has, and habitually exercises in UK, an authority to
negotiate and enter into contracts for or on behalf of
the Indian enterprise, unless his activities are limited
to purchase of goods or merchandise for the Indian
enterprise; or
b) he habitually maintains in UK a stock of goods or
merchandise from which he regularly delivers goods
or merchandise for or on behalf of the Indian
enterprise; or
c) he habitually secures orders in UK, wholly or almost
wholly for the Indian enterprise or for other
enterprise and the enterprises controlling, controlled
by, or subject to the same common control, as the
Indian enterprise.
Treaty with United
kingdom
Article 6: Income from

Immovable Property
Income from Immovable property will be
taxed in the state where such property is
situated
Immovable property shall include:
Property accessory in immovable property
Livestock and equipment used in agriculture
Usufruct of immovable property
Ships and Aircrafts have been excluded from
the meaning of immovable property as there
are separate Articles for these.
Treaty with United
Article 7: Business
kingdom
Profits
Profits of the UK PE of an Indian
Resident
The profits of an Indian enterprise shall be
taxable only in India unless the enterprise
carries on business in UK through a PE
situated in UK. If the enterprise carries on
the business as aforesaid, the profits of the
enterprise may be taxed in UK, but only so
much of them as is directly or indirectly
attributable to the PE.
Treaty with United
kingdom
Article 7: Business
Profits
Special features of Article 7
Taxation of PE income both by India & UK &
credit method for elimination of Double
Taxation
PE to be treated & taxed as separate &
distinct entity
No Force of Attraction However, Clause (b)
of old Protocol clarifies that tax authorities
not precluded from determining whether PE
took active part in Orders placed directly
with HO
Treaty with United
Article 8 : Air
kingdom
transport
Profits derived from the operation of
aircraft in international traffic by an
Indian enterprise shall not be taxed in
UK.
Profits to include interest derived from
the investment or deposit of receipts
arising directly from the operation of
aircraft in international traffic but shall
not include interest derived from
reinvestment of such interest
Treaty with United
kingdom
Article 9 : Shipping
Income of an Indian enterprise from
the operation of ships in
international traffic shall be taxable
only in UK.
This Articles does not apply to
income from journeys between
places which are situated in India
or UK

Treaty with United
kingdom
Article 10: Associated

Enterprises
Article 10(1) permits transfer pricing

adjustment Where:
a) an enterprise of India participates directly or
indirectly in the management, capital or
control (MCC) of an enterprise of UK, or
b) the same persons participate directly or
indirectly in the MCC of an Indian and an UK
enterprise, and conditions are made
between the two enterprises in their
commercial or financial relations which
differs from those which would be made
between independent enterprises, then any
profits which would have accrued to one of
the enterprises, but, by reason of those
conditions,
13/09/2013
Howhave not
To Read A Tax Treatyso
Sushil Lakhani
accrued, may be 23
- By CA
Treaty with United
kingdom
Article 10: Associated

Enterprises
Article 10(2): Mandates corresponding
adjustment in the other Country
Similar clause for corresponding

adjustment in the other country is
missing in the treaties of India-
Mauritius and India-Singapore.

Treaty with United
kingdom
Article 11: Dividends

Old Provision
In respect of dividend paid by a UK Company to an Indian resident:
Taxable in India
UK tax on dividends to Individual resident of India limited to 15% of gross dividends
provided that the Individual is entitled to tax credit in India.
UK tax on dividends to other Indian residents (other than Individuals) to be exempt
in UK.
In respect of dividends paid by an Indian Company to a UK resident

Taxable in UK
India tax not to exceed 15% of gross amount
DDT (in India) not affected
New Provision wef AY 2014-15

Standard Article
10% of gross dividends in the source country (15% in case of distribution of
income/gains from immovable property)
Para 6 Anti Avoidance provision clarified that benefit not available if the main
purpose of creation or assignment of shares was to take advantage of this Article.

