notification no. 68/2016 f. no. 500/3/2012 ftd ii / so 2680 e

MINISTRY OF FINANCE (Department of Revenue) NOTIFICATION New Delhi, the 10th August, 2016 (INCOME-TAX) S.O. 2680(E).—Whereas, a Protocol amending the agreement between the Government of the Republic of India and the Government of Mauritius, signed on 24th August, 1982 for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains, and for the encouragement of mutual trade and investment, (hereinafter referred to as the said Protocol) as set out in the Annexure to this notification, was signed at Mauritius on the 10th day of May, 2016; 8 THE GAZETTE OF INDIA : EXTRAORDINARY [PART II—SEC. 3(ii)] And whereas, the said Protocol entered into force on the 19th day of July, 2016, being the date of the later of the notifications of the completion of the procedures as required by the respective laws for entry into force of the said Protocol, in accordance with paragraph 1 of Article 9 of the said Protocol; Now, therefore, in exercise of the powers conferred by sub-section (1) of section 90 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies that all the provisions of said Protocol, as annexed hereto as Annexure, shall be given effect to in the Union of India, in accordance with Article 9 of the said Protocol. ANNEXURE PROTOCOL PROTOCOL AMENDING THE CONVENTION BETWEEN THE GOVERNMENT OF THE REPUBLIC OF INDIA AND THE GOVERNMENT OF MAURITIUS FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND CAPITAL GAINS, AND FOR THE ENCOURAGEMENT OF MUTUAL TRADE AND INVESTMENT, SIGNED AT PORT LOUIS ON 24TH AUGUST 1982 The Government of the Republic of India and the Government of the Republic of Mauritius, Desiring to amend the Convention between the Government of the Republic of India and the Government of Mauritius for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains, and for the encouragement of mutual trade and investment, signed at Port Louis on 24th August, 1982 (hereinafter referred to as “the Convention”); Have agreed as follows: Article 1 Article 5 (Permanent Establishment) of the Convention shall be amended by inserting in paragraph 2 the following new sub-paragraph: “(j) the furnishing of services, including consultancy services, by an enterprise through employees or other personnel engaged by the enterprise for such purpose, but only where activities of that nature continue (for the same or connected project) for a period or periods aggregating more than 90 days within any 12-month period.” Article 2 Article 11 (Interest) of this Convention shall be amended by: (i) replacing paragraph 2 with the following: “However, subject to provisions of paragraphs 3, 3A and 4 of this Article, 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 beneficial owner of the interest is a resident of the other Contracting State, the tax so charged shall not exceed 7.5 per cent of the gross amount of the interest,”; (ii) deleting the paragraph 3(c); and (iii) inserting a new paragraph 3A as follows: “Interest arising in a Contracting State shall be exempt from tax in that State provided it is derived and beneficially owned by any bank resident of the other Contracting State carrying on bona fide banking business. However, this exemption shall apply only if such interest arises from debt- claims existing on or before 31st March, 2017.” Article 3 The Convention is amended by adding after Article 12 the following new Article: “Article 12A FEES FOR TECHNICAL SERVICES 1. Fees for technical services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. ¹Hkkx IIµ[k.M 3(ii)º Hkkjr dk jkti=k % vlk/kj.k 9 2. However, such fees for technical services may also be taxed in the Contracting State in which they arise, and according to the laws of that State, but if the beneficial owner of the fees for technical services is a resident of the other Contracting State the tax so charged shall not exceed 10 per cent of the gross amount of the fees for technical services. 3. The term “fees for technical services” as used in the Article means payments of any kind, other than those mentioned in Articles 14 and 15 of this Convention as consideration for managerial or technical or consultancy services, including the provision of services of technical or other personnel. 4. The provisions of paragraph 1 and 2 shall not apply if the beneficial owner of the fees for technical services being a resident of a Contracting State, carries on business in the other Contracting State in which the fees for technical services arise, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the fees for technical services are paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply. 5. Fees for technical services shall be deemed to arise in a Contracting State when the payer is that State itself, a political sub-division, a local authority, or a resident of that State. Where, however, the person paying the fees for technical services, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the liability to pay the fees for technical services was incurred, and such fees for technical services are borne by such permanent establishment or fixed base, then such fees for technical services shall be deemed to arise in the Contracting 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 the fees for technical services 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 4 Article 13 (Capital Gains) of the Convention shall be amended with effect from 1.4.2017, by: (i) inserting - new paragraphs 3A and 3B as follows: “3A. Gains from the alienation of shares acquired on or after 1st April 2017 in a company which is resident of a Contracting State may be taxed in that State. 3B. However, the tax rate on the gains referred to in paragraph 3A of this Article and arising during the period beginning on 1st April, 2017 and ending on 31st March, 2019 shall not exceed 50% of the tax rate applicable on such gains in the State of residence of the company whose shares are being alienated”; and (ii) replacing the existing paragraph 4 with the following: