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Finland 14.
Convention for avoidance of double taxation with Finland Whereas
the annexed Convention between the Government of the Republic of India and the
Government of the Republic of Finland for the avoidance of double taxation with
respect to taxes on income and on capital has come into force on the
notification by both the Contracting States to each other of the compliance of
the constitutional requirements, as required by paragraph 1 of article 29 of
the said Convention. Now, therefore, in exercise of the powers conferred by
section 90 of the Income-tax Act, 1961 (43 of 1961), section 24A of the Companies
(Profits) Surtax Act, 1964 (7 of 1964) and section 44A of the Wealth-tax Act,
1957 (27 of 1957), the Central Government hereby directs that all the
provisions of the said Convention shall be given effect to in the Union of India. Notification : No. GSR
786(E), dated 20-11-1984, as amended by Notification No. 10671 [F. No.
501/13/80-FTD], dated 13-8-1998. Text of the annexed convention, dated 10-6-1983
The
Government of the Republic of India and the Government of the Republic of
Finland desiring to conclude a new Convention for the avoidance of double
taxation with respect to taxes on income and on capital have agreed as follows
: ARTICLE
1 - Personal scope - This Convention shall apply to persons who are
residents of one or both of the Contracting States. ARTICLE
2 - Taxes covered - 1. The taxes which are the subject of
the present Convention are : (a) in Finland : (i) the state income
taxes ; (ii) the corporate
income-tax ; (iii) the communal
tax ; (iv) the church
tax ; (v) the tax withheld
at source from interest ; (vi) the tax withheld
at source from non-residents income ; and (vii) the state capital
tax ; (hereinafter referred
to as Finnish tax) ; (b) in India : (i) the income-tax
including any surcharge thereon; and (ii) the
wealth-tax ; (hereinafter referred
to as Indian tax). 2. The
convention shall apply also to any identical or substantially similar taxes
which are imposed after the date of signature of the Convention in addition to,
or in place of, the existing taxes. The competent authorities of the
Contracting States shall notify each other of significant changes which have
been made in their respective taxation laws. ARTICLE
3 - General definitions - 1. For the purposes of this Convention,
unless the context otherwise requires : (a) the term person
includes an individual, a company and any other body of persons; (b) the term company
means any body corporate or any entity which is treated as a body corporate for
tax purposes; (c) the terms
enterprise of a Contracting State and enterprise of the other Contracting
State mean respectively an enterprise carried on by a resident of a
Contracting State and an enterprise carried on by a resident of the other
Contracting State; (d) the term
national means any individual possessing the nationality of a Contracting
State, and any legal person, partnership and association deriving its status
as such from the laws in force in a Contracting State; (e) the term
international traffic means any transport by a ship or aircraft operated by
an enterprise of a Contracting State, except when the ship or aircraft is
operated solely between places in the other Contracting State; (f) the term
competent authority means : (i) in Finland, the
Ministry of Finance, its authorised representative or the authority which, by
the Ministry of Finance, is designated as competent authority; (ii) in India, the
Central Government in the Ministry of Finance (Department of Revenue), or their
authorised representative; (g) the term fiscal
year means : (i) in Finland, the
tax year as defined in the taxation laws of Finland relating to income-tax; (ii) in India, the
previous year as defined in section 3 of the Income-tax Act, 1961; (h) the term tax
means Finnish tax or Indian tax, as the context requires, but 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 or
interest imposed relating to those taxes. 2. As
regards the application of the 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 State concerning the taxes to which the
Convention applies. ARTICLE
4 - Fiscal domicile - 1. For the purposes of this Convention, the
term resident of a Contracting State means any person, under the laws of
that State, is liable to tax therein by reason of his domicile, residence,
place of management 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 State in which he has a permanent home available to
him; if he has a permanent home available to him in both States, he shall be
deemed to be a resident of the 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 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 States, or
in neither of them, he shall be deemed to be a resident of the State of which
he is a national; (d) if he is a national of both 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 State in which its place of effective management is
situated. ARTICLE
5 - Permanent establishment - 1. For the purposes of the
Convention, 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; (c) an office; (d) a factory; (e) a workshop; (f) a mine, a quarry or any other place of
extraction of natural resources; (g) warehouse; and (h) premises used as a sales outlet or for
receiving or soliciting orders. 3. The
term permanent establishment, also includes (a) a building site, a construction, assembly or
installation project or supervisory activities in connection therewith, but
only where such site, project or activities continue for a period of more than
six months; (b) a building site, a construction, assembly or
installation project or supervisory activity being incidental to the sale of
machinery or equipment, where such site, project or activity continues for a
period not exceeding six months and the charges payable for the project or
supervisory activity exceed 10 per cent of the sale price of the machinery or
equipment. 4.