Treaty with United
kingdom
Article 12: Interest
1. Interest arising in UK and paid to resident

of India may be taxed in India.
2. However, such interest may also be taxed

in UK where it arises and according to the
laws of UK provided that where the
resident of India is the beneficial owner
of the interest, the tax so charged shall not
exceed 15% of the gross amount of
interest.
Treaty with United
kingdom
3.Notwithstanding the provisions of para 2:

a) Where the interest is paid to a bank carrying
on a bonafide banking business which is a
resident of India and is the beneficial
owner of the interest, the tax charged in UK
in which the interest arises shall not exceed
10% of the gross amount of interest.
b) Where the interest is paid to the Government
of India or a political sub-division or a local
authority of India or the RBI, it shall not be
subject to tax in UK.
Treaty with United
kingdom
Article 13 : Royalties / FTS
Example UK resident as recipient of

income:
Royalties & FTS arising in India and paid to

resident of UK may be taxed in UK.
However, such Royalties & FTS may also be
taxed in India where they arise and according
to the laws of India but if the beneficial owner
of Royalties / FTS is resident of UK, the tax
so charged shall not exceed

Treaty with United
kingdom
Article 13 : Royalties / FTS
Tax Rates for Royalties & FTS are as follows:

For Equipment Royalties & Services ancillary &
subsidiary to enjoyment of such equipments 10% of
gross amounts
For Royalties & Fees for Technical Services other than
those covered above:
During first five years for which this Convention has
effect:
15% where the payer is Government or its political sub
division
20% where the payer is other than what stated above
During subsequent years 15% of gross amounts

Treaty with United
kingdom
Article 13 : Royalties /
FTS
Definition of fees for technical service inter-alia
includes payments of any kind in consideration for
the rendering of any technical or consultancy
services which:
C) make available technical knowledge, experience,
skill know-how or processes, or consist of the
development and transfer of a technical plan or
technical design.
Meaning of make available as explained in other
treaties would have to applied to the UK Treaty.
CIT vs. De Beers India Minerals (P.) Ltd. (346 ITR 467)
(Kar.)

Treaty with United
kingdom
Article 14: Capital Gains
Each Contracting state may tax capital

gains in accordance with the provisions
of its domestic laws.
Instead of providing for allocation of
taxing rights, the Article makes a
reference to Domestic Laws of respective
Contracting States.
Same is the case with India-US tax treaty
Compare with other Tax treaties or even
Model Conventions Vast Difference
Treaty with United
kingdom
Article 15: Independent

Personal Service
Income derived by an individual, whether in his own capacity
or as a member of a partnership, who is a resident of India in
respect of professional or other independent activities of a
similar character may be taxed in India. Such income may also
be taxed in UK if such services are performed in UK and if :
a) he is present in UK for a period or periods aggregating to 90 days in
the relevant fiscal year; or
b) he, or the partnership, has a fixed base regularly available to him, or
it, in UK for the purpose of performing his activities
but in each case only so much of the income as is attributable
to those services
It should be noted that the provisions of this Article apply only
to income derived by an individual. Whereas in the treaty
between India and Netherlands, similar Article applies to a
resident.
Treaty with United
kingdom

Personal Service
How to Calculate No. of Days for
partnerships:
For the purposes of paragraph 1 of this Article
an individual who is a member of a
partnership shall be regarded as being
present in the UK during days on which,
although he is not present, another individual
member of the partnership is so present and
performs professional services or other
independent activities of a similar character
in UK.
Treaty with United
kingdom

Personal Service
Professional services include
independent:
- Scientific, literary, artistic, educational or

teaching activities
as well as independent activities of:
- Physicians, surgeons, lawyers, engineers,

architects, dentists and accountants
Treaty with United
kingdom
Article 16 : Dependent
Personal Services
Indian resident deriving salary

from UK:
Subject to . Salaries, wages
and other similar remuneration
derived by an Indian resident in
respect of an employment shall be
taxable only in India unless the
employment is exercised in UK. If the
employment is so exercised, such
remuneration as is derived therefrom
13/09/2013
Sushil Lakhani 35
Treaty with United
kingdom
Article 16 : Dependent
Personal Services
Remuneration derived by Indian resident
in respect of an employment exercised
in UK shall not be taxed in UK if :
he is present in UK for a period not exceeding
in aggregate 183 days during the relevant fiscal
year;
the remuneration is paid by, or on behalf of, an
employer who is not resident of UK, and
the remuneration is not deductible in computing
the profits of an enterprise chargeable to tax in
UK
Treaty with United
kingdom
Article 17-Directors fees
Directors fees and similar payments

derived by a resident of India in his
capacity as a member of the board
of directors of a company which is a
resident of UK may be taxed in UK.
Taxability at place where the
company is resident

