Section 90 of the Income-tax Act, 1961 - Double
Taxation Agreement - Agreement for Avoidance of Double Taxation and
Prevention of Fiscal Evasion with Foreign Countries - Malaysia
Notification No. 7/2013 [F. No. 506/123/84-FTD-II], dated 29-1-2013
Whereas the annexed Agreement between the Government of
the Republic of India and the Government of Malaysia for the avoidance
of double taxation and the prevention of fiscal evasion with respect to
taxes on income (hereinafter referred to as "DTAA") signed on the 9th
day of May, 2012 shall enter into force on the 26:h day of December,
2012, being the date of the later of the notifications after completion
of the procedures as required by the laws of the respective countries
for the entry into force of the DTAA, in accordance with Article 30 of
the said DTAA.
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 DTAA annexed
hereto shall be given effect to in the Union of India in accordance with
Article 30 of the said DTAA with effect from the 1st day of April,
2013.
AGREEMENT BETWEEN THE
GOVERNMENT OF THE REPUBLIC OF INDIA AND THE GOVERNMENT OF MALAYSIA FOR
THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION
WITH RESPECT TO TAXES ON INCOME
The Government of the Republic of India and the Government
of Malaysia, desiring to conclude an Agreement for the avoidance of
double taxation and the prevention of fiscal evasion with respect to
taxes on income and with a view to promoting economic cooperation
between the two countries, have agreed as follows:
ARTICLE 1
PERSONS COVERED
1. This Agreement shall apply to persons who are residents of one or both of the Contracting States.
ARTICLE 2
TAXES COVERED
1. This Agreement shall apply to taxes on income imposed
on behalf of a Contracting State or of its political subdivisions or
local authorities, 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 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 existing taxes which are the subject of this Agreement are:
(a) in India, the income tax, including any surcharge thereon; (hereinafter referred to as "Indian tax");
(b) in Malaysia:
(i) the income tax; and
(ii) the Petroleum income tax;
(hereinafter referred to as "Malaysian tax").
4. The Agreement shall apply also to any identical or
substantially similar taxes that are imposed after the date of signature
of the Agreement in addition to, or in place of, the existing taxes.
The competent authorities of the Contracting States shall notify each
other of any significant changes that have been made in their respective
taxation laws.
ARTICLE 3
GENERAL DEFINITIONS
1. For the purposes of this Agreement, unless the context otherwise requires:
(a) the term "India" means the territory of
India and includes the territorial sea 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, including the United Nations Convention on the
Law of the Sea;
(b) the term "Malaysia" means the territories
of the Federation of Malaysia, the territorial waters of Malaysia and
the sea-bed and subsoil of the territorial waters, and the air space
above such areas, and includes any area extending beyond the limits of
the territorial waters of Malaysia, and the sea-bed and subsoil of any
such area, which has been or may hereafter be designated under the laws
of Malaysia and in accordance with international law as an area over
which Malaysia has sovereign rights or jurisdiction for the purposes of
exploring and exploiting the natural resources, whether living or
non-living;
(c) the terms "Contracting State" and "the
other Contracting State" mean the Republic of India or Malaysia as the
context requires;
(d) the term "person" includes an individual,
a company, a body of persons and any other entity which is treated as a
taxable unit under the taxation laws in force in the respective
Contracting States;
(e) the term "company" means any body corporate or any entity that 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 "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;
(h) the term "competent authority" means:
(i) in the case of India: the Finance Minister, Government of India, or his authorized representative;
(ii) in the case of Malaysia, the Minister of Finance or his authorized representative;
(i) the term "national" means:
(i) any individual possessing the nationality or citizenship of a Contracting State; and
(ii) any legal person, partnership or association deriving its status as such from the laws in force in a Contracting State;
(j) the term "tax" means Malaysian tax or
Indian tax, as the context requires, but shall not include any amount
which is payable in respect of a default or omission in relation to the
taxes to which this Agreement applies or which represents a penalty or
fine imposed relating to those taxes;
(k) for the purposes of the Agreement, the term "fiscal year" wherever it appears means:
(i) in the case of India, the financial year beginning on the 1st day of April;
(ii) in the case of Malaysia, the meaning as assigned by section 20 of the Income Tax Act, 1967.
2. As regards the application of the Agreement at any time
by a Contracting State any term not defined therein shall, unless the
context otherwise requires, have the meaning that it has at that time
under the law of that State for the purposes of the taxes to which the
Agreement applies and any meaning under the applicable tax laws of that
State prevailing over a meaning given to the term under other laws of
that State.
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 and also
includes that State and any political subdivision or local authority or a
statutory body established under an Act of Parliament or State
Legislative Assembly thereof. This term, however, 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 only
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 only 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 only 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 only
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 endeavour to 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 only of the State in
which its place of effective management is situated. If the State in
which its place of effective management is situated cannot be
determined, then the competent authorities of the Contracting States
shall endeavour to settle the question by mutual agreement.
