DTAA BETWEEN INDIA & CHINA

DTAA BETWEEN INDIA & CHINA

Agreement For Avoidance Of Double Taxation Of Income And The Prevention Of Fiscal Evasion With China

Whereas the annexed Agreement
between the Government of the Republic of India and the Government of the People’s
Republic of China for the avoidance of double taxation and the prevention of
fiscal evasion with respect to taxes on income has come into force on the 21st
day of November, 1994 after the notification by both the Contracting States to
each other of the completion of the procedures required under their laws for
bringing into force of the said Agreement in accordance with Article 28 of the
said Agreement;

Now, therefore, in exercise of
the powers conferred by section 90 of the Income-tax Act, 1961 (43 of 1961),
the Central Government hereby directs that all the provisions of the said
Agreement shall be given effect to in the Union of India.

Notification : No. GSR 331(E),
dated 5-4-1995.

ANNEXURE
AGREEMENT BETWEEN THE GOVERNMENT
OF THE REPUBLIC OF INDIA AND THE
GOVERNMENT OF THE PEOPLE’S REPUBLIC OF CHINA 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 the
People’s Republic of China,
desiring to conclude an Agreement for the avoidance of double taxation and the
prevention of fiscal evasion with respect to taxes on income, have agreed as
follows :

ARTICLE 1 : Personal scope – This
Agreement shall apply to persons who are residents of one or both of the
Contracting States.

ARTICLE 2 : Taxes covered –

1.
This Agreement shall apply to taxes on income imposed on behalf of a Contracting
State or of its political
sub-divisions or local authorities, irrespective of the manner in which they
are levied.

2. There shall be regarded as
taxes on income, all taxes imposed on total income, or on elements of income,
including taxes on gains from the alienation of movable or immovable property,
as well as taxes on capital appreciation.

3. The existing taxes to which
the Agreement shall apply are :

(a) in China
:

(i) the individual income-tax;

(ii) the income-tax for enterprises with foreign
investment and foreign enterprises;

(iii) the local income-tax; (hereinafter referred
to as “Chinese Tax”).

(b) in India;
the income-tax including any surcharge thereon;

(hereinafter referred to as
“Indian Tax”).

4. This Agreement shall also
apply to any identical or substantially similar taxes which are imposed after
the date of signature of this Agreement in addition to, or in place of, the
existing taxes referred to in paragraph 3. The competent authorities of the
Contracting States shall notify each other of any substantial changes which
have been made in their respective taxation laws within a reasonable period of
time after such changes.

ARTICLE 3 : General definitions –

1. For the purposes
of this Agreement, unless the context otherwise requires,—

(a) the term “China” means the People’s Republic
of China; when used in geographical sense means all the territory of the
People’s Republic of China, including its territorial sea, in which the Chinese
laws relating to taxation apply, and any area beyond its territorial sea,
within which the People’s Republic of China has sovereign rights of exploration
for any exploitation of resources of the sea-bed and its sub-soil and
superjacent water resources in accordance with international law;

(b) the term “India” means the territory of the
Republic of India and includes the territorial sea and airspace above it, as
well as any other maritime zone in which India has sovereign rights, other
rights and jurisdictions, according to the Indian law and in accordance with
international law;

(d) the term “tax” means Chinese tax or Indian
tax, as the context requires;

(e) 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;

(f) the term “company” means any body corporate
or any entity which is treated as a body corporate for tax purposes;

(g) the terms “enterprise of a Contracting
State” and “enterprise of the other
Contracting State”
mean, respectively, and enterprise carried on by a resident of a Contracting
State and an enterprise carried on
by a resident of the other Contracting
State;

(h) the term “nationals” means any individual
possessing the nationality of a Contracting
State and any legal person,
partnership or association deriving its status from the laws in force in the Contracting
State;

(i) the term “international traffic” means any
transport by a ship or aircraft operated by an enterprise which is a resident
of a Contracting State,
except when the ship or aircraft is operated solely between places in the other
Contracting State;

(j) the term “competent authority” means, in the
case of China,
the State Administration of Taxation or its authorized representative, and in
the case of India,
the Central Government in the Ministry of Finance (Department of Revenue) or
their authorized representative.

2. As regards the application of
this Agreement 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 Agreement
applies.

ARTICLE 4 : Resident –

1. For the
purposes of this Agreement, 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 office or any other
criterion of a similar nature.

