TaxTMI 
TaxTMI 
Convention Between The Government of The Republic of India And The Government of Japan For The Avoidance of Double Taxation And The Prevention of Fiscal Evasion With Respect To Taxes On Income
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....F JAPAN FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME The Government of the Republic of India and the Government of Japan, Desiring to conclude a new Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income. Have agreed as follows : ARTICLE 1 This Convention shall apply to persons who are residents or one or both of the Contracting States. ARTICLE 2 1. The taxes which are the subject of this Convention are : (a) In Japan : (i) the income tax; and (ii) the corporation tax (hereinafter referred to as Japanese tax"); (b) In India: the income-tax including any surcharge thereon (hereinafter referred to as "Indian fax"). 2. This Convention shall also apply to any identical or substantially similar taxes which are imposed after the date of signature of this Convention in addition to, or in place of, those referred to in paragraph 1. The competent authorities of the Contracting States shall notify each other of any substantial changes which have been made in their respectble taxation laws....
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....ter of Finance or his authorized representative; (ii) in India, the Central Government in the Ministry of Finance, Department of Revenue, or their authorized representative. 2. As regards the application of this Convention by a Contracting State, any term not defined therein shall, unless the context otherwise requires, have the meaning which it has under the laws of that Contracting State concerning the taxes to which this Convention applies. ARTICLE 4 1. For the purposes of this Convention, the term "resident of a Contracting State" means any person who, under the laws of that Contracting State, is liable to tax therein by reason of his domicile, residence, place of head or main office or any other criterion of a similar nature. 2. Where by reason of the provisions of paragraph 1 a person is a resident of both Contracting States, then the competent authorities of the Contracting States shall determine by mutual agreement the Contracting State of which that person shall be deemed to be a resident for the purposes of this Convention. ARTICLE 5 1. For the purposes of this Convention, the term "permanent establishment" means a fixed place of business throug....
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.... or of collecting information, for the enterprise; (e) the maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, pay other activity of a preparatory or auxiliary character. 7. Notwithstanding the provisions of paragraphs 1 and 2, where a person other than an agent of an independent status to whom paragraph 8 applies-is acting in a Contracting State on behalf of an enterprise of the other Contracting State, that enterprise shall be deemed to have a permanent establishment in the first-mentioned Contracting State, if: (a) he has and habitually exercises in that Contracting State an authority to conclude contracts on behalf of the enterprise, unless his activities are limited to those mentioned in paragraph 6 which, if exercised through a fixed place of business, would not make this fixed place of business a permanent establishment under the provisions of that paragraph; (b) he has no such authority, but habitually maintains in the first-mentioned Contracting State a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the enterprise; or (c) he habitually se....
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....ts of the enterprise may be taxed in that other Contracting State but only so much of them as is directly or indirectly attributable to that permanent establishment. 2. Subject to the provisions of paragraph 3, where an enterprise of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment the profits which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a permanent establishment. 3 In determining the profits of a permanent establishment, there shall be allowed as deductions expenses which are incurred for the purposes of the permanent establishment, including executive and general administrative expenses so incurred, whether in the Contracting State in which the permanent establishment is situated or elsewhere. 4. Insofar as it has been customary in a Contracting State to determine the profits to be attributed to a permanent establishment on the basis of....
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....he management, control or capital of an enterprise of the other Contracting State, or (b) the same persons participate directly or indirectly in the management, control or capital of an enterprise of a Contracting State and an enterprise if the other Contracting State, and in either case conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those cosditions, have not so accrued, may be included in the points of that enterprise and taxed accordingly. 2. Where a Contracting State includes in the profits of an enterprise of that Contracting State-and taxes accordingly-profits on which an enterprise of the other Contracting State has been charged to tax in that other Contracting State and where the competent authorities of the Contracting States agree upon consultation, that all or part of the profits so included are profits which would have accrued to the enterprise of the first-mentioned Contracting State if the conditions made betwee....
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....nent establishment or a fixed bases situated in that other Contracting State, nor subject the company's undistributed profits to a tax on the company's undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in that other Contracting State. ARTICLE 11 1. Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other Contracting State. 2. However, such interest may also be taxed in the Contracting State in which it arises, and according to the laws of that Contracting State, but if the recipient is the beneficial owner of the interest the tax so charged shall not exceed : (a) 10 per cent of the gross amount of the interest if the beneficial owner is a bank; and (b) 15 per cent of the gross amount of the interest in all other cases. 3. Notwithstanding the provisions of paragraph 2 interest arising in a Contracting State and derived by the Government of the Other Contracting State, a political sub-division or a local authority thereof, the Central Bank of that other Contacting State or any financial institution who....
