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PHILIPPINES 37. Convention for avoidance for double taxation
and prevention of fiscal evasion with Philippines Whereas the annexed Convention between the Government of the Republic of India and the Government of the Republic of Philippines for the avoidance of double taxation and the prevention of fiscal evasion with respect of taxes on income has entered into force on the 21st March, 1994, after the notification by both the Contracting States to each other of the completion of the procedures required under their laws for bringing into force of the said Convention in accordance with 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), 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
173(E), dated 2-4-1996 Annexure Convention between the Government of India
and the Republic of The
Government of the Republic of India and the Government of the Republic of
the Philippines. Desiring
to conclude a Convention for the avoidance of double taxation and the
prevention of fiscal evasion with respect to taxes on income. Have
agreed as follows : Article 1 : Personal scope - This Convention
shall apply to persons who are residents of one or both of the Contracting
States. Article 2 : Taxes covered - 1.
This Convention shall apply are to taxes of income imposed on behalf of each
Contracting State, irrespective of manner in which they are levied. 2. There
shall be regarded as taxes on income all taxes imposed on total income or on
elements of income, including taxes on gains from the alienation of movable or
immovable property, and taxes on the total amounts of wages or salaries paid by
enterprises. 3. The
taxes to which this Convention 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) ; (hereafter
referred to as Indian tax) ; (b) in the Philippines : the
income-taxes imposed by the Government of the Republic of the Philippines ; (hereafter
to as Philippine tax). 4. The
Convention 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 Convention in addition to, or in place of, the taxes referred to in
paragraph 1. The competent authorities of the Contracting State shall notify
each other of any substantial changes which are made in their respective
taxation laws. Article 3 : General definitions - 1.
In this Convention, 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 in which India has sovereign rights, other rights and
jurisdictions, according to the Indian law and in accordance with international
law/the U.N. Convention on the Law of the Sea ; (b) the term Philippines means the Republic of
the Philippines and when used in a geographical sense means the national
territory comprising the Republic of the Philippines ; (c) the terms a Contracting State and the other
Contracting State mean India or the Philippines as the context requires ; (d) the term tax means Indian tax or Philippine
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
Convention applies or which represents a penalty imposed relating to those
taxes ; (e) the term
person includes an individual, a company and any other 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 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 the
Philippines, the Secretary of Finance or his authorized representative ; (i) the term national means any individual,
possessing the citizenship of a Contracting State and any legal person,
partnership or association deriving its status from the laws in force in the
other Contracting State ; (j) 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 ; 2. As
regards the application of the Convention by a Contracting State, any term not
defined herein shall, unless the context otherwise requires, have the meaning
which it has under the law of that State concerning the taxes to which the
Convention applies. Article 4 : Resident - 1.
For the purposes of this Convention, 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 of 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, 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. If the
place of effective management cannot be determined, then the competent
authorities shall settle the question by mutual agreement. Article 5 : Permanent establishment -
1. For the purposes of this Convention, the term permanent
establishment means a fixed place of business through which the business of
the 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 place of exploration of natural resources ; (h) a building site or construction project or
supervisory activities in connection therewith, where such site, project or
activity continues for a period of more than six months ; (i) a warehouse, in relation to a person providing
storage facilities for others. 3. Notwithstanding
the preceding provisions of this Article, the term permanent establishment
shall be deemed not to include : (a) the use of facilities solely for the purpose
of storage, display or delivery of goods or merchandise belonging to the
enterprise ; (b) the maintenance of a stock of goods or
merchandise belonging to the enterprise solely for the purpose of storage,
display or delivery ; (c) the maintenance of a 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 carrying on, for the enterprise, any other activity
of a preparatory or auxiliary character ; (f) the maintenance of a fixed place of business
solely for any combination of activities mentioned in sub-paragraphs (a)
to (e), provided that the overall activity of the fixed place of
business resulting from this combination is of a preparatory or auxiliary
character. 4. A
person acting in a Contracting State on behalf of an enterprise of the other
Contracting State (other than an agent of an independent status to whom
paragraph 6 applies) shall be deemed to be a permanent establishment in the
first-mentioned State if : (a) he has, and habitually exercises in the State,
an authority to conclude contracts on behalf of the enterprise, unless his
activities are limited to those mentioned in paragraph 3 of this Article ; or (b) he 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 ;
or (c) in so acting, he manufactures or processes in
that State for the enterprise goods or merchandise belonging to the enterprise. 5. An
insurance enterprise of a Contracting State shall, except in regard to
reinsurance, be deemed to have a permanent establishment in the other State if
it collects premiums in the territory of that State or insures risks situated
therein through an employee or through a representative who is not agent of an
independent status. 6. 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 the enterprise, he shall not considered an agent of an
independent status within the meaning of this paragraph if it is shown that the
transactions between the agent and the enterprise were not made under
arms-length conditions. In such a case, the provisions of paragraph 4 shall
apply. 7. The
fact that a company which is a resident of a Contracting State controls or is controlled
by a company which is a resident of the other Contracting State, or which
carries on business in that other State (whether through a permanent
establishment or otherwise) shall not of itself constitute for 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 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 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 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. 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 more
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.
