Convention between the
Government of the Republic of India and the Government of the Hungarian
People's Republic for the avoidance of double taxation with respect to taxes on
income
Notification No. 7181 [F.
No. 501/14/73-FTD], dated 13 March, 1987 as corrected by Notification No. 8695
[F. No.501/14/73-FTD], dated 9 July, 1990
G.S.R. 282(E).--Whereas
the annexed Convention between the Government of the Republic of India and the
Government of the Hungarian People's Republic for the avoidance of double
taxation with respect to taxes on income has come into force on the 7th
January, 1987 on the Notification by both the Contracting States to each other
of the completion of the procedures required by their laws for its bringing
into force, in pursuance of Article 28 of the said Convention;
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
Convention shall be given effect to in the Union of India.
The Government of the
Republic of India and the Government of the Hungarian People's Republic :
Desiring to further expand
and facilitate mutual economic relations, have resolved to conclude a
Convention for the avoidance of double taxation with respect to taxes on income
and 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 to taxes on
income imposed on behalf of each Contracting State or of its political
sub-divisions or local authorities, irrespective of the manner in which they
are levied.
2. The taxes to which this Convention shall apply are :
(a) In the case of India :
(1) income-tax including any surcharge thereon;
(2) surtax;
(hereinafter referred to as "Indian tax").
(b) In the case of the Hungarian People's Republic:
(1) general income-tax (az a'ltalanos j'o've-delemado');
(2) income-tax on household and auxiliary
farms (a h'azta'ji e's Kisegi'td gazdasa'gok jo'vedelemao'ja);
(3) corporation
taxes (a ta'rsulati aoo'es a tarsa'ji aoo);
(4) special
corporation tax (a ta'rsulati Kolonacc);
(5) profit
tax of State enterprises (az allami vellalatok nyereso gaddja);
(6) town and
community contribution (varosi e's ko'zsegi hozza'ja rula's);
(7) levy on dividends and profit
distribution of commercial companies (a koreskedelmi ta'rasa'gok os nyerse'g
Kifizete 'seiuta'ni illete'k);
(hereinafter referred to
as "Hungarian tax").
3. 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 2 of this
Article.
4. At the end of each year, the competent
authorities of the Contracting States shall notify to each other any
significant changes which have been made in their respective taxation laws
which are the subject of this Convention and furnish copies of relevant
enactment and regulations.
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 seas and airspace above it, as
well as any other maritime zone in which India has sovereign rights, other
rights and jurisdiction, according to the Indian law and in accordance with
international law;
(b) the term "Hungarian People's
Republic" means the territory of the Hungarian People's Republic;
(c) the terms "a Contracting
State" and "the other Contracting State" mean India or the
Hungarian People's Republic; as the context requires;
(d) the term "person" comprises an individual, a
company and any other body of persons;
(e) the term "company" means any
body corporate or any entity which is treated as a body corporate for tax
purposes;
(f) 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;
(g) the term "national" of a
Contracting State means :
(i) any individual possessing the
nationality of a Contracting State;
(ii) any legal person, partnership or
association deriving its status as such from the law in force in a Contracting
State;
(h) the term "international
traffic" means any transport by a ship or aircraft operated by an
enterprise which has its place of effective management in a Contracting State,
except when the ship or aircraft is operated solely between the 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); and in the case of the Hungarian
People's Republic, the Ministry of Finance.
2. In the application of the provisions of
this Convention by one of the Contracting State, any term not defined herein
shall, unless the context otherwise requires, have the meaning which it has
under the laws in force in that State relating to the taxes which are the
subject of this Convention.
ARTICLE 4: Fiscal
domicile.—
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,
resident, place of management or any other criterion of a similar nature.