Notwithstanding the preceding provisions of this article the term permanent
shall be deemed not to include (a) the use of facilities solely for the purpose
of storage or display 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 or
display; (c) the maintenance of a stock 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 advertising, for the supply of information or for scientific
research, being activities, solely of a preparatory or auxiliary character in
the business of the enterprise. 5.
Notwithstanding the provisions of paragraphs (1) and (2), where a personother
than an agent of an independent status to whom paragraph (7) appliesis 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 in respect of any activities which that person
undertakes for the enterprise, if such a person : (a) has and habitually exercises in that State an
authority to conclude contracts in the name of the enterprise, unless the
activities of such person are limited to those mentioned in paragraph (4) which,
if exercised through a fixed place of business, would not make the fixed place
of business a permanent establishment under the provisions of that paragraph;
or (b) has no such authority, but habitually
maintains in the first-mentioned State a stock of goods or merchandise from
which he regularly delivers goods or merchandise on behalf of the enterprise. 6.
Notwithstanding the preceding provisions of this article, an insurance
enterprise of a Contracting State shall, except in regard to re-insurance, be
deemed to have a permanent establishment in the other Contracting State if it
collects premiums in the territory of that other State or insures risk situated
therein through a person other than an agent of an independent status to whom
paragraph (7) applies. 7. An
enterprise shall not be deemed to have a permanent establishment in a
Contracting State merely because it carries on business in that 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 shall not be considered an agent of an
independent status within the meaning of this paragraph. 8. The
fact that a company which is a resident to 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 or 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 (including income from
agriculture or forestry) situated in the other Contracting State may be taxed
in that other State. 2. (a)
The term immovable property shall, subject to the provisions of
sub-paragraphs (b) and (c), have the meaning which it has under
the law of the Contracting State in which the property in question is situated. (b)
The term immovable property 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. (c)
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 us in any other form of immovable property. 4. Where
the ownership of shares or other corporate rights in a company entitles the
owner of such shares or corporate rights to the enjoyment of immovable property
held by the company, the income from the direct use, letting, or use in any
other form of such right of enjoyment may be taxed in the Contracting State in
which the immovable property is situated. 5. 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 State unless the enterprise
carries on 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 State but
only so much of them as is attributable to (a) that permanent
establishment; (b) sales in that other State of goods or merchandise of
the same or similar kind as those sold through that permanent establishment; or
(c) other business activities carried on in that other State of the same
or similar kind as those effected through 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 State in which the permanent establishment is
situated or elsewhere, which are allowed under the provisions of the domestic
law of the Contracting State in which the permanent establishment is situated.
However, no such deduction shall be allowed in respect of amounts, if any paid,
(otherwise than towards reimbursement of actual expenses) by the permanent
establishment to the head office of the enterprise or any of its other
offices, by way of royalties, fees or other similar payments in return for the
use of patents or other rights, or by way of commission, for specific services
performed or for management, or, except in the case of a banking enterprise, by
way of interest on money lent to the permanent establishment. Likewise, no
account shall be taken, in determining the profits of a permanent
establishment, for amounts charged (otherwise than towards reimbursement of
actual expenses) by the permanent establishment to the head office of the
enterprise or any of its other offices, by way of royalties, fees or other
similar payments in return for the use of patents or other rights, or by way of
commission for specific services performed or for management or, except in the
case of a banking enterprise, by way of interest on money lent to the head
office of the enterprise or any of its other offices. 4. In so
far as it has been customary in a Contracting State to determine the profits to
be attributed to a permanent establishment on the basis of an apportionment of
the total profits of the enterprise to its various parts, nothing in paragraph
(2) shall preclude that Contracting State from determining the profits to be
taxed by such an apportionment as may be customary. The method of apportionment
adopted shall, however, be such that the result shall be in accordance with the
principles contained in this article. 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 the preceding paragraphs, 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 Convention, then the provisions of those articles shall not be
affected by the provisions of this article. ARTICLE
8 - Air transport - 1. Income derived by an enterprise of a
Contracting State from the operation of aircraft in international traffic
shall be taxable only in that State. 2.