Treaty with United
kingdom
Article 18: Artistes and

Athletes
Income derived by entertainers (such as
stage, motion picture, radio or television
artistes and musicians) or athletes, from
their personal activities, whether accruing to
themselves or to any other person, may be
taxed in the source country.
Provisions of the Article would not apply if
the entertainer or the athlete is directly or
indirectly supported, wholly or substantially,
from the public funds of the other
Contracting State
Treaty with United
kingdom
Article 19: Government

Remuneration and Pensions
Standard as per UN and OECD Model

Treaty with United
kingdom
Article 20 : Pensions &

Annuities
Any pension, other than a pension
referred to in Art. 19(2) of this
Convention, or annuity paid to a
resident of India shall be taxable
only in India.
CASE OF DOUBLE NON-

TAXATION

Treaty with United
kingdom
Article 21 : Students &

trainees
Indian residents, who are temporarily present
in UK for purpose of studying, or for securing
necessary training or studying or doing research
as a recipient of a grant, allowance, or award
from governmental, religious, . organisation
shall not be subject to tax in UK in respect of
following (for a maximum of 5 years):
Gifts from abroad for the purposes of his maintenance,
education, study, research or training;
the grant, allowance or award; and
income from personal services to the extent of 750
sterling pounds for each relevant fiscal year
Treaty with United
kingdom
Article 22: Teachers

An individual who visits UK for a period not
exceeding two years for the purpose of
teaching or engaging in research at a
university, college or other recognised
educational institution in UK, and who was
immediately before that visit a resident
of India, shall be exempted from tax by UK.
CAN BE A CASE OF DOUBLE NON

TAXATION
Treaty with United
kingdom
Article 23 : Other
Income
Subject to the provisions of para 2 of this Article,
items of income beneficially owned by an Indian
resident, wherever arising, other than income
paid out of trusts or the estates of deceased
persons in the course of administration, which
are not dealt with in the foregoing Articles of this
Convention, shall be taxable only in India.
Notwithstanding the provisions of para 1 & 2,
income of an Indian resident not dealt with in
the other Articles, and arising in UK may be
taxed in UK
Treaty with United
kingdom
Article 24: Elimination of

Double Taxation
Credit for the tax on the income
doubly taxed: Allowed
Underlying tax credit allowed only in
UK and not in India.
(DTAAs of Mauritius and Singapore
with India provide for underlying tax
credit in India also)
Tax sparing: allowed in source???
country
Treaty with United
kingdom
Article 25: Partnership
This Article has been deleted w.e.f.

April 1, 2013

Treaty with United
kingdom
Article 26: Non-

discrimination
Nationals and enterprises of
other Country shall not be subjected
to taxation in the source country,
which is more burdensome than that
of nationals and enterprises of the
source country.
Discrimination of individuals on the
basis of residence is permitted.

Treaty with United
kingdom
Article 27: Mutual Agreement

Procedure
Standard Clause as per UN Model

Treaty with United
kingdom
Article 28: Exchange of

Information
This Article has been amended by the New Protocol wef 1 st
April,2013 and made more stringent in the following respects:
The two countries can exchange information which is foreseably

relevant as against info which is necessary as per the old Article
If information is requested by Contracting State in accordance with this
Article, the other Contracting State shall use its information gathering
measures to obtain the requested information, even though that other
State may not need such information for its own tax purposes. The
standard imitations in Para 3 shall not be construed to permit a
Contracting State to decline to supply information solely because it has no
domestic interest in such information.
The standard limitations in Para 3 shall not be construed to permit a
Contracting State to 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.
Treaty with United
kingdom
Article 28A: Tax Examination

Abroad
Inserted by New Protocol w.e.f. 1st
April,2013
For instance in case Indian tax

authorities request for
examination of a UK Resident
The representatives of India may
request the competent authority of
UK to interview a UK Citizen and
examine records with prior written
13/09/2013
Sushil Lakhani 49
Treaty with United
kingdom
Article 28B: Assistance in