2. Where by reason of the provisions of
paragraph 1 of this Article an individual is a resident of both Contracting
States, then his status shall be determined in accordance with the following
rules :
(a) he shall be deemed to be a resident of
the Contracting State in which he has a permanent home available to him; if he
has a permanent home available to him in both Contracting States, he shall be
deemed to be a resident of the Contracting State in which the centre of his
vital interests is located;
(b) if the Contracting State in which he has
his centre of vital interests cannot be determined, or if he has not a
permanent home available to him in either Contracting State, he shall be deemed
to be a resident of the Contracting State in which he has an habitual abode;
(c) if he has an habitual abode in both
Contracting States or in neither of them he shall be deemed to be a resident of
the Contracting State of which he is a national;
(d) if he is a national of both Contracting
States or of neither of them, the competent authorities of the Contracting
State shall settle the question by mutual agreement in accordance with Article
25.
3. Where by reason of the provisions of
paragraph 1, a person other than an individual is a resident of both
Contracting States, then it shall be deemed to be a resident of the Contracting
State in which its place of effective management is situated.
ARTICLE 5: Permanent
establishment.—
1. For the purposes of this Convention, the
term "permanent establishment" means a fixed place of business or
production through which the activities of an enterprise are wholly or partly
carried on.
2. The term "permanent establishment" shall include
especially :
(a) a place of management;
(b) a branch;
(c) an
office;
(d) a
factory;
(e) a
workshop or a warehouse;
(f) a mine, a
quarry, an oil field or other place of extraction of natural resources;
(g) a building site or construction,
installation or assembly project or supervisory activities in connection
therewith, where such site, project or supervisory activity continues for a
period of more than six months, or where such project or supervisory activity,
being incidental to the sale of machinery or equipment, continues for a period
not exceeding six months and the charges payable for the project or supervisory
activity exceed 10 per cent of the sale price of the machinery and equipment.
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 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 overall activity of the fixed place of business
resulting from this combination is of a preparatory or auxiliary character.
4. Notwithstanding the provisions of
paragraphs 1 and 2, where a person other than an agent of an independent status
to whom paragraph 5 applies 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 Contracting State in
respect of any activities which that person undertakes for the enterprise, if
such a person :
(a) has and habitually exercises in that
State an authority to conclude contracts in the name of the enterprise, unless
the activities of such person are limited to those mentioned in paragraph 3
which, if exercised through a fixed place of business, would not make this
fixed place of business a permanent establishment under the provisions of that
paragraph; or
(b) has no such authority, but habitually
maintains in the first-mentioned State a stock of goods or merchandise from
which he regularly delivers goods or merchandise on behalf of the enterprise.
5. An enterprise of a Contracting State
shall not be deemed to have a permanent establishment in the other Contracting
State merely because it carries on business in that other State through a
broker, general commission agent or any other agent of an independent status,
where such persons are acting in the ordinary course of their business.
However, when the activities of such an agent are devoted wholly or almost
wholly on behalf of that enterprise, he will not be considered an agent of an
independent status within the meaning of this paragraph.
6. The fact that a company, which is a
resident of a Contracting State controls or is controlled by a company which is
a resident of the other Contracting State, or which carries on business in that
other Contracting 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 from immovable property may be
taxed in the Contracting State in which such property is situated.
2. The term "immovable property"
shall be defined in accordance with the law of the Contracting State in which
the property 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, all
India, quarries and other places of extraction of natural resources. Ships,
boats and aircraft shall not be regarded as immovable property.
3. The provisions of paragraph 1 shall
apply to income derived from the direct use, letting or use in any other form
of immovable property.
4. The provisions of paragraphs 1 and 3
shall also apply to the income from immovable property of an enterprise and to
income from immovable property used for the performance of professional
services.
ARTICLE 7: Business
profits.—
1. The profits of an enterprise of a
Contracting State shall be taxable only in that State unless the enterprise
carries on business in the other Contracting State through a permanent
establishment situated therein. If the enterprise carries on business as
aforesaid, the profits of the enterprise may be taxed in the other State but
only so much of them as is attributable to (a) that permanent establishment;
(b) sales in that other State of goods or merchandise of the same or similar
kind as those sold through that permanent establishment; or (c) other business
activities carried on in that other State of the same or similar kind as those
effected through that permanent establishment.