2. Where by reason of the
provisions of paragraph 1 an individual is a resident of both Contracting
States, then his status shall be
determined as follows :

(a) He shall be deemed to be a resident of the
Contracting State in which he has a permanent home available to him; if he has
a permanent home available to him in both Contracting States, he shall be
deemed to be a resident of the Contracting State with which his personal and
economic relations are closer (centre of vital interests);

(b) If the State in which he has his centre of
vital interests cannot be determined, or if he has not a permanent home
available to him in either Contracting
State, he shall be deemed to be a
resident of the State in which he has an habitual abode;

(c) If he has an habitual abode in both
Contracting States or in neither of them, he shall be deemed to be a resident
of the Contracting State
of which he is a national;

(d) If he is a national of both Contracting
States or of neither of them, the competent authorities of the Contracting
States shall settle the question by mutual agreement.

3. Where by reason of the
provisions of paragraph 1 a person other than an individual is a resident of
both Contracting States, then it shall be deemed to be a resident of the Contracting
State in which its head office is
situated.

ARTICLE 5 : Permanent
establishment –

1. For the purposes of this Agreement, the term “permanent
establishment” means a fixed place of business through which the business of an
enterprise is wholly or partly carried on.

2. The term “permanent
establishment” includes especially :

(a) a place of management;

(b) a branch;

(d) a factory;

(e) a workshop;

(f) a mine, an oil or gas well, a quarry or any
other place of extraction of natural resources;

(g) a warehouse, in relation to a person providing
storage facilities for others;

(h) a farm, plantation or other place where
agriculture, forestry, plantation or related activities are carried on;

(i) an installation or structure used for the
exploration or exploitation of natural resources, but only if so used for a
period of more than 183 days;

(j) a building site or construction, installation
or assembly project or supervisory activities in connection therewith, where
such site, project or activities (together with other such sites, projects or
activities, if any) continue for a period of more than 183 days;

(k) the furnishing of services other than
technical services as defined in Article 12 (Royalties and Fees for Technical
Services), by an enterprise of a Contracting State through employees or other
personnel in the other Contracting State, but only if activities of that nature
continue within that other Contracting State for a period or periods
aggregating more than 183 days.

3. Notwithstanding the preceding
provisions of this Article, the term “permanent establishment” shall be deemed
not to include :

(a) the use of facilities solely
for the purpose of storage, display or delivery of goods or merchandise
belonging to the enterprise;

(b) the maintenance of a stock of goods or merchandise
belonging to the enterprise solely for the purpose of storage, display or
delivery;

(c) the maintenance of a sock of goods or
merchandise belonging to the enterprise solely for the purpose of processing by
another enterprise;

(d) the maintenance of a fixed place of business
solely for the purpose of purchasing goods or merchandise or of collecting
information, for the enterprise;

(e) the maintenance of a fixed place of business
solely for the purpose of carrying on, for the enterprise, any other activity
of a preparatory or auxiliary character.

4. Notwithstanding the provisions
of paragraphs 1 and 2, where a person – other than an agent of an independent
status to whom the provisions of paragraph 5 apply – is acting in a Contracting
State on behalf of an enterprise of the other Contracting State, has and
habitually exercises an authority to conclude contracts in the name of the
enterprise, that enterprise shall be deemed to have a permanent establishment
in the first-mentioned Contracting State in respect of any activities which
that person undertakes for the enterprise, unless the activities of such person
are limited to those mentioned in paragraph 3 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.

5. An enterprise of a Contracting
State shall not be deemed to have a
permanent establishment in the other Contracting
State merely because it carries on
business in that other Contracting State
through a broker, general commission agent or any other agent of an independent
status, provided that such persons are acting in the ordinary course of their
business. However, when the activities of such an agent are devoted wholly or
almost wholly on behalf of that enterprise, he will not be considered an agent
of an independent status within the meaning of this paragraph.

6. The fact that a company which
is a resident of a Contracting State controls or is controlled by a company
which is a resident of the other Contracting State, or which carries on
business in that other State (whether through a permanent establishment or
otherwise), shall not of itself constitute either company a permanent
establishment of the other.

ARTICLE 6 : Income from immovable property –

1. Income
derived by a resident of a Contracting
State from immovable property
situated in the other Contracting State
may be taxed in that other Contracting
State.

2. The term “immovable property”
shall have the meaning which it has under the law of the Contracting
State in which the property in
question is situated. The term shall in any case include property accessory to
immovable property, livestock and equipment used in agriculture and forestry,
rights to which the provisions of general law respecting landed property apply,
usufruct of immovable property and rights to variable or fixed payments as
consideration for the working of, or the right to work, mineral deposits,
sources and other natural resources. Ships and aircraft shall not be regarded
as immovable property.