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 an 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 sales outlet;
(g) a warehouse in relation to a person providing storage facilities for others;
(h) a farm, plantation or other place where agricultural, forestry, plantation or related activities are carried on; and
(i) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources.
3. (a) A building site or construction,
installation or assembly project or supervisory activities in connection
therewith constitutes a permanent establishment only if such site,
project or activities last more than nine months.
(b) The furnishing of services, including
consultancy services, by an enterprise through employees or other
personnel engaged by the enterprise for such purpose constitutes a
permanent establishment, but only where activities of that nature
continue (for the same or connected project) within the country for a
period or periods aggregating more than 90 days within any twelve-month
period.
4. 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
subparagraphs (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.
5. Notwithstanding the provisions of paragraphs 1 and 2,
where a person - other than an agent of an independent status to whom
paragraph 7 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 4 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;
(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; or
(c) habitually secures orders in the first-mentioned State, wholly or almost wholly for the enterprise itself.
6. Notwithstanding the preceding provisions of this
Article, an insurance enterprise of a Contracting State shall, except in
regard to re-insurance, be deemed to have a permanent establishment in
the other Contracting State if it collects premiums in the territory of
that other State or insures risks situated therein through a person
other than an agent of an independent status to whom paragraph 7
applies.
7. 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 that enterprise, and conditions are made or imposed between
that enterprise and the agent in their commercial and financial
relations which differ from those which would have been made between
independent enterprises, he will not be considered an agent of an
independent status within the meaning of this paragraph.
8. 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 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 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 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 the tax 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 banking enterprises, 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 toward
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.
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 the mere 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 Agreement, then the provisions
of those Articles shall not be affected by the provisions of this
Article.
ARTICLE 8
SHIPPING AND AIR TRANSPORT
1. Profits derived by an enterprise of a Contracting State
from the operation of ships or aircraft in international traffic shall
be taxable only in that State.
2. For the purposes of this Article, profits from the
operation of ships or aircraft in international traffic shall mean
profits derived by an enterprise described in paragraph 1 from the
transportation by sea or air respectively of passengers, mail, livestock
or goods carried on by the owners or lessees or charterers of ships or
aircraft including:
(a) the sale of tickets for such transportation on behalf of other enterprises; and
(b) the rental of ships or aircraft incidental to any activity directly connected with such transportation.
3. Profits of an enterprise of a Contracting State
described in paragraph 1 from the use, maintenance, or rental of
containers (including trailers, barges and related equipment for the
transport of containers) used in connection with the operation of ships
or aircraft in international traffic which is supplementary or
incidental to its international operation of ships or aircrafts shall be
taxable only in that Contracting State unless the containers are used
solely within the other Contracting State.
4. For the purposes of this Article, interest on
investments directly connected with the operation of ships or aircraft
in international traffic shall be regarded as profits derived from the
operation of such ships or aircraft if they are integral to the carrying
on of such business, and the provisions of Article 11 shall not apply
in relation to such interest.
5. The provisions of paragraph 1 shall also apply to
profits from the participation in a pool, a joint business or an
international operating agency.
ARTICLE 9
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 the 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
may 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 Agreement 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 beneficial
owner of the dividends is a resident of the other Contracting State, the
tax so charged shall not exceed 5 per cent of the gross amount of 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
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 company's
undistributed profits to a tax on the company's 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 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 beneficial owner of the interest is a resident of the
other Contracting State, the tax so charged shall not exceed 10 per cent
of the gross amount of the interest.
3. Notwithstanding the provisions of paragraph 2, interest
arising in a Contracting State shall be exempt from tax in that State
provided it is derived and beneficially owned by:
(a) in the case of Malaysia:
(i) the Government of Malaysia;
(ii) the Government of the States;
(iii) Bank Negara Malaysia;
(iv) the local authorities;
(v) the statutory bodies wholly owned by the Government;
(vi) the Export-Import Bank of Malaysia Berhad (EXIM Bank);
(vii) Bank Pembangunan Malaysia Berhad(Development Bank of Malaysia Berhad);
(viii) Bank Perusahaan Kecil & Sederhana Malaysia Berhad(Small & Medium Enterprise Bank of Malaysia Berhad); and
(ix) Malaysia Industrial Development Finance Berhad;
(b) in the case of India:
(i) the Government;
(ii) the political sub-divisions;
(iii) the statutory bodies wholly owned by the Government;
(iv) the local authorities;
(v) the Export-Import Bank of India (EXIM Bank);
(vi) the Reserve Bank of India;
(vii) the Industrial Finance Corporation of India;
(viii) the Industrial Development Bank of India;
(ix) the National Housing Bank; and
(x) the Small Industrial Development Bank of India;
(c) any other institution as may be agreed from time to time between the competent authorities of the Contracting States.