2. 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 so far as it has been customary in a
Contracting State to determine the profits to be attributed to a permanent
establishment on the basis of an apportionment of the total profits of the
enterprise to its various parts, nothing in paragraph 2 shall preclude that
Contracting State from determining the profits to be taxed by such an apportionment
as may be customary; the method of apportionment adopted shall, however, be
such that the result shall be in accordance with the principles laid down in
this Article.
4. In the determination of the profits of a
permanent establishment, there shall be allowed as deductions expense 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 as are
in accordance with the provisions of and subject to the limitations of the
taxation laws of that State. 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, know-how or other rights, or
by way of commission or other charges, for specific services performed of 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, know-how or other rights, or by way of commission or
other charges 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.
5. No profits shall be attributed to a
permanent establishment by reason of the mere purchase by that permanent
establishment of goods or merchandise for the purpose of export to the
enterprise of which it is the permanent establishment.
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 which are
dealt with separately in other Article of this Convention, then the provisions
of those Articles shall not be affected by the provisions of this Article.
ARTICLE 8: Air transport.—
1. Income derived from the operation of
aircraft in international traffic by an enterprise of one of the Contracting
States shall not be taxed in the other Contracting State.
2. Paragraph 1 shall likewise apply in
respect of participations in pools of any kind by enterprises engaged in air
transport.
3. The provisions of paragraphs 1 and 2
shall also apply where the enterprise has an office or agency in the other
State for the transportation of goods or persons. However, this shall only
apply to activities directly connected with the business of aircraft
transportation.
4. Interest on funds connected with the
operation of aircraft in international traffic as mentioned in paragraph 1
shall be regarded as income from the operation of such aircraft.
ARTICLE 9: Associated
enterprises.--Where--
(a) an enterprise of a Contracting State
participates directly or indirectly in the management, control or capital of an
enterprise of the other Contracting State, or
(b) the same persons participate directly or
indirectly in the management, control or capital of an enterprise of a
Contracting State and an enterprise of the other Contracting State,
and in either case
conditions are made or imposed between the two enterprises in their commercial
or financial relations which differ from those which would be made between
independent enterprises, then any profits which would, but for those
conditions, have accrued to one of the enterprises, but, by reason of those
conditions, have not so accrued, may be included in the profits of that
enterprise and taxed accordingly.
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 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
this Convention and the competent authorities of the Contracting States shall,
if necessary, consult each other.
ARTICLE 10: Dividends.—
1. Dividends paid by a company which is a
resident of a Contracting State to a resident of the other Contracting State
may be taxed in that other 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 and the dividends relate to a new
contribution, the tax so charged shall not exceed fifteen 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.
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 taxation 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 recipient of the dividends, being a resident of a
Contracting State, carries on business in the other Contracting State of which
the company paying the dividends is a resident, through a permanent
establishment situated therein, or performs in that other State independent
personal services, from a fixed base situated therein, and the holding in
respect of which the dividends are paid is effectively connected with such
permanent establishment or fixed base. In such a 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
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 in so far as such dividends are paid to a resident of that other State or
in so far 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 company's undistributed profits to a tax
on the company's undistributed profits even if the dividends paid or the
undistributed profit consist wholly or partly of profits or income arising in
such other State.
6. As used in paragraph 2 of this Article,
the term "new contribution" means any share capital, other than bonus
share or shares of a new company formed as a result of the amalgamation of two
or more existing companies, issued after the date of entry into force of this
Convention by a company which is a resident of a Contracting State and
beneficially owned by a resident of the other Contracting State.
ARTICLE 11: Interest.—
1. Interest arising in a Contracting State
and paid to a resident of the other Contracting State may be taxed in that
other 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 and the
interest is paid in respect of a loan or debt first created after the date of
entry into force of this Convention, the tax so charged shall, not exceed 15
per cent of the gross amount of 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 of the other Contracting State;
(b) interest arising in a Contracting State
shall be exempt from tax in that State if it is beneficially owned by a
resident of the other Contracting State and is derived in connection with a
loan or credit extended or endorsed by :
(i) in the case of Hungarian People's
Republic, the Magyar Kulkereskedelmi Bank Rt., to the extent such interest is
attributable to financing of exports and imports only.