3. The provisions of paragraph 1
shall apply to income derived from the direct use, letting, or use in any other
form of immovable property.

4. The provisions of paragraphs 1
and 3 shall also apply to the income from immovable property of an enterprise
and to income from immovable property used for the performance of independent
personal services.

ARTICLE 7 : Business profits –

1.
The profits of an enterprise of a Contracting
State shall be taxable only in that
Contracting State
unless the enterprise carries business in the other Contracting
State through a permanent
establishment situated therein. If the enterprise carries on business as
aforesaid, the profits of the enterprise may be taxed in the other Contracting
State but only so much of them as
is directly or indirectly attributable to that permanent establishment.

The provisions of this paragraph
shall, however, not apply if the enterprise proves that the above activities
could not have been undertaken by the permanent establishment or have no
relation with the 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. Insofar as the tax law of a
Contracting State provides with respect to a specific business activity that
the profits to be attributed to a permanent establishment are to be determined
on the basis of a deemed profit, nothing in paragraph 2 shall preclude that
Contracting State from applying those provisions of its law, provided that the
result is in accordance with the principles contained in this Article.

4. In determining the profits of
a permanent establishment, there shall be allowed as deduction expenses which
are incurred for the purposes of the business 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 in accordance with the provisions of tax law of that Contracting
State.

5. No profits shall be attributed
to a permanent establishment by reason of the mere purchase by that permanent
establishment of goods or merchandise for the enterprise.

6. For the purposes of paragraphs
1 to 5, the profits to be attributed to the permanent establishment shall be
determined by the same method year by year unless there is good and sufficient
reason to the contrary.

7. Where profits include items of
income which are dealt with separately in other Articles of this Agreement,
then the provisions of those Articles shall not be affected by the provisions
of this Article.

ARTICLE 8 : Shipping and air transport –

1. Profits
derived by an enterprise which is a resident of a Contracting State from the
operation by that enterprise of ships or aircraft in international traffic
shall be taxable only in that Contracting State.

2. For the purposes of this
Article, profits from the operation of ships or aircraft in international
traffic shall mean profits derived by an enterprise described in paragraph 1
from the transportation by sea or air respectively of passengers, mail,
livestock or goods carried on by the owners or lessees or charterers of ships
or aircraft including :

(a) the sale of tickets for such transportation ;

(b) the rental of ships or aircraft connected
with such transportation; and

(c) income from use, maintenance, or rental of
containers (including trailers, barges, and related equipment for the transport
of containers) operated in international traffic.

3. For the purposes of this
Article, interest on funds directly connected with the operation of ships or
aircraft in international traffic shall be regarded as profits described in
this Article, and the provisions of Article 11 (interest) shall not apply in
relation to such interest.

4. The provisions of paragraph 1
shall also apply to profits from the participation in a pool, a joint business
or an international operating agency.

ARTICLE 9 : Associated
enterprises –

1. Where—

(a) an enterprise of a Contracting
State participates directly or
indirectly in the management, control or capital of an enterprise of the other Contracting
State, or

(b) the same persons participate directly or
indirectly in the management, control or capital of an enterprise of a
Contracting State and an enterprise of the other Contracting State, 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 the reason of those
conditions, have not so accrued, may be included in the profits 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 the profits so
included are profits which would have accrued to the enterprise of the
first-mentioned Contracting State if the conditions made between the two
enterprises had been those which would have been made between independent
enterprises, then that other State shall make an appropriate adjustment to the
amount of tax charged therein on those profits. In determining such adjustment,
due regard shall be had to the other provisions of this Agreement and the
competent authorities of the Contracting States shall, if necessary, consult
each other.

ARTICLE 10 : Dividends –

1.
Dividends paid by a company which is a resident of a Contracting
State to a resident of the other Contracting
State, may be taxed in that other Contracting
State.

2. However, such dividends may
also be taxed in the Contracting State
of which the company paying the dividends is a resident and according to the
laws of that Contracting State,
but if the recipient is the beneficial owner of the dividends the tax so
charged shall not exceed 10 per cent of the gross amount of the dividends. The
provisions of this paragraph shall not affect the taxation of the company in
respect of the profits out of which the dividends are paid.

3. The term “dividends” as used
in this Article means income from shares, or other rights, not being debt
claims, participating in profits, as well as income from other corporate rights
which is subjected to the same taxation treatment as income from shares by the
laws of the State of which the company making the distribution is a resident.