Profits derived by an enterprise of a Contracting State from the operation of
aircraft in international traffic shall be taxable in that State. 2.
Notwithstanding the provisions of paragraph 1, profits from sources within a
Contracting State derived by an enterprise of the other Contracting State from
the operation of aircraft in international traffic may be taxed in the first-mentioned
State in accordance with its domestic law, but the tax so charged shall be
reduced by forty per cent. In no case, however, shall the tax so charged exceed
the lowest rate of Philippine tax that may be imposed on profits of the same
kind derived under similar circumstances by a resident of a third State. 3. The
provisions of paragraphs 1 and 2 shall also apply to profits from the
participation in a pool, a joint business or an international operating agency. Article 9 : Shipping - 1.
Profits derived by an enterprise of a Contracting State from the operation of
ships in international traffic shall be taxable in that State. 2.
Notwithstanding the provisions of paragraph 1, profits from sources within a
Contracting State derived by an enterprise of the other Contracting State from
the operation of ships in international traffic may be taxed in the
first-mentioned State in accordance with its domestic law, but the tax so
charged shall be reduced by forty per cent. In no case, however, shall the tax
so charged exceed the lowest rate of Philippine tax that may be impose on
profits of the same kind derived under similar circumstances by a resident of
a third State. 3. The
provisions of paragraphs 1 and 2 shall also apply to profits from the
participation in a pool, a joint business or an international operating agency. Article 10 : 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 State -
and taxes accordingly - profits on which an enterprise of the other Contracting
State has been charged to tax in that other State and the 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 this Convention and the competent authorities of the Contracting
States shall, if necessary, consult each other. 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. 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) 15 per cent of the gross amount of the
dividends if the beneficial owner is a company which owns at least ten per cent
of the shares of the company paying the dividends; (b) 20 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 15, 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 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 if the recipient is the
beneficial owner of the interest the tax so charged shall not exceed : (a) 10% of the gross amount of interest if the
interest is received by a financial institution (including insurance companies)
; (b) the Philippine tax on interest paid by a
company which is a resident of the Philippines to a resident of India in respect
of public issues of bonds, debentures or similar obligations shall not exceed 10
per cent of the gross amount of interest ; and (c) 15% of the gross amount of interest in all
other cases. 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 of the other Contracting
State ; (iii) other lending institutions as may be specified
and agreed in letters exchanged between the competent authorities of the
Contracting State ; (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 sales on credit of any industrial, commercial or scientific
equipment, 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 the
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 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
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 to the
last mentioned amount. In such case, the excess part of the payments shall
remain taxable according to the laws of each Contracting State, due regard
being had to the other provisions of this Convention. Article 13 : Royalties - 1.