Paragraph (1) shall likewise apply in respect of participations in pools of
any kind by enterprises engaged in air transport. 3. For
the purposes of this article (a) interest on funds connected with the operation
of aircraft in international traffic shall be regarded as income from the
operation of such aircraft ; and (b) the term operation of aircraft shall include
transportation by air of persons, livestock, goods or mail, carried on by the
owners or lessee or charterers of aircraft, including the sale of tickets for
such transportation on behalf of other enterprises, the incidental lease of
aircraft on a charter basis and any other activity directly connected with such
transportation. ARTICLE
9 - Shipping - 1. Income of an enterprise of a Contracting
State derived from the other Contracting State from the operation of ships in
international traffic may be taxed in that other State, but the tax chargeable
in that other State on such income shall be reduced by an amount equal to fifty
per cent of such tax. 2.
Paragraph (1) shall not apply to profits arising as a result of coastal
traffic. ARTICLE
10 - Associated enterprises - 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 reason of those
conditions, have not so accrued, may be included in the profits of that
enterprise and taxed accordingly. ARTICLE
11 - 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 State. 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 State, but
the tax so charged shall not exceed 15 per cent of the gross amount of the
dividends. 2.
However, as long as an individual resident in Finland is entitled to a tax
credit in respect of dividends paid by a company resident in Finland, the
following provisions of this paragraph shall apply in Finland instead of the
provisions of paragraph 1. Dividends
paid by a company which is a resident of Finland to a resident of India shall
be exempt from Finnish tax on
dividends. 3. The
provisions of paragraphs 1 and 2 shall not affect the taxation of the company
in respect of the profits out of which the dividends are paid. 4. 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. 5. The
provisions of paragraphs (1) and (2) shall not apply if the recipient 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 other 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 15, as the case may be, shall
apply. 6. Where
a company which is a resident of a Contracting State derives profits or income
from the other Contracting State, that other 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 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 State, nor subject the companys
undistributed profits, to a tax on the companys undistributed profits even if
the dividends paid or the undistributed profits consist wholly or partly of
profits or income arising in such other State. ARTICLE
12 - Interest - 1. Interest arising in a Contracting State
and paid to a resident of the other Contracting State may be taxed in that
other State. 2.
However, such interest may also be taxed in the Contracting State in which it
arises and according to the laws, of that State, but the tax so charged shall
not exceed 10 per cent of the gross amount of the interest. 3.
Notwithstanding the provisions of paragraphs 1 and 2, (a) interest arising in India shall be exempt from
Indian tax if the interest is paid to (i) the Bank of Finland; and (ii) the Finnish fund for Industrial Cooperation
Ltd. (FINNFUND) or any other similar institution, as may be agreed upon from
time to time between the competent authorities of the Contracting States; (b) interest arising in Finland shall be exempt
from Finnish tax if the interest is paid to (i) the Reserve Bank of India; (ii) National Housing Bank; (iii) Small Industries Development Bank of India
(SIDBI); and (iv)
Exim
Bank; (c) interest arising in a Contracting State on a
loan guaranteed by any of the bodies mentioned or referred to in sub-paragraph
(a) or (b) and paid to a resident of the other Contracting State
shall be exempt for tax in the first-mentioned 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 debtors profits, and in particular, income from Government
securities and income from bonds or debentures, including premiums and prizes
attaching to such securities, bonds and 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 recipient 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 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 of fixed base. In such case the provisions of Article 7
or Article 15, as the case may be, shall apply. 6.
Interest shall be deemed to arise in a Contracting State when the payer is that
State itself, a political sub-division, a statutory body, a local authority or
a resident of that 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 State in which the permanent establishment or fixed
base is situated. 7.
