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Indonesia 19. Indonesia - Agreement for avoidance of
double taxation with Indonesia Whereas
the annexed Agreement between the Government of the Republic of India and the
Government of the Republic of Indonesia for the avoidance of double taxation
and the prevention of fiscal evasion with respect to taxes on income has
entered into force on the 19th December, 1987 on the notification by both the
Contracting States to each other of the completion of the procedures required
by their laws, as specified by article 26 of the said Agreement; Now,
therefore, in exercise of the powers conferred by section 90 of the Income-tax
Act, 1961 (43 of 1961) and section 24A of the Companies (Profits) Surtax Act,
1964 (7 of 1964), 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 77(E), dated 4-2-1988. TEXT OF ANNEXED AGREEMENT, DATED 7-8-1987 The
Government of the Republic of India and the Government of the Republic of
Indonesia 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. The taxes to which this Agreement shall apply
are : (a)
in
India : (i) the income-tax including any surcharge
thereon imposed under the Income-tax Act, 1961 (43 of 1961) ; (ii) the surtax imposed under the Companies
(Profits) Surtax Act, 1964 (7 of 1964) ; (hereinafter
referred to as Indian Tax) ; (b) in Indonesia : the
income-tax imposed under the Undangundang Pajak Penghasilan 1984 (Law No. 7 of
1983) and to the extent provided in such income-tax law, the company tax
imposed under the Ordonansi Pajak Perseroan 1925 (State Gazette No. 319 of 1925
as lastly amended by Law No. 8 of 1970) and the tax imposed under the
Undangundang Pajak atas Bunga, Dividen dan Royalty 1970 (Law No. 10 of
1970) ; (hereinafter
referred to as Indonesian Tax) 2. The
agreement shall also apply to any identical or substantially similar taxes
which are imposed by either Contracting State after the date of signature of
the present Agreement in addition to, or in place of, the taxes referred to in
paragraph 1. The competent authorities of the Contracting States shall notify
each other of any substantial changes which are made in their respective
taxation laws. ARTICLE
3 - General definitions - 1. In this Agreement, unless the context
otherwise requires :
(a) the
term India means the territory of India and includes the territorial sea and
air space above it, as well as any other maritime zone which India has
sovereignty, sovereign rights, other rights and jurisdiction according to the
Indian Law and in accordance with International Law, particularly the United Nations
Convention on the Law of the Sea, 1982 ;
(b) the
term Indonesia comprises the territory of the Republic of Indonesia as
defined in its laws and the adjacent areas over which the Republic of Indonesia
has sovereignty, sovereign rights or jurisdiction in accordance with
international law, particularly the provisions of the United Nations Convention
on the Law of the Sea, 1982 ;
(c) the
terms a Contracting State and the other Contracting State mean India or
Indonesia as the context requires;
(d) the
term tax means Indian tax or Indonesian 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 this Agreement applies or which
represents a penalty imposed relating to those taxes ;
(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 company
or body corporate under the taxation laws in force in the respective
Contracting States ;
(g) 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 ;
(h) 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 ;
(i) the
term competent authority means in the case of India, the Central Government
in the Ministry of Finance (Department of Revenue) or their authorised
representative ;
and in the case of Indonesia, the Minister of Finance or
his authorised representative ;
(j) the term
national 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. 2. As
regards the application of the Agreement by a Contracting State, any term not
defined therein shall, unless the context otherwise requires, have the meaning
which it has under the law of that State concerning the taxes to which the
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
State, is liable to tax therein by reason of his domicile, residence, place of
management or any other criterion of a similar nature. But this term does not include any person
who is liable to tax in that State in respect only of income from sources in
that State. 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, 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, the competent authorities of the
Contracting States shall settle the question by mutual agreement keeping in
view its place of incorporation, place of effective management and other
relevant factors. 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 ; (c) an office ; (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 building site or construction, installation
or assembly project or supervisory activities in connection therewith, but only
where such site, project or activity continues for a period of 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 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 for collecting
information, for the enterprise ; and (e) the maintenance of a fixed place of business
solely for the purpose of advertising for the supply of information, for
scientific research or for similar activities which have a preparatory or
auxiliary character for the enterprise. 4. Where
a person (other than an agent of an independent status to whom the provisions
of paragraph 7 apply) is acting in a Contracting State on behalf of an
enterprise of the other Contracting State, that enterprise shall be deemed to
have a permanent establishment in the first-mentioned State in respect of any