Collection of Taxes
Inserted by New Protocol w.e.f. 1 st April,2013
Contracting States shall lend assistance to each other in the collection
of revenue claims in respect of taxes covered by the Convention
Revenue claim" means an amount owed in respect of taxes covered
by this Convention as well as interest, administrative penalties and
costs of collection or conservancy related to such amount.
Claim of a contracting state owed by a resident of the other
contracting state may, at request of such contracting state, be
collected by the other contracting state as collection of its own taxes
as if the revenue claim were a revenue claim of that other state.
When a Contracting State may, under its law, take interim measures
of conservancy by freezing of assets before a revenue claim is raised
against a person, the competent authority of the other Contracting
State, if requested by the competent authority of the first mentioned
State, shall take measures for freezing the assets of that person in
that Contracting State in accordance with the provisions of its law.

Treaty with United
kingdom
Article 28C: Limitation of

Benefits
Benefits of this treaty shall not be
available if the main purpose or
one of the main purposes of the
creation or existence of such a
resident or of the transaction
undertaken by him, was to obtain
benefits under this treaty.

Treaty with United
kingdom
Article 29 :
Diplomatic & consular officials
Nothing in this Convention shall affect the fiscal
privileges of diplomatic or consular officials
under the general rules of international law or
under the provisions of special agreements.
Notwithstanding the provisions of para 1 of Art.
4 (Fiscal domicile), an individual who is a
member of the diplomatic, consular or
permanent mission of India situated in UK and
who is subject to tax in UK only if derives
income from sources therein, shall not be
deemed to be a resident of UK.
DTAA with
Netherlands
53
Treaty with Netherlands
Relevant Dates
Signed on July 13th, 1988

Date of coming into force January
21st, 1989
Year of coming into force A.Y. 1990-
91
Protocol signed on May 10th , 2012
coming into force from November 2nd
, 2012.

Netherland taxes covered include:

Income tax;
Wages tax;
Company tax;
Dividend tax; and
Capital tax
Indian taxes covered include:
Income tax
Surtax
Wealth tax
Establishment
NATURE OF PE CONDITIONS
Installation used for Six Month
exploration activities
Six Month
Construction PE
(Supervision not
covered) delivery not permitted
Prep. & Aux. Third condition securing
Activities orders missing
Dep. Agent PE No PE if the DAPE paid
arms length commission
Article 7: Business
Profits
Protocol clarifies that profit of PE to be
determined not w.r.t. full amount but only
w.r.t. remuneration attributable to PEs
activity.
Protocol clarifies that profit of PE to be
determined not w.r.t. full amount but only
w.r.t. remuneration attributable to PEs
activity.
MFN Clause for HO expenses - Protocol caps
the restriction U/s. 44C to that existing on
date of signing the Treaty.
Article 8: Air transport
Taxablewhere place of effective

management is situated.

Article 8A: Shipping
Profits from the operation of ships in

international traffic shall be taxable
only in the State in which the place
of effective management of the
enterprise is situated.
interest on funds connected with the
operation of ships in international
traffic shall be regarded as profits
from the operation of such ships and
the provisions of Article 11 shall not
13/09/2013
Sushil Lakhani 59
Tax in source country limited to 10%

Article 12: Royalty and Fees

for technical services
Article12 of India-USA Treaty & MOU

to US Treaty substituted for Article
12 by Protocol.
Protocol provides for MFN in respect
of R & D cess.


Gains from the alienation of ships or aircraft
operated in international traffic shall be taxable
only in the State in which the place of effective
management of the enterprise is situated.
Gains derived by a resident of Netherlands from

the alienation of shares (other than shares quoted
on an approved stock exchange) forming part of
a substantial interest in the capital stock of an
Indian company, the value of which shares is
derived principally from immovable property
situated in India may be taxed in that other State.
A substantial interest exists when

the resident owns 25 per cent or
more of the shares of the capital
stock of a company.
Gains from alienation of shares is

taxable in source country unless
realized in course of corporate
re-organization / amalgamation
etc.
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Sushil Lakhani 63

Personal Service
Unlike in the DTAA with UK, this
article is applicable to all residents.
The limit for the number of days i.e.
183 days is available to all residents.