Royalties 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 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 provided that such royalties are
payable : (i) in the case of Philippines, by an enterprise
which is registered with the Board of Investment, and (ii) in the case of India, by an enterprise in
pursuance of any collaboration agreement approved by the Government of India. 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 films, 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 15, 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 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 Convention. Article 14 : 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 shares of a company, the property of which consists
principally of immovable property situated in a Contracting State, may be taxed
in that State. Gains from the alienation of interest in a partnership or a
trust, the property of which consists principally of immovable property
situated in a Contracting State, may be taxed in that State. 5. Gains
from the alienation of any property other than that mentioned in paragraphs 1,
2, 3 and 4 shall be taxable only in the Contracting State of which the
alienator is a resident. 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 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 the recipient is present in the other State for a period or periods
exceeding in the aggregate 183 days in the relevant previous year in the case
of Republic of India or calendar year in the case of Republic of the
Philippines.] 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 16 : Dependent personal
services - 1. Subject to the provisions of Articles 17 (Directors
Fees), 18 (Entertainers and Athletes), 19 (Government Service), 20
(Non-Government Pensions and Annuities), 21 (Students and Trainees) and 22
(Professors and Teachers), 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 relevant
previous year in the case of Republic of India or calendar year in the case
of the Republic of the Philippines ; (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 17 : 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 of a company which
is a resident of the other Contracting State may be taxed in that other State. Article 18 : Entertainers and Athletes -
1. Notwithstanding the provisions of Articles 15 (Independent Personal
Services) and 16 (Dependent Personal Services), income derived by a resident of
a Contracting State as an entertainer such as 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 (Business Profits), 15 (Independent Personal Services) and 16
(Dependent Personal Services), 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
only in the first-mentioned Contracting State, if the activities in the other
Contracting State are exercised pursuant to a special programme between the
Governments of the two Contracting States for cultural exchange and are
supported substantially from the public funds of the first-mentioned Contracting
State or a political sub-division, or a local authority thereof or from the
funds of a statutory body, or a non-profit organisation which is certified as
qualifying under this provision by the competent authority of that State. 4.
Notwithstanding the provisions of paragraph 2 and Articles 7 (Business
Profits), 15 (Independent Personal Services), and 16 (Dependent Personal
Services), 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 such activities
are exercised by an entertainer or athlete of that other Contracting State pursuant
to a special programme between the Governments of the two Contracting States
for cultural exchange and are supported substantially from the public funds of
that other State, a political sub-division or a local authority thereof or from
the funds of a statutory body, or a non-profit organisation which is certified
as qualifying by the competent authority of that other State of which he is a
resident. Article 19 : Government service - 1.
(a) Remuneration, other than a pension paid by a Contracting State or a
political sub-division or a local authority thereof to an individual in respect
of services rendered to that State or sub-division or authority shall be
taxable only in that State. (b)
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 : (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
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. (b)
However, such pension shall be taxable only in the other Contracting State if
the individual is a resident of, and a national of that other State. 3. The
Provisions of Articles 16 (Dependent Personal Services), 17 (Directors Fees)
and 20 (Non-Government Pensions and Annuities) shall apply to remuneration and
pensions in respect of services rendered in connection with business carried on by a Contracting State
or a political sub-division or a local authority thereof. Article 20 : Non-Government pensions
and annuities - 1. Any pension, other than a pension referred to in
Article 19, 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. 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. 3. 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 return for adequate and full consideration in money or
moneys worth. Article 21 : Students and trainees -
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 State on : (a) payments made to him by persons residing
outside that other State for the purposes of his maintenance, education or
training; and (b) remuneration from employment in that other
State, in an amount not exceeding Rs. 15,000 or its equivalent in Philippine
currency during any previous year in the case of Republic of India or
calendar year in the case of the Republic of the Philippines, 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 three consecutive years from the date of his first
arrival in that other Contracting State. 3. The
amounts referred to in paragraphs 1 and 2 of this Article may be reviewed and
agreed upon by the competent authorities of both Contracting States from time
to time. Article 22 : Professors and teachers -
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 21, an individual shall be deemed to
be a resident of a Contracting State if he is resident in that Contracting
State in the previous year in the case of Republic of India or calendar
year in the case of the Republic of the Philippines, in which he visits the
other Contracting State or in the immediately preceding previous year or the