activities which that person undertakes for the enterprise, if : (a) that person has, and habitually exercises in
the first-mentioned State, an authority to conclude contracts on behalf of the
enterprise ; or (b) that person maintains the first-mentioned
Contracting State a stock of goods or merchandise belonging to the enterprise
from which he regularly delivers goods or merchandise on behalf of the
enterprise. 5. An enterprise
of a Contracting State shall be deemed to have a permanent establishment in the
other Contracting State if it furnishes services, including consultancy
services in that other Contracting State through employees or other
personnelother than an agent of an independent status to whom the provisions
of paragraph 7 applyprovided that activities of that nature continue (for the
same or a connected project) within the country for a period or periods
aggregating more than 91 days in any twelve-month period. 6. An
insurance enterprise of a Contracting State shall, except with regard to
reinsurance, be deemed to have a permanent establishment in the other
Contracting State if it collects premiums in that other State or insures risks
situated therein through an employee or through a representative who is not an
agent of an independent status within the meaning of paragraph 7. 7. An
enterprise of a Contracting State shall not be deemed to have a permanent establish-ment
in the other Contracting State merely because it carries on business in that
other 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, then 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. 8. The
fact that a company which is 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 Contracting State (whether through a
permanent establishment or other-wise), 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, including income from
agriculture or forestry, situated in the other Contracting State may be taxed
in that other 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, boats and aircraft shall not be regarded as immovable property. 3. The
provisions of paragraph 1 shall also 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 income from immovable property used for the
performance of independent personal services. 1ARTICLE 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. 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
attributable 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 business 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. 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 moneys lent to the permanent establishment.
Likewise, no account shall be taken, in the determination of 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 moneys lent to
the head office of the enterprise or any of its other offices. 4.
Insofar as it has been customary in a Contracting State to determine the
profits to be attributed to a permanent establishment on the basis of 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 mechandise 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 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 of a Contracting State from the operation of ships or aircraft in
international traffic shall be taxable only in that State. 2. The
provisions of paragraph 1 of this article shall also apply to profits from
participation in a pool, a joint business or an international operating agency. 3. For
the purposes of this article, interest on funds connected with the operation of
ships or aircraft in international traffic shall be regarded as profits derived
from the operation of such ships or aircraft and the provisions of article 11
shall not apply in relation to such interest. 4. The
term operation of ships or aircraft shall mean business of transportation of
passengers, mail, livestock or goods carried on by the owners or lessees or
charterers of ships or aircraft, including the sale of tickets for such
transportation on behalf of other enterprises, the incidental lease of ships or
aircraft and any other activity directly connected with such transportation. 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 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 Stateand
taxes accordinglyprofits on which an enterprise of the other Contracting State
has been charged to tax in that other State and the profits so included are
profits which would have accrued to the enterprise of the first mentioned 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 the tax charged therein on
those profits. In determining such
adjustment, due regard shall be had to the other provisions of the 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
resident of a Contracting State to a resident of the other Contracting State
may be taxed in that other State. 2.
However, such dividends may also be taxed in the Contracting State of which the
company paying the dividends is a resident and according to the laws of that
State, but if the recipient is the beneficial owner of the dividends, the tax
so charged shall not exceed :
(a)
10
per cent of the gross amount of dividends if the beneficial owner is a company
which owns at least twenty-five per cent of the shares of the company paying
the dividends ;
(b)
15
per cent of the gross amount of the dividends in all other cases. 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 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 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 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
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 State. 12.
However, such interest may also be taxed in the Contracting State in which it
arises and according to the laws of that 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 or the interest. 3.
Notwithstanding the provisions of paragraph 2 : (a) interest arising in a Contracting State shall
be exempt from tax in that State provided it is derived and beneficially owned
by : (i) the Government, a political sub-division or a
local authority of the other Contracting State ; or (ii)
the Central Bank or any
agency or instrumentality (including a financial institution) wholly owned by
the other Contracting State or political sub-division or local authority
thereof ; (b) interest arising in a Contracting State shall
be exempt from tax in that Contracting State to the extent approved by the
Government of that State if it is derived and beneficially owned by any person
[other than a person referred to in sub-paragraph (a)] who is a resident
of the other Contracting State, provided that the transaction giving rise to
the debt-claim has been approved in this regard by the Government of the
first-mentioned Contracting State. 4. The
term interest as used in this article means income from debt-claims of every
kind (including interest on deferred payments sales) 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 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 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 provision 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 that
Contracting State itself, a political sub-division, 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 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 - 1. Royalties 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 may also be taxed in the Contracting State in which
they arise, and according to the laws of that State, but if the recipient is
the beneficial owner of the royalties, the tax so charged shall not exceed 15
per cent of the gross amount of the royalties. 3. The
term royalties as used in this article means payments 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 film, or films or tapes
used 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
provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the
royalties, being a resident of a Contracting State, carries on business in the
other Contracting State in which the royalties 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 or property
in respect of which the royalties 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.
Royalties shall be deemed to arise in a Contracting State when the payer is
that State itself, a political sub-division, a local authority or a resident of
that State. Where, however, the person
paying the royalties, 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 was incurred, and such
royalties are borne by such permanent establishment or fixed base, then such
royalties shall be deemed to arise in the State in which the permanent
establishment or fixed base is situated. 6. 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 royalties, 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 State. 2. 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 together
with the whole enterprise) or of such fixed base, may be taxed in that other
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 any property other than that mentioned in paragraphs 1,
2 and 3 shall be taxable only in the Contracting State of which the alienator
is a resident, ARTICLE
14 - 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 shall be taxable only in that
State except in 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 ; or (b) if his stay in the other Contracting State is
for a period or periods amounting to or exceeding in the aggregate 91 days in
any twelve month period; in that case, only so much of the income as is derived
from his activities performed in that other State may be taxed in that other
State. 2. The
term professional services includes independent scientific, literary,
artistic, educational or teaching activities, as well as the independent
activities of.physicians, surgeons, lawyers, engineers, architects, dentists
and accountants. ARTICLE
15 - Dependent personal services - 1. Subject to the provisions of
articles 16, 17, 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 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 any
twelve-month period ; 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 by an enterprise of a Contracting State shall be taxable
only in that State. ARTICLE
16 - Directors fees - Directors fees and similar payments derived
by a resident of a Contracting State in his capacity as a member of the Board
of Directors (by whatever name called) of a company which is a resident of the
other Contracting State may be taxed in that other State. ARTICLE
17 - Entertainers and athletes - 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 an athlete, from his personal activities as such exercised
in the other Contracting State may be taxed in that other State. 2. While
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, 14 and 15 be taxed in the Contracting State in which the
activities of the entertainer or athlete are exercised. 3.
Notwithstanding the provisions of paragraph 1, income derived by an entertainer
or an athlete who is a resident of a Contracting State from his personal
activities as such exercised in the other Contracting State, shall be taxable
in the first-mentioned Contracting State if : (a) the activities in the other Contracting State
are supported wholly or substantially from the public funds of the
first-mentioned Contracting State, including any of its political sub-divisions
or local authorities, or (b) the activities in the other Contracting State
are in pursuance of a special programme for cultural exchange agreed upon
between the Governments of the two Contracting States. 4. Notwithstanding the provisions
of paragraph 2 and articles 7, 14 and 15 where income in respect of personal
activities exercised by an entertainer or an athlete in his capacity as such in
a Contracting State accrues not to the entertainer or athlete himself but to
another person, that income shall be taxable only in the other Contracting
State if : (a) that other person is supported wholly or
substantially from the public funds of that other State, including any of its
political sub-divisions or local authorities, or (b) the activities are exercised by an individual,
being a resident of the other Contracting State, in pursuance of a special
programme for cultural exchange agreed upon between the Governments of the two
Contracting States and that other person to whom income therefrom accrues is a
resident of the other Contracting State. ARTICLE
18 - Remuneration and pensions in respect of Government service - 1.