Double Taxation
Method Credit Method
Underlying Tax No
Credit
No
Tax Sparing

Article 26: Exchange of

Information
Inserted w.e.f. November 2nd, 2012
Similar to UK Treaty

DTAA with
Singapore
67
Treaty with Singapore
Relevant Dates
Year of coming into force - A.Y. 1995-96
Amending Protocol w.e.f. 1st August, 2005

Singapore Income tax

Indian taxes covered include Income
tax and any surcharge thereon

Establishment
NATURE OF PE CONDITIONS
Only if used for > 120

days in a fiscal year.
Installation for Natural
Resources 183 days in a fiscal
year
Construction PE
183 days in a fiscal
Supervisory PE year
Establishment
Service PE
for exploration activities > 183 days in a fiscal
year.
For other services > 90 days in a fiscal year
(>30 days for related
enterprise)
Prep & Aux Activities Includes Occasional
Delivery
Dep. Agent PE All three alternate tests.

Article 7: Business Profits

(Article 7)
Art. 7(1) r.w. 7(8) directly or
indirectly
attributable to PE
(similar to Japan Treaty
Protocol).
Art. 7(3) Deduction of exp.
Subject to domestic
law

Article 8: Shipping and Air

Transport
Taxable in country of residence

Source country 10% / 15%

Article 12: Royalties/

FTS
Source State Tax Limited to 10% (Protocol)
Definition of royalty Includes gains from alienation of

rights

Definition of FTS
make available which
enables .. to apply the
technology
Development & Transfer of technical
plan / design covered only if it
enables application of technology.
Excludes services linked to sale of
property.
Excludes services in connection with
exploration activities.
From all property

other than
immovable
property or PE
property or ships /
aircraft Taxable only in
the country of
residence of
alienator
13/09/2013 Sushil Lakhani (Protocol)
77

Personal Service
> 90 days in fiscal year
> limited only to individuals.

Article 15: Dependant

personal service
Taxable @ 15% in source state if the

remuneration deductible in
employees country against FTS
derived by employer.

Article 24: Limitation
of Relief
Reduced rate of tax or exemption

only applicable to that part of the
income which is remitted to the
residence state.

Article 25:
Avoidance of Double Tax
Credit Method
Underlying Tax credit on inbound

investment & outbound investment.
Tax sparing by both countries.

Limitation on Benefits
(protocol)
Treaty Benefit not available
where primary purpose was treaty

shopping.
to shell / conduct companies
where annual expenditure on operations

less than $200,000 or Rs. 50 lakhs in
preceding 24 months.
DTAA with
Mauritius
83
Treaty with Mauritius
Entry into Force
Treaty A.Y. 1983-84

Article 4: Resident
(Article 4)
PIB press release dt. 13.4.2000
(Certificate of Residency to be taken

as proof of Residency.)
also refer to SC decision in Azadi

Bachao(263 ITR 706 (SC))

Article 5:
Permanent Establishment
Construction & Supervisory PE Activity > 9 months
Prep & Aux. activities Delivery not permitted
Dependent Agent - Third condition of securing

orders absent
- In second condition fulfill
used instead of delivers

Article 7: Business
Profits
No restriction on deduction of HO
expenses

Article 8:
Shipping and Air Transport
Taxable where place of effective
management situated


Source Country Tax No limit
Exemption in source country To interest paid to government or
Bank or if the loan was approved
by Government (refer DLJMB
(228 ITR 268 (AAR) & Yobo
(Unreported)

Article 12: Royalties

Source Country Tax Limited to 15%
FTS Not covered

Article 13: Capital

Gains
From shares Taxable only in resident country
of alienator.

Article 14:
Independent Personal Services
No time limit specified only test of

fixed base provided for.
Available to all residents & not

restricted to individuals.

Article 22: Other

Income
Taxable only in the resident
country

Article 23:
Elimination of Double Tax
Creditmethod
Underlying Tax Credit for both
inbound & outbound investment.
Tax sparing by both countries.