4. The provisions of paragraphs 1
and 2 shall not apply if the beneficial owner of the dividends, being a
resident of a Contracting State, carries on business in the other Contracting
State of which the company paying the dividends is a resident, through a
permanent establishment situated therein, or performs in that either
Contracting State independent personal services from a fixed base situated
therein, and the holding in respect of which the dividends are paid is
effectively connected with such permanent establishment or fixed base, in such
case the provisions of Article 7 or Article 14, as the case may be, shall
apply.

5. Where a company which is a
resident of a Contracting State derives profits or income from the other
Contracting State, that other Contracting State may not impose any tax on the
dividends paid by the company, except insofar as such dividends are paid to a
resident of that other Contracting State or insofar as the holding in respect
of which the dividends are paid is effectively connected with a permanent
establishment or a fixed base situated in that other 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 such other Contracting State.

ARTICLE 11 : Interest –

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 10 per cent of the gross
amount of the interest.

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, a local
authority and the Central Bank thereof or any financial institution wholly
owned by that Government, or by any other resident of that other Contracting
State with respect to debt claims indirectly financed by the Government of that
other Contracting State, a political sub-division, a local authority, and the
Central Bank thereof or any financial institution wholly owned by that
Government shall be exempt from tax in the first-mentioned Contracting State.

4. The term “interest” as used in
this Article means income from debt-claims of every kind, whether or not
secured by mortgage and whether or not carrying a right to participate in the
debtor’s profits, and in particular, income from Government securities and
income from bonds or debentures, including premiums and prizes attaching to
such securities, bonds or debentures. Penalty charges for late payment shall
not be regarded as interest for the purpose of this Article.

5. The provisions of paragraphs 1
and 2 shall not apply if the beneficial owner of the interest, being a resident
of a Contracting State, carries on business in the other Contracting State in
which the interest arises, through a permanent establishment situated therein,
or performs in that other Contracting State independent personal services from
a fixed base situated therein, and the debt-claim in respect of which the
interest is paid is effectively connected with such permanent establishment or
fixed base. In such case the provisions of Article 7 or Article 14, as the case
may be, shall apply.

6. Interest shall be deemed to
arise in a Contracting State
when the payer is the Government of that Contracting
State, a political sub-division, 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 Contracting
State or not, has in a Contracting
State a permanent establishment or
a fixed base in connection with which the indebtedness on which the interest is
paid was incurred, and such interest is borne by such permanent establishment
or fixed base. Then such interest shall be deemed to arise in the Contracting
State in which the permanent
establishment or fixed base is situated.

7. Where, by reason of a special
relationship between the payer and the beneficial owner or between both of them
and some other person, the amount of the interest, having regard to the
debt-claim for which it is paid, exceeds the amount which would have been
agreed upon by the payer and the beneficial owner in the absence of such
relationship, the provisions of this Article shall apply only to the
last-mentioned amount. In such case, the excess part of the payments shall
remain taxable according to the laws of each Contracting
State, due regard being had to the
other provisions of this Agreement.

ARTICLE 12 : Royalties and fees
for technical services –

1. Royalties or fees for technical services 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 royalties or
fees for technical services may also be taxed in the Contracting State in which
they arise, and according to the laws of that Contracting State, but if the
recipient is the beneficial owner of the royalties or fees for technical
services, the tax so charged shall not exceed 10 per cent of the gross amount
of the royalties or fees for technical services.

3. The term “royalties” as used
in this Article means payment of any kind received as a consideration for the
use of, or the right to use, any copyright of literary, artistic or scientific
work including cinematograph films and films or tapes for radio or television
broadcasting, any patent, trade mark, design or model, plan, secret formula or
process, or for the use of, or the right to use, industrial, commercial or
scientific equipment, or for information concerning industrial, commercial or
scientific experience.

4. The term “fees for technical
services” as used in this Article means any payment for the provision of
services of managerial, technical or consultancy nature by a resident of a Contracting
State in the other Contracting
State, but does not include payment
for activities mentioned in paragraph 2(k) of Article 5 and Article 15 of the
Agreement.

5. The provisions of paragraphs 1
and 2 shall not apply if the beneficial owner of the royalties or fees for
technical services, being a resident of a Contracting State, carries on business
in the other Contracting State in which the royalties or fees for technical
services arise, through a permanent establishment situated therein, or performs
in that other Contracting State independent personal services from a fixed base
situated therein, and the right, property or contract in respect of which the
royalties or fees for the technical services are paid is effectively connected
with such permanent establishment or fixed base. In such case the provisions of
Article 7 or Article 14, as the case may be, shall apply.