Where, by reason of a special relationship between the payer and the recipient
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 recipient in the absence of
such relationship, the provisions of this article shall apply only to the
last-mentioned amount. In such a 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
13 - Royalties and fees for technical services - 1. Royalties
and 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 State. 2. However,
such royalties and fees for technical services may also be taxed in the
Contracting State in which they arise and according to the laws of that State,
but the tax so charged shall not exceed : (a) in the case of royalties within sub-paragraph
(a) of paragraph 3, and fees for technical services within
sub-paragraphs (a) and (c) of paragraph 4 ; (i) during the years 1997 to 2001 : (aa) 15 per cent of the gross amount of such
royalties or fees, for technical services when the payer of the royalties or, fees
for technical services is the Government of the first-mentioned Contracting
State or a political sub-division of that State, and (bb) 20 per cent of the gross amount of such
royalties or fees for technical services in all other cases; and (ii) during subsequent years, 15 per cent of the
gross amount of such royalties or fees for technical services; and (b) in the case of royalties within sub-paragraph
(b) of paragraph 3 and fees for technical services defined in
sub-paragraph (b) of paragraph 4, 10 per cent of the gross amount of
such royalties and fees for technical services. 3. For
the purposes of this Article, the term royalties means : (a) payments of any kind received as a
consideration for the use of, or the right to use, any copyright of a literary,
artistic or scientific work, including cinematograph films or work on film,
tape or otherwise means of reproduction for use in connection with radio or
television broadcasting, any patent, trade-mark, design or model, plan, secret
formula or process, or for information concerning industrial, commercial or
scientific experience; and (b) payments of any kind received as a
consideration for the use of, or the right to use, any industrial, commercial
or scientific equipment, other than income derived by an enterprise of a
Contracting State from the operation of ships or aircraft in international
traffic. 4. For
the purposes of paragraph 2, and subject to paragraph 5, the term fees for
technical services means payments of any kind to any person in consideration
for the rendering of any technical or consultancy services (including the
provision of services of technical or other personnel) which : (a) are ancillary and subsidiary to the
application or enjoyment of the right, property or information for which a
payment described in sub-paragraph (a) of paragraph 3 is received; or (b) are ancillary and subsidiary to the enjoyment
of the property for which a payment described in sub-paragraph (b) of
paragraph 3 is received; or (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. 5. The
definitions of fees for technical services in paragraph 4 shall not include
amounts paid : (a) for services that are ancillary and
subsidiary, as well as inextricably and essentially linked, to the sale of
property, other than property described in sub-paragraph (a) of
paragraph 3; (b) for services that are ancillary and subsidiary
to the rental of ships, aircraft, containers or other equipment used in
connection with the operation of ships, or aircraft in international traffic; (c) for teaching in or by educational
institutions; (d) for services for the private use of the
individual or individuals making the payment; or (e) to an employee of the person making the
payments or to any individual or partnership for professional services as defined
in Article 15. 6. 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 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 technical services are paid is
effectively connected with such permanent establishment or fixed base. In such
case, the provisions of article 7 or article 15, as the case may be, shall
apply. 7.
Royalties and fees for technical services shall be deemed to arise in a
Contracting State when the payer is that State itself, a political
sub-division, a statutory body, local authority or a resident of that 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
obligation to make the payments was incurred, and such payments are borne by
such permanent establishment or fixed base, then such royalties or fees for
technical services shall be deemed to arise in the State in which the permanent
establishment or fixed base is situated. 8. Where,
by reason of a special relationship between the payer and the recipient or
between both of them and some other person, the amount of the royalties or fees
for technical services exceeds, for whatever reason, the amount which would
have been paid 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 law of each Contracting State, due regard
being had to the other provisions of this Convention. ARTICLE
14 - Capital gains - 1. Gains derived by a resident of a
Contracting State from the alienation of immovable property referred to in
paragraph 2 of article 6 and situated in the other Contracting State may be
taxed in that other State. 2. Gains
derived by a resident of a Contracting State from the alienation of shares or
other corporate rights may be taxed in the Contracting State in which the
company is registered. 3. Gains
from the alienation of movable property forming part of the 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 with the whole enterprise) or of
such fixed base, may be taxed in that other State. 4. 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 in which the place of effective
management of the enterprise is situated. ARTICLE
15 - Independent personal services - 1. Income derived by a
resident of a Contracting State in respect of professional services or other
independent activities of a similar character may be taxed in that State. Such
income may also be taxed in the other Contracting State if such services are
performed in that other State and if (a) he is present in that other State for a period
or periods aggregating to 90 days or more in the relevant fiscal year; or (b) he has a fixed base regularly available to him
in that other State for the purpose of performing his activities;
but
in each case only so much of the income as is attributable to those services. 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
16 - Dependent personal services - 1. Subject to the
provisions of articles 17, 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 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 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 State
for a period or periods not exceeding in the aggregate 183 days in the calendar
year concerned, and (b) the remuneration is paid by, or on behalf of,
an employer who is not a resident of the other State, and (c) the remuneration is not borne by a permanent
establishment or a fixed base which the employer has in the other State. 3.