(ii) in the case of India, the Export-Import
Bank of India (Exim Bank), to the extent such interest is attributable to
financing of exports and imports only;
(iii) any
institution of a Contracting State in charge of public financing of external
trade;
(iv) any other person provided that the loan
or credit is approved 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, whether or not
secured by mortgage and where or not carrying a right to participate in the
debtor's profits, and in particular, income from government securities and
income from bonds or debentures, including premiums and prizes attaching to
such securities, bonds or debentures. Penalty charges for late payment shall
not be regarded as interest for the purpose to 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 provisions of Article 7 or Article 14, as the case may be, shall
apply.
6. Interest shall be deemed to arise in a
Contracting State when the payer is that 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 a fixed
base, then such interest shall be deemed to arise in the Contracting State in
which the permanent establishment or the fixed base is situated.
7. Where, owing to a special relationship
between the payer and the beneficial owner or between both of them and some
other person the amount of the interest paid, having regard to the debt-claim
for which it is paid, exceeds the amount which would have been agreed upon by
the payer and the recipient in the absence of such relationship, the provisions
of this Article shall apply only to the last-mentioned amount. In that case,
the excess part of the payments shall remain taxable according to the law of
each Contracting State, due regard being had to the other provisions of this
Convention.
ARTICLE 12: Royalties and
fees for technical services.—
1. Royalties and fees for technical
services arising in a Contracting State and paid to a resident of the other
Contracting State may be taxed in that other State.
2. However, such royalties, and fees for
technical services may also be taxed in the Contracting State in which they
arise and according to the law of that State; provided that where the royalties
or fees for technical services are paid to a resident of the other Contracting
State who is the beneficial owner thereof and they are paid in respect of a
right of property which is first granted, or under a contract which is signed,
after the date of entering into force of this Convention, the tax so charged
shall not exceed,--
(a) in the case of royalties, 40 per cent of the gross amount
thereof;
(b) in the
case of fees for technical services, 20 per cent of the gross amount thereof.
3. The term "royalties" as used
in this Article means payments of any kind including rentals received as a
consideration,
(a) for the use of, or the right to use, any
copyright of literary, artistic or scientific work including cinematograph
films, and films or tapes for television or radio broadcasting;
(b) for the use of, or the right to use, any
patent, trademark, design or model, plan, secret formula or process, or any
industrial, commercial or scientific equipment;
(c) for
information concerning industrial, commercial or scientific experience.
4. The term "fees for technical
services" as used in this Article means payments of any kind to any
person, other than payments to an employee of the person making the payments
and to any individual for independent personal services mentioned in Article 14
(Independent Personal Services), in consideration for services of a managerial,
technical or consultancy nature, including the provision of services of
technical or other personnel.
5. The provisions of paragraphs 1 and 2 of
this Article shall not apply if the beneficial owner of the royalties or fees
for technical services, being a resident of a Contracting State, carries on
business in the other Contracting State in which the royalties or fees for
technical services arise through a permanent establishment situated therein, or
performs in that other State independent personal services from a fixed base
situated therein, and the right, property or contract in respect of which the
royalties or fees for technical services are paid is effectively connected with
such permanent establishment or fixed base. In such case, the provisions of
Article 7 (Business Profits) or Article 14 (Independent Personal Services), as
the case may be, shall apply.
6. Royalties and fees for technical
services shall be deemed to arise in a contracting State where 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 or fees for
technical services, whether he is a resident of a Contracting State or not, has
in a Contracting State a permanent establishment or a fixed base in connection
with which the obligation to make the payments was incurred and the payments
are borne by that permanent establishment or fixed base, then the royalties or
fees for technical services shall be deemed to arise in the Contracting State
in which the permanent establishment or the fixed base in situated.