6. Royalties or fees for
technical services shall be deemed to arise in a Contracting
State when the payer is the
Government of that Contracting State,
a political sub-division, a 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 a special
relationship between the payer and the beneficial owner or between both of them
and some other person, the amount of the royalties or fees for 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 to the laws of each Contracting
State, due regard being had to the
other provisions of this Agreement.

ARTICLE 13 : Capital gains –

1.
Gains derived by a resident of a Contracting
State from the alienation of
immovable property referred to in Article 6 and situated in the other Contracting
State may be taxed in that other Contracting
State.

2. Gains from the alienation of
movable property forming part of business property of a permanent establishment
which an enterprise of a Contracting State has in the other Contracting State
or of movable property pertaining to a fixed base available to a resident of a
Contracting State in the other Contracting State for the purpose of performing
independent personal services, including such gains from the alienation of such
a permanent establishment (alone or together with the whole enterprise) or of
such a fixed base, may be taxed in that other Contracting State.

3. Gains from the alienation of
ships or aircraft operated in international traffic or movable property
pertaining to the operation of such ships or aircraft shall be taxable only in
the Contracting State
of which the alienator is a resident.

4. Gains from the alienation of
shares of the capital stock of a company the property of which consists
directly or indirectly principally of immovable property situated in a Contracting
State may be taxed in that Contracting
State.

5. Gains from the alienation of
any property other than that referred to in the preceding paragraphs of this
Article, arising in a Contracting State, may be taxed in that Contracting
State.

ARTICLE 14 : Independent personal
services –

1. Income derived by a resident of a Contracting State in respect of
professional services or other activities of an independent character shall be
taxable only in that Contracting State except in one of the following
circumstances, when such income may also be taxed in the other Contracting
State :

(a) if he has a fixed base regularly available to
him in the other Contracting State
for the purpose of performing his activities; in that case, only so much of the
income as is attributable to that fixed base may be taxed in that other Contracting
State;

(b) if his stay in the other Contracting State is
for a period or periods exceeding in the aggregate 183 days in the taxable year
concerned; in that case, only so much of the income as is derived from his
activities performed in that other Contracting State may be taxed in that other
Contracting State.

2. The term “professional
services” includes especially independent scientific, literary, artistic,
educational or teaching activities as well as the independent activities of
physicians, lawyers, engineers, architects, dentists and accountants.

ARTICLE 15 : Dependent personal
services –

1. Subject to the provisions 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 there
from 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 State if :

(a) the recipient is present in the other
Contracting State for a period or periods not exceeding in the aggregate 183
days in the taxable year concerned; and

(b) the remuneration is paid by, or on behalf of,
an employer who is not a resident of the other Contracting
State; and

(c) the remuneration is not borne by a permanent
establishment or a fixed base which the employer has in the other Contracting
State.

3. Notwithstanding the provisions
of paragraphs 1 and 2 of this Article, remuneration derived in respect of an
employment exercised aboard a ship or aircraft operated by an enterprise which
is a resident of a Contracting State in international traffic shall be taxable
only in that Contracting State.

ARTICLE 16 : Directors’ fees –
Directors’ fees and other similar payments derived by a resident of a Contracting
State in his capacity as member of
the Board of Directors of a company which is resident of the other Contracting
State may be taxed in that other Contracting
State.

ARTICLE 17 : Artistes and
sportspersons –

1. Notwithstanding the provisions of Articles 14 and 15, income
derived by a resident of a Contracting State as an entertainer, such as a
theatre, motion picture, radio or television artiste, or a musician, or as a
sportsperson, from his personal activities as such exercised in other
Contracting State, may be taxed in that other Contracting State.

2. Where income in respect of
personal activities exercised by an entertainer or a sportsperson in his
capacity as such accrues not to the entertainer or sportsperson himself but to
another person, that income may, notwithstanding the provisions of Articles 7,
14 and 15, be taxed in the Contracting State in which the activities of the
entertainer or sportsperson are exercised.

3. Notwithstanding the provisions
of paragraphs 1 and 2, income derived by entertainers or sportsperson who are
residents of a Contracting State from the activities exercised in the other
Contracting State either as a part of culture exchange between the Contracting
States or supported wholly or substantially from the public funds in either of
the Contracting States or political sub-divisions or local authorities thereof,
shall be exempt from tax in that other Contracting State.

ARTICLE 18 : Pensions –

1.
Subject to the provisions of paragraph 2 of Article 19, pensions, annuity and
other similar remuneration paid to a resident of a Contracting State in
consideration of past employment shall be taxable only in that Contracting
State.