Notwithstanding the preceding provisions of this article, remuneration derived
in respect of an employment exercised aboard a ship or aircraft operated in
international traffic, may be taxed in the Contracting State in which the place
of effective management of the enterprise is situated. ARTICLE
17 - Directors fees - Directors fees and other similar payments
derived by a resident of a Contracting State in his capacity as a member of the
board of directors or any other similar organ of a company which is a resident
of the other Contracting State may be taxed in that other State. ARTICLE
18 - Artistes and athletes - 1. Notwithstanding the
provisions of articles 15 and 16, 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 an athlete, from his personal activities as such
exercised in the other Contracting State, may be taxed in that other State. 2. Where
income in respect of personal activities exercised by an entertainer or an
athlete in his capacity as such accrues
not to the entertainer or athlete himself but to another person, that income
may, notwithstanding the provisions of articles 7, 15 and 16, be taxed in the Contracting State in
which the activities of the entertainer or athlete are exercised. 3. The
provisions of paragraphs 1 and 2 shall not apply if the visit to a contracting
State of the entertainer or the athlete is directly or indirectly supported,
wholly or substantially, from the public funds of the other contracting State,
including a political sub-division, or a statutory body or a local authority of
that other State. ARTICLE
19 - Pensions and social security payments - Subject to the provisions
of paragraph (2) of article 20, pensions and other similar remuneration in
consideration of past employment paid by a resident of, and pensions and other
payments made under a public scheme which is part of the social security system
of a contracting State to a resident of the other contracting State shall be
taxable only in the first-mentioned State. ARTICLE
20 - Government service - (1) (a) Remuneration, other
than a pension, paid by a contracting State or a statutory body or a local authority thereof to an individual in
respect of services rendered to that State or body or authority shall be
taxable only in that State. (b)
However, such remuneration shall be taxable only in the contracting State of
which the individual is a resident if the services are rendered in that State
and the individual (i) is a national of that State; or (ii) did not become a resident of that State solely
for the purpose of rendering the services. (2)(a)
Any pension paid by, or out of funds created by, a contracting State or a
statutory body or a local authority thereof to an individual in respect of
services rendered to that State or body or authority shall be taxable only in
that State. (b)
However, such pensions shall be taxable only in the contracting State of which
the individual is a resident if he is a national of that State. 3. The
provisions of articles 16, 17 and 19 shall apply to remuneration and pensions
in respect of services rendered in connection with a business carried on by a
contracting State or a statutory body or a local authority thereof. ARTICLE
21 - Students and apprentices - 1. Payments which a student
of business, technical, agricultural or forestry apprentice 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 or training receives for the purpose of his maintenance,
education or training shall not be taxed in that State, provided that such
payments arise from sources outside that State. 2.
A student at a university or other
institution for higher education in a Contracting State, or a business,
technical, agricultural or forestry apprentice who is or was immediately before
visiting the other Contracting State a resident of the first-mentioned State
and who is present in the other Contracting State for a period or periods not
exceeding in the aggregate 183 days in the calendar year concerned, shall not
be taxed in that other State in respect of remuneration for services rendered
in that State, provided that the services are in connection with his studies or
training and the remuneration constitutes earnings necessary for his
maintenance. If he is present in that other State for a period or periods
aggregating to 183 days or more in the calendar year concerned, he shall be
entitled to the same exemptions, reliefs or reductions in respect of taxes as
are granted to residents of that State. ARTICLE
22 - Other income - Items of income of a resident of a contracting
State, wherever arising, not dealt with in the foregoing articles of this
Convention shall be taxable only in that State except that, if such income is
derived from sources in the other contracting State it may also be taxed in
accordance with the law of that other State. ARTICLE
23 - Capital - 1. Capital represented by immovable property
referred to in paragraph (2) of article 6, owned by a resident of a contracting
State and situated in the other contracting State, may be taxed in that other
State. 2.