Remuneration, other than a pension, paid by a Contracting State or a political
sub-division or a local authority thereof to an individual in respect of
services rendered to that State or sub-division or authority shall be taxable
only in that State. However such
remuneration shall be taxable only in the other Contracting State if the
services are rendered in that other State and the individual is a resident of
that State who : (a) is a national of that State ; or (b)
did not become a
resident of that State solely for the purpose of rendering the services. 2. Any
pension paid by, or out of funds created by, a Contracting State or a political
sub-division or a local authority thereof to an individual in respect of
services rendered to that State or sub-division or authority shall be taxable
only in that State. 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 State. 3. The
provisions of articles 15, 16 and 17 shall apply to remuneration and pensions
in respect of services rendered in connection with a business carried on by a
Contracting State or a political sub-division or a local authority thereof. ARTICLE 19 -
Non-Government pensions and annuities - 1. Any pension, other than a
pension referred to in article 18, or any annuity derived by a resident of a
Contracting State from sources within the other Contracting State may be taxed
only in the first-mentioned Contracting State. 2.
Notwithstanding, the provisions of paragraph 1, pensions paid out of a pension
fund approved by the Government of a Contracting State (or its authorised
Agency) to a resident of the other Contracting State in consideration of past
employment may be taxed in the first-mentioned State. 3. The
term pension means a periodic payment made in consideration of past services
or by way of compensation for injuries received in the course of performance of
services. 4. The
term annuity means a stated sum payable periodically at stated times during
life or during a specified or ascertainable period of time, under an obligation
to make the payments in returns for adequate and full consideration in money or
moneys worth. ARTICLE
20 - Students and apprentices - 1. A student or business apprentice
who is or was a resident of one of the Contracting States immediately before
visiting the other Contracting State and who is present in that other State
solely for the purpose of his education or training, shall be exempt from tax
in that other State on : (a) payments made to him by persons residing
outside that other State for the purpose of his maintenance, education or
training ; and (b) remuneration from employment in that other
State, in an amount not exceeding Rs. 20,000 or Rs. 20,00,000 during any
twelve-month period, as the case may be, provided that such employment is
directly related to his studies or is undertaken for the purpose of his
maintenance. 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 other Contracting State. ARTICLE
21 - Professors, teachers and Research Scholars - 1. A professor or
teacher who is or was a resident of one of the Contracting States immediately
before visiting the other Contracting State for the purpose of teaching or
engaging in research, or both, at a university, college, school or other
approved institution in that other Contracting State shall be exempt from tax
in that other State on any remuneration for such teaching or research for a period
not exceeding two years from the date of his arrival in that other State. 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. 3. For
the purposes of this article and article 20, an individual shall be deemed to
be a resident of a Contracting State if he is resident in that Contracting
State in the year of income, in which he visits the other Contracting State or
in the immediately preceding year of income. 4. For
the purposes of paragraph 1, approved institution means an institution which
has been approved in this regard by the competent authority of the concerned
Contracting State. ARTICLE
22 - Other income - 1. Subject to the provisions of paragraph 2,
items of income of resident of a Contracting State, wherever arising, which are
not expressly 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 State independent personal services from a fixed base
situated therein, and the right of 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 with in the foregoing Articles of
this Agreement and arising in the other Contracting State may also be taxed in
that other State. ARTicLE 23 -
Elimination of double taxation - 1. The laws in force in either of
the Contracting States shall continue to govern the taxation of income in the
respective Contracting States except where provisions to the contrary are made
in this Agreement. 2. The
amount of Indonesian tax payable, under the laws of Indonesia and in accordance
with the provisions of this Agreement, whether directly or by deduction, by a
resident of India, in respect of profits or income arising in Indonesia, which
have been subjected to tax both in India and in Indonesia, shall be allowed as
a credit against the Indian tax payable in respect of such profits or income
provided that such credit shall not exceed the Indian tax (as computed before
allowing any such credit) which is appropriate to the profits or income arising
in Indonesia. Further, where such
resident is a company by which surtax is payable in India, the credit aforesaid
shall be allowed in the first instance against income-tax payable by the
company in India and as to the balance, if any, against surtax payable by it in
India. 3. The
term Indonesian tax payable shall be deemed to include the amount of
Indonesian tax which would have been paid if the Indonesian tax had not been
exempted or reduced in accordance with the special incentive measures under
Article 33 of Law No. 7 of 1983 (Undangundang Pajak Penghasilan, 1984) which
are designed to promote economic development in Indonesia, effective on the
date of signature of this Agreement, or which may be introduced in the future
in modification of, or in addition to, the existing provisions for promoting
economic development in Indonesia, and such other incentive measures which may
be agreed upon from time to time by the Contracting States. 4. The
amount of Indian tax payable under the laws of India and in accordance with the
provisions of this Agreement, whether directly or by deduction, by a resident
of Indonesia, in respect of profits or income arising in India, which has been
subjected to tax both in India and in Indonesia, shall be allowed as a credit
against Indonesian tax payable in respect of such profits or income provided
that such credit shall not exceed the Indonesian tax (as computed before
allowing any such credit) which is appropriate to the profits or income arising
in India. 5. The
term Indian tax payable shall be deemed to include the amount of Indian tax
which would have been paid, if the Indian tax had not been exempted or reduced
in accordance with the special incentive measures under the provisions of the
Income-tax Act, 1961 (43 of 1961), which are designed to promote economic
development in India, effective on the date of signature of this agreement, or
which may be introduced in the future in modification of, or in addition to,
the existing provisions for promoting economic development in India, and such
other incentive measures which may be agreed upon from time to time by the
Contracting States. 1ARTICLE
24 - 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. 3.
Nothing contained in this article shall be construed as, obliging a Contracting
State to grant to persons not resident in that State any personal allowances,
reliefs, reductions and deductions for taxation purposes which are by law
available only to persons who are so resident. 4.
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
Contracting 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 that first-mentioned State are or may be
subjected in the same circumstances. 5. 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 this Agreement, he may,
notwithstanding the remedies provided by the national laws of those States,
present his case to the competent authority of the Contracting State of which
he is a resident. This case must be
presented within three years of the date of receipt of notice of the action
which gives rise to taxation not in accordance with 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 an appropriate 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 not in accordance
with the Agreement. Any agreement
reached shall be implemented notwithstanding any time limits in the national
laws 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 the 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 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
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 the Agreement or of the domestic
laws of the Contracting States concerning taxes covered by the Agreement,
insofar as the taxation thereunder is not contrary to the Agreement, in
particular, for the prevention of fraud or evasion of such taxes. 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. However,
if the information is originally regarded as secret in the transmitting State,
it 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 which are the subject of the Agreement. Such persons or authorities shall use the
information only for such purposes but may disclose the information in public
court proceedings or in judicial decisions.
The competent authorities shall, through consultation, develop
appropriate conditions, methods and techniques concerning the matters in
respect of which such exchange of information shall be made, including, where
appropriate, exchange of information regarding tax avoidance. 2. The
exchange of information or documents shall be either on a routine basis or on
request with reference to particular cases or both. The competent authorities of the Contracting States shall agree
from time to time on the list of the information or documents which shall be
furnished on a routine basis. 3. 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 administrative practice of that or of the other
Contracting State ; (b)
to supply information
or documents which are 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 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. ARTICLE
27 - Diplomatic and consular activities - Nothing in this Agreement
shall affect the fiscal privileges of diplomatic or consular officials under
the general rules of international law or under the provisions of special
agreements. ARTICLE
28 - Entry into force - Each of the Contracting State shall notify
to the other the completion of the procedures required by its law for the
bringing into force of this Agreement.
This Agreement shall enter into force on the date of the later of these
notifications and shall thereupon have eftect : (a) 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 later of the notifications is given ; (b) in Indonesia, in respect of income arising in
any year of income beginning on or after the first day of January next
following the calendar year in which the later of the notifications is given. 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 the other Contracting State
through diplomatic channels, written notice of termination and, in such event,
this Agreement shall cease to have effect : (a) in India, in respect of income arising in any
previous year beginning on or after the 1st day of April next following the
calendar year in which the notice is given ; (b) in Indonesia, in respect of income arising in
any year of income beginning on or after the lst day of January next following
the calendar year in which the notice of termination is given. In
witness whereof the undersigned, being duly authorised thereto, have signed the
present Agreement. Done in
duplicate at Jakarta this seventh day of August, one thousand nine hundred and
eighty-seven in Hindi, Bahasa Indonesia and English languages, all texts being
equally authentic. In the
case of divergence of interpretation, the English text shall prevail.
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