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.... State itself, a political sub-division or a local authority thereof or a resident of that Contracting State. Where, however, the person paying the interest, whether he is a resident of a Contractions State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment or fixed base, then such interest shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated. 8. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the interest, having regard to the debt-claim for which it is paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only or to the last mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Convention. ARTICLE 1....
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....local authority thereof or a resident of that Contracting State. Where, however, the person paying the royalties or fees for technical services, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the liability to pay the royalties or fees for technical services was incurred, and such royalties or fees for technical services are borne by such permanent establishment or fixed base, then such royalties or fees for technical services shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated. 7. Where, by reason of special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the royalties or fees for technical services, having regard to the use, right or information for which they are paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according t....
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....e to that fixed base or is derived in that other Contracting State during the aforesaid period or periods. 2. The term "professional services" includes especially independent scientific. literary, artistic, educational or teaching activities as well as the independent activities of physicians, surgeons, lawyers, engineers, architects, dentists and accountants. ARTICLE 15 1. Subject to the precisions of Articles 16, 18, 19, 20 and 21, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that Contracting State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other Contracting State. 2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned Contracting State, if : (a) the recipient is present in that other Contracting State for a period or periods not exceeding in the aggregate 183 days during any t....
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....n that Contracting State. ARTICLE 19 1. (a) Remuneration, other than a pension, paid by a Contracting State, or a political sub-division or a local authority thereof, to an individual in respect of services rendered to that Contracting State, or a political sub-division or a local authority thereof, in the discharge of functions of a governmental nature, shall be taxable only in that Contracting State. (b) However, such remuneration shall be taxable only in the other Contracting State if the services are rendered in that other Contracting State and the individual is a resident of that other Contracting State ; who : (i) is a national of that other Contracting State ; or (ii) did not become a resident of that other Contracting State solely for the purpose of performing the services. 2. (a) Any pension paid by, or out of funds to which continuous are made by, a contacting state, or a political sub-division or a local authority thereof, to an individual in respect of services rendered to that Contracting State, or a political sub-division or a local authority thereof, shall be taxable only in that contracting State. (b) However, such pension shall be t....
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....otwithstanding the provisions of paragraphs 1 and 2 items of income oi a resident of a Contracting State not dealt with in the foregoing Articles of this Convention and arising in the other contracting State may be taxed in that other contracting state. ARTICLE 23 1. The laws in force in either of the Contracting States shall continue to govern the taxation of income in the respective Contracting State except where express provisions to the contrary are made in this Convention. 2. Double taxation shall be avoided in the case of India as follows: (a) Where a resident of India derives income which, in accordance with the provisions of this Convention, may be taxed in Japan, India shall allow as a deduction from the tax on the income of that resident an amount equal to the Japanese tax paid in Japan, whether directly or by deduction. Such deduction in either case shall not, However, exceed that part of the income-tax (as computed before the deduction is given) which is attributable, as the case may be, to the income which may be taxed in Japan. Further, where such resident is a Company by which surtax is payable in India, the deduction in respect or income-tax paid i....
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.... burdensome than the taxation and connected requirements to which nationals of that other Contracting State in the same circustances are or may be subjected. This provision shall, notwithstanding the provisions of Article 1, also apply to persons who are not residents of one or both of the Contracting States. 2. The taxation on a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favourably levied in that other Contracting State than the taxation levied on enterprises of that other Contracting State carrying on the same activities. This provision shall not be construed as obliging a Contracting State to grant to residents of the other Contracting State any personal allowances, reliefs and reductions for taxation purposes on account of civil status or family responsibilities which it grants to its own residents. 3. Except where the provision of Article 9, paragraph 8 of Article 11, or paragraph 7 of Article 12, apply, interest royalties and other disbursements paid by an enterprise of a Contracting state to a resident of the other Contracting state shall, for the purpose of determining the taxable profits ....
