Government of Yemen Arab Republic

United Arab Republic

Double Taxation Avoidance Agreement

CONVENTION BETWEEN THE GOVERNMENT OF INDIA AND THE GOVERNMENT OF THE UNITED ARAB REPUBLIC FOR THE AVOIDANCE OF DOUBLE TAXATION WITH RESPECT TO TAXES ON INCOME

Notification No. G.S.R. 2363, dtd. 30.9.1969.

Whereas the annexe Convention between the Government of India and the Government of the United Arab Republic for the avoidance of double taxation with respect to taxes on income has been ratified and the instruments of ratification exchanged, as required by 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) 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 in to the Union of India.

ANNEXURE

CONVENTION BETWEEN THE GOVERNMENT OF INDIA AND THE GOVERNMENT OF THE UNITED ARAB REPUBLIC FOR THE AVOIDANCE OF DOUBLE TAXATION WITH RESPECT TO TAXES ON INCOME

The Government of India and the Government of the United Arab Republic,

Desiring to conclude a Convention for the avoidance of double taxation with respect to taxes on income,

Have agreed as follows:

CHAPTER I

SCOPE OF THE CONVENTION

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, where, they have the authority, irrespective of the manner in which they are levied.

2.     There shall be regarded as taxes on income all taxes imposed on total income or on all elements of income including taxes on gains from the sale, exchange or transfer of movable or immovable property and taxes on the total amounts of wages or salaries paid by enterprises.

3.     The existing taxes to which the Convention shall apply, are, in particular:

a.     In the case of India:

1.     the income-tax, including super tax and the surcharge imposed under the Income-tax Act, 1961 (43 of 1961); and

2.     the surtax imposed under the Companies (Profits) Surtax Act, 1964 (7 of 1964); (hereinafter referred to as " Indian tax ".)

b.    In the case of the United Arab Republic:

1.     tax on income derived from immovable property (including the land tax, the buildings tax and the ghaffir tax);

2.     tax on income from movable capital;

3.     tax on commercial and industrial profits;

4.     tax on wages, salaries, indemnities and pensions (as mentioned in book III of Law (14 of 1939);

5.     tax on profits from liberal professions and all non-commercial professions;

6.     general income-tax;

7.     defence tax (imposed on income);

8.     national security tax (imposed on income); and

9.     supplementary taxes imposed as percentage of taxes mentioned above;

(hereinafter referred to as " United Arab Republic tax ").

1.     The Convention shall also apply to any identical or substantially similar taxes which are subsequently imposed in addition to, or in the place of, the existing taxes.

2.     At the end of each year, the competent authority of the Contracting States shall notify to each other any singnificant changes which have been made in their respective taxation laws.

CHAPTER II

DEFINITIONS

Article 3

General definitions

1.     In this Convention, unless the context otherwise requires;

a.     the term " India " shall have the meaning assigned to it in Article 1 of the Constitution of India;

b.    the term " United Arab Republic " means Egypt;

c.     the terms " a Contracting state " and " the other Contracting state " mean India or the United Arab Republic, as the context requires;

d.    the term " tax " means Indian tax or United Arab republic tax, the context requires;

e.     the term " person " includes individuals, companies and all other entities which are treated as taxable units under the tax laws in force in either Contracting state;

f.     the term " company " for tax purposes means any entity which is treated as a company under the Indian tax law or any entity which is treated as a body corporate under the United Arab Republic tax law;

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 and Insurance); and in the case of the United Arab Republic, the Minister of Treasury or his authorised representative.

2.     In the application of the provisions of this Convention by one of the Contracting States any term not otherwise defined 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 Connvention.

Article 4

Fiscal Domicile

1.     For the purposes of this Convention the term " resident of a Contracting State " means any person who under the law of the State, is resident of that State for the purposes of taxation therein by reason of his domicile, residence, place of management or any other criterion applied under the tax laws of that State.

2.     Where by reason of the provisions of paragraph 1, an individual is a resident of both Contracting States, then his case shall be determined in accordance with the followiing 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 permanent home available to him in both Contracting States, he shall be deemed to be a resident of the Contracting State with which his personal and economic relations are closest (Centre of vital interest):

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 if 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 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 in which the business of the enterprise is wholly or partly carried on.

2.     The term "permanent establishment" shall include:

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 oilfield or other place of extraction of natural resources;

g.    a permanent sales exhibition;

h.     a building site or construction or assembly project which exists for more than ninety days.

3.     The term "permanent establishment" shall not be deemed 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 fixed place of business solely for the purpose of purchasing goods or merchandise or for collecting information, for the enterprise; and

d.    the maintenance of a fixed place of business solely for the purpose of advertising or for scientific research, for the enterprise.

4.     A person acting in one of the Contracting States for or on behalf of an enterprise of the other Contracting State, shall be deemed to be a permanent establishment of that enterprise, or in the first mentioned State if:

                      i.        he has and habitually exercises in that State a general authority to negotiate and enter into contracts for or on behalf of the enterprise, unless the activities of the person are limited to the purchase of goods or merchandise for the enterprise, or

                     ii.        he habitually maintains in the first-mentioned Contracting State a stock of goods or merchandise belonging to the enterprise from which the person regularly delivers goods or merchandise for or on behalf of the enterprise, or

                    iii.        he habitually secures orders in the first-mentioned Contracting State exclusively or almost exclusively, for the enterprise itself or for the enterprise and other enterprises whcih are controlled by it or have a controlling interest in it.

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 of a genuinely independent status.

6.     The fact that a company, which is a resident of one of the Contracting states, has a subsidiary company which either is a resident of the other Contracting State or carries on a trade or business in that other Contracting State (whether through a permanent establishment or otherwise) shall not, of itself, constitute that subsidiary company a permanent establishment of its parent company.

CHAPTER III

TAXATION OF INCOME

ARTICLE 6

INCOME FROM IMMOVABLE PROPERTY

1.     Income from immovable property shall be taxable only in the Contracting state in which such property is situated.

2.     The term " immovable property " shall be defined in accordance with the law and usage of the Contracting state in which the property in question is situated. The term shall in any case include property accessory to immovable property, live-stock and equipment used in agriculture and foresrty, 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 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 paragraph 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 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.     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 attributted to that permanent establishment that 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 independent with the enterprise of which it is a permanent establishment.

3.     In the determination of the profits of a permanent establishment, there shall be allowed as deductions expenses which are incurred for the purposes of the permanent establishment including executive and general administrative expense 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 vairous 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.