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 23 : 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. Article 24 : 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 Convention. 2. The
amount of Philippine tax payable, under the laws of the Philippines and in
accordance with the provisions of this Convention, whether directly or by
deduction, by a resident of India, in respect of profits or income arising in
the Philippines, which have been subjected to tax both in India and in the
Philippines, 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 the Philippines. 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 Philippine tax payable shall be deemed to include the amount of
Philippine tax which would have been paid if the Philippine tax had not been
exempted or reduced in accordance with this Convention and the special
incentive laws designed to promote economic development in the Philippines,
effective on the date of signature of this Convention, or which may be
introduced in the future in the Philippine taxation laws in modification of, or
in addition to, the existing laws. 4. The amount of Indian tax
payable under the laws of India and in accordance with the provisions of this
Convention, whether directly or by deduction, by a resident of the Philippines,
in respect of profits or income arising in India, which has been subjected to
tax both in India and the Philippines, shall be allowed as a credit against
Philippine tax payable in respect of such profits or income provided that such
credit shall not exceed the Philippine tax (as computed before allowing any
such credit) which is appropriate to the profits or income arising in India. 5. For
the purposes of the credit referred to in paragraph 4, the term Indian tax
payable shall be deemed to include any amount which would have been payable as
Indian tax for any assessment year but for an exemption or reduction of tax
granted for that year or any part thereof by the special incentive measures
under the provisions of the Income-tax Act, 1961 (43 of 1961), which are
designed to promote economic development, or which may be introduced hereafter
in modification of, or in addition to, the existing provisions for promoting
economic development in India. 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. 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.
Notwithstanding the preceding provisions of this Article, either Contracting
State may, in the promotion of necessary industry or business, limit to its
nationals the enjoyment of tax incentives granted by it. 6. In
this Article, the term taxation means taxes which are the subject of 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 laws 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 this 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 other
Contracting State, with a view to the avoidance of taxation which is not in
accordance with the provisions of this 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 this Convention. They may also consult together for the
elimination of double taxation in cases not provided for in this Convention
relating to the taxes which are the subject of this Convention. 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 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 the 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, 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 Convention. 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 paragraphs 1 and 2 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 28 : Diplomatic agents and
consular officers - Nothing in this Convention shall affect the fiscal
privileges of diplomatic or consular officials under the general rules of
international law or under the provisions of special agreements. Article 29 : Entry into force -
Each of the Contracting States shall notify to the other the completion of the
procedures required by its law for the bringing into force of this Convention.
This Convention shall enter into force on the date of the later of these
notifications and shall thereupon have effect : (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 Philippines, 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 notification is given. Article 30 : Termination - This
Convention 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 Convention 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 the Philippines, in respect of income
arising in any year of income beginning on or after the 1st 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 Convention. DONE in
duplicate at Manila this twelfth day of February, one thousand and nine hundred
and ninety-six in Hindi and English languages, both the texts being equally
authentic. In case of divergence in interpretation, the English text shall
prevail. PROTOCOL 1. For
purposes of Article 1, nothing in this Convention shall be construed as
preventing either Contracting State from taxing its citizens, in accordance
with its domestic legislation, who may be residing in the other Contracting
State. However, no credit shall be given under this Convention for taxes
paid/payable in pursuance of such domestic legislation. 2. For
purposes of paragraph 3 of Article 7, the deductions in respect of expenses
incurred outside the Contracting State shall be restricted as per the
limitation on allowance of such expenses provided in the domestic law of the
concerned Contracting State. 3. For
purposes of paragraph 2 of Articles 8 and 9, the rate of tax prescribed therein
is understood to include the Branch Profit Remittance Tax as may be leviable by
either Contracting State. 4. With
reference to Articles 8 and 9 if at any time after the date of signature of the
Convention the Philippines agrees to a lower or nil rate of tax with a
third State the Government of the Republic of the Philippines shall without
undue delay inform the Government of India through diplomatic channels and the
two Governments will undertake to review these Articles with a view to
providing such lower or nil rate to profits of the same kind derived
under similar circumstances by enterprises of both Contracting States. IN
WITNESS WHEREOF the undersigned, being duly authorised thereto, have
signed this Protocol. DONE in
duplicate at Manila this twelfth day of February, one thousand and nine hundred
and ninety-six in Hindi and English languages, both the texts being equally
authentic. In case of divergence in interpretation, the English text shall
prevail.
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