Capital represented by shares or other corporate rights referred to in
paragraph (4) of article 6 and owned by a resident of a contracting State may
be taxed in the contracting State in which the movable property held by the
company is situated. 3. Capital
represented by movable property forming part of the business property of a
permanent establishment which an enterprise of a contracting State has in the
other contracting State or by 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 may be taxed in
that other State. 4.
Capital represented by ships and aircraft operated in international traffic,
and by movable property pertaining to the operation of such ships and aircraft,
shall be taxable only in the contracting State in which the place of effective
management of the enterprise is situated. (5)
Elements of capital of a resident of a contracting State not dealt with in the
foregoing paragraphs of this article shall be taxable only in that State except
that, if such elements are situated in the other contracting State they may
also be taxed in accordance with the law of that other State. ARTICLE
24 - Elimination of double taxation - 1. In Finland, double
taxation shall be eliminated as follows : (a) Where a resident of Finland derives income or
owns capital which, in accordance with the provisions of this Convention, may be
taxed in India, Finland shall, subject to the provisions of sub-paragraph (b),
allow : (i) as a deduction from the tax on income of that
person, an amount equal to the tax on income paid in India, (ii) as a deduction from the tax on capital of
that person, an amount equal to the tax on capital paid in India.
Such
deduction in either case shall not, however, exceed that part of the tax on
income or on capital, as computed before the deduction is given, which is
attributable, as the case may be, to the income of the capital which may be
taxed in India. (b) Dividends paid by a company being a resident
of India to a company which is a resident of Finland and which controls
directly at least 10 per cent of the voting power in the company paying the
dividends shall be exempt from Finnish tax. (c) Notwithstanding any other provision of this
Convention, an individual who is a resident of India and under Finnish taxation
law with respect to the Finnish taxes referred to in article 2 also is regarded
as a resident of Finland may be taxed in Finland. However, Finland shall allow
any Indian tax paid on the income or the capital as a deduction from Finnish
tax in accordance with the provisions of sub-paragraph (a). The
provisions of this sub-paragraph shall apply only to nationals of Finland. (d) Where in accordance with any provisions of the
Convention, income derived or capital owned by a resident of Finland is exempt
from tax in Finland, Finland may nevertheless, in calculating the amount of
tax on the remaining income or capital of such resident, take into account the
exempted income or capital. (2)
For the purposes of paragraph 1, taxes paid in India shall be deemed to include
any amount which would have been payable as Indian tax but for a deduction
allowed in computing the taxable income or an exemption or reduction of tax
granted for that year under (a) sections 10(4), 10(4A), 10(5B),
10(15)(iv) and 80-IA of the
Income-tax Act, 1961 so far as they are in force or as modified only in minor
respects so as not to affect their general character; or (b) any other provisions which may subsequently be
enacted granting an exemption or reduction from tax which is agreed to by the
competent authorities of the two contracting States. (3) In
India double taxation shall be eliminated as follows: (a) The amount of Finnish tax payable, under the
laws of Finland and in accordance with the provisions of this Convention,
whether directly or by deduction, by a resident of India, in respect of income
which has been subjected to tax both in India and Finland shall be allowed as a
credit against the Indian tax payable in respect of such income but in an
amount not exceeding that proportion of Indian tax which such income bears to
the entire income chargeable to Indian tax. (b) For the purposes of the credit referred to in
sub-paragraph (a) above, where the resident of India is a company by
which surtax is payable, the credit to be allowed against the Indian tax shall
be allowed in the first instance against the income-tax payable by the company
in India and, as to the balance, if any, against the surtax payable by it in
India : Provided
that income which in accordance with the provisions of this convention is not
to be subjected to tax may be taken into account in calculating the rate of tax
to be imposed. Article 25 - Non-discrimination - 1.
The 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 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 State than the taxation levied on enterprises of that other State
carrying on the same activities in the same circumstances or under the same
conditions. This provision shall not be construed as preventing a contracting
State from charging the profits of a permanent establishment which an
enterprise of the other contracting State has in the first-mentioned State at a
rate of tax which is higher than that imposed on the profits of a similar
enterprise of the first-mentioned Contracting State, nor as being in conflict
with the provisions of paragraph (3) of article 7. 3.