DTAA with
UAE
95
Treaty with UAE
Entry into Force
Limited Air Traffic treaty w.e.f. A.Y. 1991-92
Comprehensive Treaty w.e.f. A.Y. 1995-96
Protocol Amending w.e.f. A.Y. 2009-10

Treaty with UAE
Article 4: Resident
(Article 4) Liable to tax
Concept
Physical presence
UAE Individual of 183 days in the
(By Protocol) calendar year
Managed &
UAE Company controlled wholly
(By Protocol) in UAE
UAE Govt. & Govt.
Deemed to
Institutions Resident in UAE
Abu Dhabi Invt.
Deemed to
Authority Resident in UAE
Treaty with UAE
Establishment
Construction PE Supervision included
Service PE If service continue for 9 month
within any 12 month period
Prep. & Aux Activities delivery permitted
Dependent Agent PE Only one test of authority to
conclude contracts

Treaty with UAE
Article 7: Business
Profits
Deduction of Expenses (Art. 7(3)
Subject to domestic law (by Protocol)

Treaty with UAE
Article 8: International
Traffic
Where taxable Taxable in country
of Residence

Treaty with UAE
Article 10: Dividend
Source Country Tax Limited to 10%

Treaty with UAE
Source Country Tax Limited to 5% /

12.5%

Treaty with UAE
Article 12: Royalties
Exclusions from def. of royalty
royalty or other payments for

operation of mines or quarries or
exploitation of petroleum or natural
resources.
FTS not covered by the Treaty

implications ?
Treaty with UAE
Article 13: Capital

Gains
On Shares - Taxable in source
country (By protocol)

Treaty with UAE

Personal Services
No. of days of physical presence 183 days in the fiscal year
Whether limited to individuals & No; available to all residents

firms

Treaty with UAE

Double Tax
Method - Credit Method

Tax Sparing in UAE - Yes
Underlying Tax Credit - No

Article 26: Non-
Treaty with UAE
Discrimination
Taxability of PE at a
higher rate Permitted

Treaty with UAE
Limitation of Benefits
By Protocol - No treaty benefits if

the main purpose was to
obtain the treaty
benefit
No objective test specified like in
Singapore Treaty or USA Treaty

THANK YOU
CA Sushil Lakhani
109

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Following DTAAs of India:

For convenience of understanding of

The treaties would equally apply if

Signed on January 25th, 1993

Article 1: Scope of the Treaty

The Convention shall apply to

Indiais defined in Article 3(1)(b) to

UK is defined in Article 3(1)(a) to

Article 1 (contd.): Territorial

Article 2: Taxes Covered

Article 3: General Definitions

Tax excludes amount paid in

Fiscal year defined for India to

Article 3: General Definitions

Prior to amendment the definition read as under:

The term person includes an individual, a company and any

Para 2 of the Article states that a partnership which is treated

After the amendment vide the New Protocol, the definition

The term "person" includes an individual, a company, a body of

Where an Individual is a resident of both India and

How To Read A Tax Treaty - By CA

For determining whether a building site or construction,

How To Read A Tax Treaty - By CA

4.Dependent Agency PE of Indian Enterprise in

Article 6: Income from

How To Read A Tax Treaty - By CA

Article 10: Associated

Article 10(1) permits transfer pricing

Article 10: Associated

Similar clause for corresponding

How To Read A Tax Treaty - By CA

Article 11: Dividends

In respect of dividends paid by an Indian Company to a UK resident

New Provision wef AY 2014-15

How To Read A Tax Treaty - By CA

Article 12: Interest

1. Interest arising in UK and paid to resident

2. However, such interest may also be taxed

Article 12: Interest

3.Notwithstanding the provisions of para 2:

Article 13 : Royalties / FTS

Example UK resident as recipient of

Royalties & FTS arising in India and paid to

How To Read A Tax Treaty - By CA

Article 13 : Royalties / FTS

Tax Rates for Royalties & FTS are as follows:

How To Read A Tax Treaty - By CA

How To Read A Tax Treaty - By CA

Article 14: Capital Gains

Each Contracting state may tax capital

Article 15: Independent

Article 15: Independent

Article 15: Independent

- Scientific, literary, artistic, educational or

as well as independent activities of:

- Physicians, surgeons, lawyers, engineers,

Indian resident deriving salary

Article 17-Directors fees

Directors fees and similar payments

How To Read A Tax Treaty - By CA

Article 18: Artistes and