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....ARTICLE 26 1. The competent authorities of the Contracting States shall exchange such information as is necessary for carrying out the provisions of this Convention or of the domestic laws of the Contracting States concerning taxes covered by this Convention insofar as the taxation thereunder is not contrary to the provisions of this Convention, or for the prevention of fiscal evasion or fraud with respect to such taxes. Any information so exchanged shall be treated as secret and shall be disclosed only to persons or authorities including courts, involved in the assessment or collection of, the enforcement or prosecution in respect of, the taxes covered by the Convention or the determination of appeals in relation thereto. 2. In no case shall the provisions of paragraph 1 be construed so as to impose on a Contracting State the obligation: (a) to carry out administrative measures at variance with the laws and the administrative practice of that or of the other Contracting State; (b) to supply information which is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State ; or (c) to supply in....
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....in the Hindi and English languages, all the three texts being equally authentic. In case of any divergence of interpretations, the English text shall prevail. For the Government of the Republic of India Sd/- (G. N. Gupta) For the Government of Japan Sd/- (Eijiro Noda) New Delhi, March 7, 1989 Excellency, I have the honour to refer to sub-paragraph (c) of paragraph 3 of Article 23 of the Convention between the Government of the Republic of India and the Government of Japan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income which was signed today and to confirm on behalf of the Government of the Republic of India, the following understanding reached between the Government of the Republic of India and the Government of Japan; The measures set forth in the following sections of the Income-tax Act, 1961 (43 of 1961) of India, are "the special incentive measures designed to promote economic development in India, effective on the date of signature of this Convention" referred to in the said sub-paragraph: (i) Section 10(15) (iv).-relating to exemption from tax on certain interest; (....
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....industrial undertakings or hotel business in backward areas; (v) Section 80I.-relating to deduction in respect of profits and gains from industrial undertaking after a certain date, etc.; I have further the honour to request Your Excellency to be good enough to confirm the foregoing understanding on behalf of the Government of Japan." I have further the honour to confirm the understanding contained in Your Excellency's Note, on behalf of the Government of Japan. I avail myself oi this opportunity to extend to Your Excellency the assurance of my highest consideration. Eijiro Noda Ambassador Extraordinary and Plenipotentiary of Japan to India. His Excellency Mr. G. N. Gupta, Chairman, Central Board of Direct Taxes, Ministry of Finance, New Delhi, March 7, 1989 Excellency, I have the honour to refer to the Convention between the Government of Japan and the Government of the Republic of India for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income which was signed today and to confirm, on behalf of the Government of Japan, the following understanding reached between the two Governments....
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.... 7. With reference to paragraph 3 of Article 7 of the Convention, it is understood that in India the deductions in respect of the executive and general administrative expenses as referred to in the said paragraph shall be allowed in accordance with the domestic law of India, but such deductions shall in no case be less than what are allowable under the Indian Income-tax Act as effective on the date of signature of the Convention. 8. With reference to paragraph 3 of Article 7 of the Convention, no deduction shall be allowed in respect of amounts paid or charged (other than reimbursement of actual expenses) by a permanent establishment of an enterprise to the head office of the enterprise or any other offices thereof, by way of : (a) royalties, fees or other similar payments in return for the use of patents or other rights, or for the use of know-how ; (b) commission or other charges, for specific services performed or for management; and (c) interest on moneys lent to the permanent establishment, except where the enterprise is a banking institution. 9. With reference to Article 8 of the Convention: (i) interest on funds temporarily deposi....
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....ragraph (d) of paragraph 1 of Article 3 of the Convention the term "tax" shall not include any amount which is payable in respect of any default or omission in relation to the taxes to which the Convention applies or which represents a penalty imposed relating to these taxes. 3. With reference to sub-paragraph (e) of paragraph 1 of Article 3 of the Convention, in the case of India, the term "person" shall include a partnership and a Hindu Undivided Family. 4. With reference to paragraph 5 of Article 5 of the Convention the term "services or facilities" referred to therein shall include the supply of plant and machinery on hire used or to be used in the exploration, exploitation or extraction of mineral oils. 5. It is understood that the provisions of paragraph 6 of Article 5 of the Convention shall apply to the use of facilities solely for the purpose of delivery of goods or merchandise belonging to the enterprise or to the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of delivery unless sales of such goods or merchandise are effected in that other Contracting State. 6. With reference to paragraph 1 of Article 7 of the....