7. Where, owing to a special relationship
between the payer and beneficial owner or between both of them and some other
person, the amount of the royalties or fees for technical services paid exceeds
for whatever reason the amount which would have been paid in the absence of
such relationship, the provisions of this Article shall apply only to the last
mentioned amount. In that case, the excess part of the payments shall remain
taxable according to the law of each Contracting State, due regard being had to
the other provisions of this Convention.
ARTICLE 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 of which the whole enterprise) or of such
fixed base, may be taxed in that other State.
3. Gains arising from a capital asset being
ships or aircraft operated in international traffic or movable property
pertaining to the operation of such ships or aircraft by an enterprise of a
Contracting State shall be taxable only in the Contracting State in which the
place of effective management of the enterprise is situated.
4. Gains from the alienation of shares of
capital stock of a company the property of which consists directly or
indirectly principally of immovable property situated in a Contracting State
may be taxed in that State.
5. Gains from the alienation of any
property other than that referred to in paragraphs 1, 2, 3 and 4 shall be
taxable only in the Contracting State of which the alienator is a resident.
ARTICLE 14: Independent
personal services.—
1. Income derived by an individual who is a
resident of a Contracting State from the performance of personal services in an
independent capacity shall be taxable only in that State unless such services
are performed in the other Contracting State, in which case such income may be
taxed in the other Contracting State, if--
(a) the individual is present in that other
State for a period or periods aggregating more than 90 days in the 'previous
year' or 'taxable year', as the case may be, or
(b) the individual has a fixed base
regularly available to him in that other State for the purpose of performing
his activities, but only so much of the income as is attributable to that fixed
base.
2. The term "independent personal
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 Contracting State.
2. Notwithstanding the provisions of
paragraph 1, remuneration derived by a resident of a Contracting State in
respect of an employment exercise 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' or 'taxable year' as the case may be, 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 in respect of an employment exercise aboard a
ship or aircraft operated in international traffic may be taxed in the
Contracting State in which the place of effective management of the enterprise
is situated.
ARTICLE 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 or the
Supervisory Board or any other similar organ of a company which is a resident
of the other Contracting State may be taxed in that other State.
ARTICLE 17: Artistes and
athletes.—
1. Notwithstanding the provisions of
Articles 14 and 15, income derived by public entertainers (such as stage,
motion picture, radio or television artistes and musicians) or athletes, from
their personal activities as such may be taxed in the Contracting State in which
these activities are exercised.
2. Where income in respect of personal
activities exercised by an entertainer or an athlete in his capacity as such
accrues not to the entertainer or athlete himself but to another person, that
income, may, notwithstanding the provisions of Articles 7, 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
paragraphs 1 and 2 of this Article, income derived from such activities shall
be exempt from tax in the Contracting State in which these activities are
exercised if the visit of the public entertainers or athletes to that State is
directly or indirectly supported, wholly or substantially, from the public
funds of the Government of the other Contracting State.
4. For the purpose of this Article, the
term "Government" includes a State Government, a political
sub-division or a local authority of either Contracting State.
ARTICLE 18: Pensions.—
1. Subject to the provisions of paragraph 3
of Article 19, pensions and other similar remuneration paid to a resident of a
Contracting State in consideration of past employment shall be taxable only in
that State.
2. Notwithstanding the provisions of
paragraph 1, pensions paid and other payments made under a public scheme which
is part of the social security system of a Contracting State or a political
sub-division or a local authority thereof shall be taxable only in that State.
ARTICLE 19: Government
service.—
1. Remuneration (not being a pension) paid
by the Government of the Republic of India to any individual who is a citizen
of India in respect of services rendered in the discharge of Governmental
functions in the Hungarian People's Republic shall be exempt from Hungarian tax.
2. Remuneration (not being a pension) paid
by the Government of the Hungarian People's Republic to any individual who is a
citizen of the Hungarian People's Republic in respect of services rendered in
the discharge of governmental functions in India shall be exempt from Indian
tax.
3. Any pension paid by the Government of
one of the Contracting States to any individual shall be taxable in that
Contracting State.