Nothing contained in this article shall be construed as obliging a contracting
State to grant to individuals not resident in that State any personal
allowances, reliefs and reductions for taxation purposes which are by law
available only to individuals who are so resident. 4.
Nothing contained in this article shall be construed as obliging a contracting
State to compute the shipping profits in the same manner as is done in the case
of enterprises of that State. 5.
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 connected requirements to which other similar
enterprises of the first-mentioned State are or may be subjected. 6. The
provisions of this article shall apply to all taxes which are covered by this
Convention. Article 26 - 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 Convention, 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 25, 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 Convention. 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 Convention. 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 Convention. In particular, they may consult together for the
purposes of reaching an agreement on the allocation of income in cases referred
to in article 10. They may also consult together for the elimination of double
taxation in cases not provided for in the Convention. 4. In
the event the competent authorities reach an agreement referred to in
paragraphs (2) and (3), taxes shall be imposed on such income,
and refund or credit of taxes shall be allowed by the Contracting States in
accordance with such agreement. It shall be implemented notwithstanding any
time limits in the domestic law of the Contracting States. 5. The
competent authorities of the contracting States may communicate with each other
directly for the purpose of reaching an agreement in the sense of the preceding
paragraphs. When it seems advisable in order to reach agreement to have an oral
exchange of opinions, such exchange may take place through a commission
consisting of representatives of the competent authorities of the Contracting
States. Article 27 - 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 Convention or of the domestic laws of the contracting States
concerning taxes covered by the Convention insofar as the taxation thereunder
is not contrary to the Convention or for the prevention of the fraud or evasion
of taxes. The exchange of information is not restricted by article 1. Any
information received by a contracting State shall be treated as secret in the
same manner as information obtained under the domestic laws of that State and
shall be disclosed only to persons or authorities (including courts and
administrative bodies) involved in the assessment or collection of, the
enforcement of prosecution in respect of, or the determination of appeals in
relation to, the taxes covered by the Convention. 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 or 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; (c) to supply information 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. Article 28 - Diplomatic agents and
consular officers - Nothing in this Convention shall affect the fiscal
privileges of diplomatic agents or consular officers under the general rules of
international law or under the provisions of the special agreements. Article 29 - Entry into force - 1.
The Government of the Contracting States shall notify each other that the
constitutional requirements for the entry into force of this Convention have
been complied with. (2)
The Convention shall enter into force thirty days after the date of the later
of the notifications referred to in paragraph (1) and its provisions
shall have effect (a) in Finland (i) in respect of taxes withheld at source, to
income derived on or after 1st January in the calendar year next following the
year in which the Convention enters into force; (ii) in respect of other taxes on income, and
taxes on capital, to taxes chargeable for any taxable year beginning on or
after 1st January, in the calendar year next following the year in which the
Convention enters into force; (b) in India, in respect of taxes for assessment
years beginning on or after 1st April of the calendar year next following the
year in which the Convention enters into force. 3. The Agreement
between Finland and India for the avoidance of double taxation of income;
signed at New Delhi on June 23, 1961, as amended by exchange of notes on August
16, 1979, shall cease to have effect at the time that the provisions of this
Convention shall be effective in accordance with the provisions of paragraph 2. Article 30 - Termination - This
Convention shall remain in force until terminated by a contracting State.
Either contracting State may terminate the Convention, through diplomatic
channels, by giving notice of termination at least six months before the end of
any calendar year following after the period of five years from the date on
which the Convention enters into force. In such event the Convention shall
cease to have effect (a) in Finland: (i) in respect of taxes withheld at source, to
income derived on or after 1st January in the calendar year next following the
year in which the notice is given; (ii) in respect of other taxes on income, and
taxes on capital, to taxes chargeable for any taxable year beginning on or
after 1st January in the calendar year next following the year in which the
notice is given; (b) in India, in respect of taxes for any
assessment year beginning on or after 1st April of the second calendar year
following that in which the notice is given. In
witness whereof the undersigned, duly authorised thereto, have signed this
Convention. Done in
duplicate at Helsinki on this 10th day of June, 1983, in the Hindi, Finnish and
English languages, all the texts being equally authentic, except that in the
case of divergence of interpretation the English text shall prevail.
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