2. Notwithstanding the provisions
of paragraph 1, pensions, annuity paid and other similar payments made by the
Government of a Contracting State or a political sub-division or a local
authority thereof under a public welfare scheme of the special security system
of that Contracting State shall be taxable only in that Contracting State.

ARTICLE 19 : Remuneration and
pensions in respect of Government services –
1.

(a) Remuneration, other than
pension, paid by the Government of a Contracting State or a political
sub-division or a local authority thereof to an individual in respect of
services rendered to the Government of that Contracting State or a political
sub-division or 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
rendering the services.

2. (a) Any pension paid by, or
out of funds to which contributions are made by the Government of a Contracting
State or a political sub-division or a local authority thereof to an individual
in respect of services rendered to the Government of that Contracting State or
a political sub-division or a local authority thereof shall be taxable only in
the Contracting State.

(b) However, such pension shall
be taxable only in the other Contracting
State if the individual is a
resident of, and a national of, that other Contracting
State.

3. The provisions of Articles 15,
16, 17 and 18 shall apply to remuneration and pensions in respect of services
rendered in connection with a business carried on by the Government of a Contracting
State or a political sub-division
or a local authority thereof.

ARTICLE 20 : Payments received by
professors, teachers and research scholars – 1. An individual who is, or
immediately before visiting a Contracting State was, a resident of the other
Contracting State and is present in the first-mentioned Contracting State for
the primary purpose of teaching giving lectures or conducting research at a
university, college, school or educational institution or scientific research
institution approved by the Government of the first-mentioned Contracting State
shall be exempt from tax in the first mentioned Contracting State, for a period
of three years from the date of his arrival in the first-mentioned Contracting
State, in respect of remuneration for such teaching, lectures or research.

2. This Article shall not apply
to income from research if such research is undertaken primarily for the
private benefit of a specific person or persons.

ARTICLE 21 : Payments received by
students, trainees and apprentices –

1. A student, business apprentice or
trainee who is or was immediately before visiting a Contracting State a
resident of the other Contracting State and who is present in the
first-mentioned State solely for the purpose of his education, training shall
be exempt from tax in that first-mentioned State on the following payments or
income received or derived by him for the purpose of his maintenance, education
or training :

(a) payments derived from sources outside that Contracting
State for the purpose of his
maintenance, education, study, research or training;

(b) grants, scholarships or
awards supplied by the Government or a scientific, educational, cultural or
other tax-exempt organization; and

2. The benefits of this Article
shall extend only for such period of time as may be reasonable or customarily
required to complete the education or training undertaken, but in no event
shall any individual have the benefits of this Article, for more than five
consecutive years from the date of his first arrival in that Contracting State.

ARTICLE 22 : Other income –

1.
Items of income of a resident of a Contracting
State, wherever arising, not dealt
with in the foregoing Articles of this Agreement shall be taxable only in that Contracting
State.

2. The provisions of paragraph 1
shall not apply to income, other than income from immovable property as defined
in paragraph 2 of Article 6, if the recipient of such income, being a resident
of a Contracting State, carries on business in the other Contracting State
through a permanent establishment situated therein, or performs in that other
Contracting State independent personal services from a fixed base situated
therein, and the right or property in respect of which the income is paid is
effectively connected with such permanent establishment or fixed base. In such
case the provisions of Article 7 or Article 14, as the case may be, shall
apply.

3. Notwithstanding the provisions
of paragraphs 1 and 2, items of income of a resident of a Contracting
State not dealt within the
foregoing Articles of this Agreement and arising in the other Contracting
State may be taxed in that other Contracting
State.

ARTICLE 23 : Methods for the
elimination of double taxation –

1. In China,
double taxation shall be eliminated as follows :

(a) Where a resident of China
derives income from India
the amount of tax on that income payable in India
in accordance with the provisions of this Agreement, may be credited against
the Chinese tax imposed on that resident. The amount of credit, however, shall
not exceed the amount of the Chinese tax on that income computed in accordance
with the taxation laws and regulations of China.

(b) Where the income derived from India is a
dividend paid by a company which is a resident of India to a company which is a
resident of China and which owns not less than 10 per cent of the shares of the
company paying the dividend, the credit shall take into account the tax paid to
India by the company paying the dividend in respect of its income.

2. In India,
double taxation shall be eliminated as follows :

Where a resident of India
derives income which, in accordance with the provisions of this Agreement, may
be taxed in China,
India shall
allow as a deduction from the tax on the income of that resident an amount
equal to the income-tax paid in China
whether directly or by deduction. Such deduction 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 China.