4. The provisions of paragraphs 1, 2 and 3
of this Article shall not apply to payments in respect of services rendered in
connection with any business carried on by the Government of either of the
Contracting States for the purposes of profit.
5. For the purposes of this Article, the
term "Government" shall include any State Government, a political
sub-division or local authority of either Contracting State and in particular
the Reserve Bank of India and the National Bank of Hungary.
ARTICLE 20: Students.—
1. An individual who is or was immediately
before visiting the other Contracting State a resident of a Contracting State
and who visits the other Contracting State solely as a student at an approved
university, college, school or other similar approved institution in that other
Contracting State or as a business or technical apprentice therein, for a
period not exceeding five years from the date of his first arrival in that
other Contracting State in connection with that visit shall be exempt from tax
in that other Contracting State on--
(a) all remittances from abroad for the purposes of his
maintenance, education or training; and
(b) any remuneration not exceeding Rs.
20,000 or 75,000 forints, during any 'previous year' or 'taxable year' as the
case may be, for personal services rendered in that other Contracting State
with a view to supplementing the resources available to him for such purposes.
2. An individual who is or was immediately
before visiting the other Contracting State a resident of a Contracting State
and who visits the other Contracting State for the purposes of study, research
or training solely as recipient of a grant, allowance or award from the
Government of either of the Contracting States or from a scientific,
educational or charitable organisation or under a technical assistance
programme entered into by the Government of either of the Contracting State for
a period not exceeding five years from the date of his first arrival in that
other Contracting State in connection with that visit shall be exempt from tax
in that other Contracting State on:
(a) the amount of such grant, allowances or award;
(b) all
remittances from abroad for the purposes of his maintenance, education or
training; and
(c) any remuneration not exceeding Rs.
25,000 or 90,000 forints during any 'previous year' or 'taxable year' as the
case may be, in respect of services in that other Contracting State if the
services are performed in connection with his study, research, training or are
incidental thereto.
3. For the purposes of paragraph 1,
"approved university college, school or institution" means a
university, college, school and an educational or research institution which
has been approved in this regard by the competent authority of the concerned
Contracting State.
ARTICLE 21: Professors,
teachers and researchers.—
1. An individual who is a resident of one
of the Contracting States and who, at the invitation of the Government of the
other Contracting State or of a university or other approved institution
situated in that other Contracting State, visits that other Contracting State
for the primary purpose of teaching or engaging in research or both at a
university or other approved institution shall be exempt from tax in that other
Contracting State on his income from personal services for teaching or research
at the university or the approved institution, for a period not exceeding 24
months from the date of his arrival in the latter Contracting 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 paragraph 1,
"approved institution" means an educational or research institution
which has been approved in this regard by the competent authority of the
concerned Contracting State.
ARTICLE 22: Other income.—
1. Items of income of a resident of a
Contracting State, wherever arising, not dealt with in the foregoing Article of
this Convention shall be taxable only in that 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
or property in respect of which the income is paid is effectively connected
with such permanent establishment or fixed base. In such case the provisions of
Article 7 or Article 14, as the case may be, shall apply.
3. Notwithstanding the provisions of
paragraphs 1 and 2, items, if income of a resident of a Contracting State not
dealt, with in the foregoing Articles of this Convention 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 either of the
Contracting States will continue to govern the assessment and taxation of
income in the respective Contracting States except where express provisions to
the contrary is made in this Convention.
2. The income arising within the Hungarian
People's Republic which in accordance with this Convention may be subjected to
tax in the Hungarian People's Republic either directly or by deduction, subject
to the provisions of sub-paragraphs 4 and 5, shall not be subject to Indian
tax.
3. The income arising within India which in
accordance with this Convention may be subjected to tax in India either
directly or by deduction, subject to the provisions of sub-paragraphs 4 and 5,
shall not be subject to Hungarian tax.
