People s Democratic Republic of Yemen

German Democratic Republic

Double Taxation Avoidance Agreement

Agreement between the Government of Republic of the India and the Government of the German Democratic Republic for the avoidance of double taxation with respect to taxes on income and on capital

Notification No. G. S. R. 107(E), dtd. 2nd March, 1990.

Whereas the annexed agreement between the Government of the Republic of India and the Government of the German Democratic Republic for the avoidance of double taxation with respect to taxes on income and on capital has come into force on the 24th November, 1989, on the notification by both the Contracting States to each other of the approval of the agreement under their laws in accordance with article 31 of the said agreement;

Now, therefore, in exercise of the powers conferred by section 44A of the Wealth-tax Act, 1957 (27 of 1957), and section 90 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby directs that all the provisions of the said agreement shall be given effect to in the Union of India.

ANNEXURE

AGREEMENT BETWEEN THE GOVERNMENT OF THE REPUBLIC OF INDIA AND THE GOVERNMENT OF THE GERMAN DEMOCRATIC REPUBLIC FOR THE AVOIDANCE OF DOUBLE TAXATION WITH RESPECT TO TAXES ON INCOME AND ON CAPITAL.

The Government of the Republic of India and the Government of the German Democratic Republic;

Desiring to promote economic co-operation between the two States through an Agreement for the avoidance of double taxation with respect to taxes on income and on capital;

Have agreed as follows:

Article 1

PERSONAL SCOPE

This agreement shall apply to persons who are residents of one or both of the Contracting States.

Article 2

TAXES COVERED

1.     The taxes to which this Agreement shall apply are:

a.     In the Republic of India:

                              i.          the income-tax including any surcharge thereon imposed under the Income-tax Act, 1961 (43 of 1961); and

                             ii.          the wealth-tax imposed under the Wealth-tax Act, 1957 (27 of 1957) (hereinafter referred to as "Indian tax").

b.    In the German Democratic Republic:

                              i.          Einkommensteuer (income-tax);

                             ii.          Koerperschaftsteuer (corporate income-tax);

                            iii.          Gewinnabfuhrungen der Staatlichen Betriebe (revenue transfer by public enterprises);

                            iv.          Lohnsteue; (tax on wages);

                             v.          Steuer auf Lizenzgebuhren (tax on royalties);

                            vi.          Gewerbesteuer (trade-tax); and

                           vii.          Vermogensteuer (property-tax)

(hereinafter referred to as "German Democratic Republic tax").

2.     The Agreement shall also apply to any identical or substantially similar taxes which are imposed by either Contracting State after the date of signature of the present Agreement in addition to, or in place of, the taxes referred to in paragraph 1.

The competent authorities of the Contracting States shall notify each other of any substantial changes which are made in their respective taxation laws.

Article 3

GENERAL DEFINITIONS

1.             In this Agreement, unless the context otherwise requires:

a.             the terms "a Contracting State" and "the other Contracting State" mean Republic of India or the German Democratic Republic as the context requires;

b.            the term "tax" means Indian tax or German Democratic Republic tax as the context requires, but shall not include any amount which is payable in respect of any default or omission in relation to the taxes to which this Agreement applies or which represents a penalty imposed relating to those taxes;

c.             the term "person" includes an individual, a company and any other entity which is treated as a taxable unit under the taxation laws in force in the respective Contracting States;

d.            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;

e.             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;

f.             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 German Democratic Republic, the Ministry of Finance;

g.            the term "national" means:

                                          i.    any individual possessing the nationality of a Contracting State under the laws in force in that State; and

                                         ii.    any legal person, partnership or Organisation deriving its status from the laws in force in the Contracting State;

h.     the term "international traffic" means any transport by a ship or aircraft operated by an enterprise of a Contracting State, except when the ship or aircraft is operated solely between places in the other Contracting State.

2.             As regards the application of the Agreement by a Contracting State, any term not defined therein shall, unless the context otherwise requires, have the meaning which it has for the purposes of the law of that State concerning the taxes to which the Agreement applies.

Article 4

RESIDENT

1.             For the purposes of this Agreement, the term "resident of a Contracting State" means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature.

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, as 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.

Article 5

PERMANENT ESTABLISHMENT

1.             For the purposes of this Agreement, the term "permanent establishment" means a fixed place of business through which the business of 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 or a warehouse;

f.             a mine, an oil or gas well, a quarry or any other place of extraction of natural resources;

g.            a farm or plantation;

h.             a premises used as a sales outlet or for receiving or soliciting orders;

i.              an installation or structure used for the exploration or development of natural resources;

j.              a building site or construction, installation or assembly project or supervisory activities in connection therewith, where such site, project or activities (together with other such sites, projects or activities, if any) continue for a period of more than six months.

3.             Notwithstanding the preceding provisions of this article, the term "permanent establishment" shall be deemed not to include:

a.             a temporary building site or construction or installation project executed by the Government of a Contracting State in the other State;

b.            the use of facilities solely for the purpose of storage or display of goods or merchandise belonging to the enterprise;

c.             the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage or display;

d.            the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;

e.             the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise, or of collecting information, for the enterprise;

f.             the maintenance of. a fixed place of business solely for the purpose of advertising, for the supply of information, for scientific research, or for similar activities which have a preparatory or auxiliary character, for the enterprise.

However, the provisions of sub-paragraphs (b) to (f) shall not be applicable where the enterprise maintains any other fixed place of business in the other Contracting State for any purposes other than the purposes specified in the said sub-paragraphs.

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 State, if

a.             he has and habitually exercises in that State an authority to conclude contracts on behalf of the enterprise, unless his activities are limited to the purchase of goods, or merchandise for the enterprise;

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.             he habitually secures orders in the first-mentioned State, wholly or almost wholly for the enterprise itself or for the enterprise and other enterprises controlling, controlled by, or subject to the same common control as, that 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 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 that enterprise itself or on behalf of that enterprise and other enterprises controlling, controlled by, or subject to the same common control, as 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 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 the law of the Contracting State 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 are 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.             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. In any case where the correct amount of profits attributable to a permanent establishment is incapable of determination or the determination thereof presents exceptional difficulties, the profits attributable to the permanent establishment may be estimated on a reasonable basis.

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 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, 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 or for management, or, except in the case of a banking enterprise, by way of interest on moneys lent to the permanent establishment. Likewise, no account shall be taken, in the determination of the profits of a permanent establishment, for amount 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.