3. The tax paid in a Contracting
State mentioned in paragraphs 1 and 2 of this Article shall be deemed to
include the tax which would have been payable but for the legal provisions
concerning tax reduction exemption or other tax incentives of the Contracting
States for the promotion of economic development.

ARTICLE 24 : Non-discrimination –

1. Nationals of a Contracting State
shall not be subjected in the other Contracting
State to any taxation or any
requirement connected therewith, which is other or more burdensome than the
taxation and connected requirements to which nationals of that other Contracting
State in the same circumstances are
or may be subjected.

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 in the same circumstances or under the same conditions.

3. Where a Contracting State
charges the profits of a permanent establishment which an enterprise of the
other Contracting State has in the first-mentioned Contracting State at a rate
of tax which is different from that imposed on the profits of a similar
enterprise of the first-mentioned Contracting State, it shall not be construed
as discrimination under this Article.

4. Nothing contained in this
Article shall be construed as obliging a Contracting
State to grant to residents of the
other Contracting State
any personal allowances, relief’s and deductions for taxation purposes on
account of civil status or family responsibilities which it grants to its own
residents.

5. Except where the provisions of
paragraphs 1 of Article 9, paragraph 7 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 of such enterprise, be deductible
under the same conditions as if they had been paid to a resident of the
first-mentioned State subject to the provisions of domestic laws of that
Contracting State.

6. Enterprises of a Contracting
State, the capital of which is wholly or partly owned or controlled, directly
or indirectly, by one or more residents of the other Contracting State, shall
not be subjected in the first-mentioned State to any taxation or any
requirement connected therewith which is other or more burdensome than the
taxation and connected requirements to which other similar enterprises of the
first-mentioned State are or may be subjected in the same circumstances and
under the same conditions.

7. In this Article, the term
“taxation” means taxes which are the subject of this Agreement.

ARTICLE 25 : Mutual agreement
procedure –

1. Where a person considers that the actions of one or both of the
Contracting States result or will result for him in taxation not in accordance
with the provisions of this Agreement, he may, irrespective of the remedies
provided by the domestic law of those States, present his case to the competent
authority of the Contracting State of which he is a resident or, if his case
comes under paragraph 1 of Article 24, to that of the Contracting State of
which he is a national. The case must be presented within three years from the
first notification of the action resulting in taxation not in accordance with
the provisions of the Agreement.

2. The competent authority shall
endeavour, if the objection appears to it to be justified and if it is not
itself able to arrive at a satisfactory solution, to resolve, the case by
mutual agreement with the competent authority of the other Contracting State,
with a view to the avoidance of taxation which is not in accordance with the
provisions of this Agreement. Any agreement reached shall be implemented
notwithstanding any time limits in the domestic law of the Contracting States.

3. The competent authorities of
the Contracting States shall endeavour to resolve by mutual agreement any
difficulties or doubts arising as to the interpretation or application of the
Agreement. They may also consult together for the elimination of double
taxation in cases not provided for in this Agreement.

4. The competent authorities of
the Contracting States may communicate with each other directly for the purpose
of reaching an agreement in the sense of paragraphs 2 and 3. When it seems
advisable for reaching agreement, representatives of the competent authorities
of the Contracting States may meet together for an oral exchange of opinions.

ARTICLE 26 : Exchange of
information –

1. The competent authorities of the Contracting States shall
exchange such information (including documents) as is necessary for carrying
out the provisions of this Agreement or of the domestic laws of the Contracting
States concerning taxes covered by the Agreement, insofar as the taxation there
under is not contrary to this Agreement, in particular for the prevention of
evasion of such taxes. The exchange of information is not restricted by Article
1. Any information received by a Contracting
State shall be treated as secret
and shall be disclosed only to persons or authorities (including courts and
administrative bodies) involved in the assessment or collection of, the
enforcement or prosecution in respect of, or the determination of appeals in
relation to, the taxes covered by the Agreement. Such persons or authorities
shall use the information only for such purposes. They may disclose the
information in public court proceedings or in judicial decisions.

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 administrative practice of that or of the other Contracting
State;

(b) to supply information or documents which is
not obtainable under the laws or in the normal course of the administration of
that or of the other Contracting State;
and

(c) to supply information or documents which
would disclose any trade, business, industrial, commercial or professional
secret or trade process, or information, the disclosure of which would be
contrary to public policy (order public).

ARTICLE 27 : Diplomatic agents
and consular officers – Nothing in this Agreement shall affect the fiscal
privileges of diplomatic agents or consular officers under the general rules of
international law or under the provisions of special agreements.

ARTICLE 28 : Entry into force –
This Agreement shall enter into force on the thirtieth day after the date on
which diplomatic notes indicating the completion of internal legal procedures
necessary in each country for the entry into force of this Agreement have been
exchanged. This Agreement shall have effect :

(a) in China, in respect of income arising in any
taxable year beginning on or after the first day of January next following the
calendar year in which this Agreement enters into force;

(b) in India,
in respect of income arising in any previous year beginning on or after the
first day of April next following the calendar year in which this Agreement
enters into force.

ARTICLE 29 : Termination – This
Agreement shall remain in force indefinitely but either of the Contracting
States may, on or before the thirtieth day of June in any calendar year
beginning after the expiration of a period of five years from the date of its
entry into force, give written notice of termination to the other Contracting
State through the diplomatic channels. In such event this Agreement shall cease
to have effect :

(a) in China,
in respect of income arising in any taxable year beginning on or after the
first day of January next following the calendar year in which the notice of
termination is given;

(b) in India,
in respect of income arising in any previous year beginning on or after the first
day of April next following the calendar year in which the notice is given;

In witness whereof, the
undersigned, being duly authorized thereto, have signed the present Agreement.

Done in duplicate at New
Delhi on this eighteenth day of July, one thousand
nine hundred and ninety-four in the Hindi, Chinese and English languages, all
three texts being equally authentic. In case of any divergence the English text
shall prevail.

Sd/- Sd/- For the Government of the For the Government of the Republic
of India People’s Republic of

China

PROTOCOL

At the signing of the Agreement
between the Government of the Republic of India and the Government of the
People’s Republic of China for the Avoidance of Double Taxation and the
Prevention of Fiscal Evasion with respect to taxes on income (hereinafter
referred to as “The Agreement”) both sides have agreed upon the following which
form an integral part of the Agreement :

1. With reference to paragraph (1d) of Article 3
:

It is understood that the term
“tax” should not include any penalty imposed for non-compliance of the laws and
regulations relating to the taxes to which this Agreement applies.

2. With reference to Article 8, the exemption
shall also include:

(i) in China,
the business tax;

(ii) in India,
any tax similar to the business tax in China
which may be imposed in India
after signing of the Agreement.

3. With reference to Article 26:

The competent authorities of the
Contracting States shall agree from time to time on the information or documents
which shall be necessarily furnished on a routine basis.

In witness whereof, the
undersigned, being duly authorized thereto, have signed the present Protocol.

Sd/- Sd/-

For the Government of the For the Government of the Republic of India People’s Republic of

China

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India-China Signed Amended DTAA

India and China have amended their bilateral tax treaty to enable greater flow of information and help prevent tax evasion. “The Government of India and the People’s Republic of China have signed a protocol on November 26, 2018, to amend the Double Taxation Avoidance Agreement (DTAA) for avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income,” a statement from the Central Board of Direct Taxes said Monday.

This amendment brings existing provisions for exchange of information on par with latest global standards, the statement said.

The protocol incorporates changes required to implement treaty-related minimum standards under the action reports of Base Erosion & Profit Shifting (BEPS) Project, a global agreement to curb tax evasion. Tax experts say the changes would make the exchange meaningful. “This protocol strengthens the ‘Exchange of Information’ clause, bringing it to international standards, to enable a more meaningful exchange of information,” said Rakesh Nangia, managing partner, Nangia Advisors LLP. India and China inked the DTAA in 1994.

China had included 102 treaties in its list of ‘Covered Tax Agreement’ but not India while penning the ‘Multilateral Instrument’, which meant the minimum standards suggested by BEPS report wouldn’t have amended the India-China DTAA even after the global treaty. In order to bring the changes suggested by BEPS, it was necessary for India & China to sign a protocol and bring the changes bilaterally.

Base Erosion and Profit Shifting (BEPS)

BEPS is a term used to describe tax planning strategies that exploit mismatches and gaps that exist between the tax rules of different jurisdictions.

It is done to minimise the corporation tax that is payable overall, by either making tax profits ‘disappear’ or shift profits to low tax jurisdictions where there is little or no genuine activity. In general BEPS strategies are not illegal; rather they take advantage of different tax rules operating in different jurisdictions.

BEPS is of major significance for developing countries due to their heavy reliance on corporate income tax, particularly from multinational enterprises (MNEs). The BEPS initiative is an OECD initiative, approved by the G20, to identify ways of providing more standardised tax rules globally.

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