4. Where a resident of a Contracting State
derives items of income which in accordance with the provisions of Articles 10,
11 and 12 may be taxed in the other Contracting State, the first-mentioned
State shall allow as a deduction from the tax on the income of that resident an
amount equal to the tax paid in that other State. Such deduction shall not,
however, exceed that part of the tax, as computed before the deduction is given,
which is attributable to such items of income derived from that other State.
5. Notwithstanding the provisions of
paragraphs 2 and 3 of this Article, the items of income which under the laws of
a Contracting State should be taken into account for calculating the rate of
tax to be imposed in that Contracting State shall continue to be so taken into
account.
ARTICLE 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 and under the same conditions are or may be subjected.
2. The taxation on a permanent
establishment which an enterprise of a Contracting State has in the other
Contracting State shall not be less favourably levied in that other State than
the taxation levied on enterprises of that other State carrying on the same
activities in the same circumstances or under the same conditions. This
provision shall not be construed as obliging a Contracting State to grant to
residents of the other Contracting State any personal allowances, reliefs and
reductions for taxation purposes on account of civil status or family
responsibilities which it grants to its own residents.
3. 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 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 and under the same
conditions.
4. In this Article, the term "taxation" means taxes
which are the subject of this Convention.
ARTICLE 25: Mutual
agreement procedure.—
1. Where a resident of a Contracting State
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 Convention, 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. The claim must be lodged within three years from the date of
the assessment or of the withholding of tax at the source whichever is the
later.
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 Convention. Any agreement reached shall
be implemented notwithstanding any time limits in the domestic law of the
Contracting States.
3. The competent authorities of the
Contracting States shall endeavour to resolve by mutual agreement any
difficulties or doubts arising as to the interpretation or application of the
Convention. They may also consult together for the elimination of double
taxation in cases not provided for in the 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 though 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 (being information and
documents which are at their disposal under the respective taxation laws and
obtained in the normal course of administration) as is necessary for carrying
out the provisions of this Convention or for the prevention of fraud or prevention
or detection of evasion or avoidance of the taxes or the administration of
statutory provisions against legal avoidance in relation to the taxes which are
the subject of this Convention. Any information or documents so exchanged shall
be treated as secret but may be disclosed to persons (including a court or
administrative body) concerned with assessment, collection, enforcement,
investigation or prosecution in respect of taxes which are the subject of this
Convention or any fraud connected therewith, or to persons with respect to whom
the information or documents relates.
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 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: Members of
diplomatic or consular missions.--Nothing in this Convention shall affect the
fiscal privileges of members of diplomatic or consular missions 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
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 the Hungarian People's Republic, in
respect of income arising in any taxable year beginning on or after the first
day of January next following the calendar year in which the later of the
notifications is given.
ARTICLE 29:
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 Hungarian People's Republic, in
respect of income arising in any taxable year 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 New
Delhi this Thirtieth day of October, one thousand nine hundred and eightysix in
the English language.
Sd/- Sd/-
(Vishwanath Pratap Singh ) (Dr.
Istvan Hetenyi)
Finance Minister Finance
Minister
For the Government of the For
the Government of the
Republic of India. Hungarian
People's Republic.
The Government of the Republic
of India and the Government of the Hungarian People's Republic.
Having entered into a
Convention for the Avoidance of Double Taxation with respect to taxes on
Income.
Have agreed, at the time
of signing the said Convention, on the following provisions which shall
constitute an integral part thereof :
Concerning Article 5, the
term permanent establishment shall be deemed not to include the use of
facilities or the maintenance of a stock of goods or of merchandise solely for
the purpose of storage, display or delivery of spare parts or components
required by way of replacement under any warranty provisions of a contract
under which any machinery or equipment is supplied by an enterprise of a
Contracting State to an enterprise of the other Contracting State.
In witness whereof the
undersigned, being duly authorised thereto, have signed the present Protocol.
Done in duplicate at New
Delhi, this Thirtieth day of October, 1986 in English language.
Sd/- Sd/-
(Vishwanath Pratap Singh) (Dr.
Istvan Hetenyi)
Finance Minister Finance
Minister
For the Government of the For
the Government of the
Republic of India Hungarian
People's Republic.