4. The term "interest" as used in this Article means
income from debt claims of every kind, whether or not secured by
mortgage and whether 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 of 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 15, as the case may be, shall apply.
6. Interest shall be deemed to arise in a Contracting
State when the payer is 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 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 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 Agreement.
ARTICLE 12
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 10 per cent of the gross amount of
the royalties.
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 television or
radio 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
(know-how) 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 a resident of that State. Where, however, the
person paying such 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 obligation 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 a special relationship between the
payer and the beneficial owner or between both of them and some other
person, the amount of the 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 Agreement.
ARTICLE 13
FEES FOR TECHNICAL SERVICES
1. Fees for technical services arising in a Contracting
State which are derived by a resident of the other Contracting State may
be taxed in that other State.
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 percent of the gross amount of the fees
for technical services.
3. The term "fees for technical services" means payment of
any kind in consideration for the rendering of any managerial,
technical or consultancy services including the provision of services by
technical or other personnel but does not include payments for services
mentioned in Article 15 and Article 16 of this Agreement.
4. The provisions of paragraph 1 of this Article 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 personnel services from a fixed base situated therein,
and the fees for technical services are 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. Fees for technical services shall be deemed to arise in
a Contracting State when the payer is 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
obligation 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 paid exceeds, for
whatever reason, 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 only apply to the last-mentioned
amount. In such 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 Agreement.
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 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 derived by a resident of a Contracting State from
the alienation of shares deriving more than 50 per cent of their value
directly or indirectly from immovable property situated in the other
Contracting State or any other right pertaining to such immovable
property may be taxed in that other State.
5. Gains from the alienation of shares other than those
mentioned in paragraph 4 in a company which is a resident of a
Contracting State may be taxed in that State.
6. Gains from the alienation of any property other than
that referred to in paragraphs 1, 2, 3, 4 and 5, shall be taxable only
in the Contracting State of which the alienator is a resident.
ARTICLE 15
INDEPENDENT PERSONAL SERVICES
1. Income derived by an individual who is a resident of a
Contracting State from the performance 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 State; or
(b) if his stay in the other Contracting State is for a period or periods amounting to or exceeding in the aggregate 183 days in any period of twelve months commencing or ending
in the fiscal year concerned; in that case, only so much of the income
as is derived from his activities performed in that other State may be
taxed in that other State.
2. The term "professional services" includes especially
independent scientific, literary, artistic, educational or teaching
activities as well as the independent activities of physicians, lawyers,
engineers, architects, surgeons, dentists and accountants.
ARTICLE 16
DEPENDENT PERSONAL SERVICES
1. Subject to the provisions of Articles 17, 19, 20, 21
and 22, 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
any twelve months period commencing or ending in the fiscal year
concerned, 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 derived in respect of an employment exercised
aboard a ship or aircraft operated in international traffic, by an
enterprise of a Contracting State may be taxed in that State.
ARTICLE 17
DIRECTORS' FEES
Directors' fees and other similar payments derived by a
resident of a Contracting State in his capacity as a member of the board
of directors in a company which is a resident of the other Contracting
State may be taxed in that other State.
ARTICLE 18
ARTISTES AND SPORTSPERSONS
1. Notwithstanding the provisions of Articles 15 and 16,
income derived by a resident of a Contracting State as an entertainer,
such as a theatre, motion picture, radio or television artiste, or a
musician, or as a sportsperson, from personal activities as such
exercised in the other Contracting State, may be taxed in that other
State.
2. Where income in respect of personal activities
exercised by an entertainer or a sportsperson in his capacity as such
accrues not to the entertainer or sportsperson himself but to another
person, that income may, notwithstanding the provisions of Articles 7,
15 and 15, be taxed in the Contracting State in which the activities of
the entertainer or sportsperson are exercised.
3. The provisions of paragraphs 1 and 2, shall not apply
to income from activities performed in a Contracting State by
entertainers or sportspersons if the activities are substantially
supported by public funds of one or both of the Contracting States or of
political subdivisions or local authorities thereof. In such case, the
income shall be taxable only in the Contracting State of which the
entertainer or sportsperson is a resident.
ARTICLE 19
PENSIONS
1. Subject to the provisions of paragraph 2 of Article 20,
pensions, annuities 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. 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 20
GOVERNMENT SERVICE
1. (a) Salaries, wages and other similar
remuneration, other than a pension, paid by a Contracting State or a
political subdivision or a local authority or a statutory body thereof
to an individual in respect of services rendered to that State or
political subdivision or local authority or statutory body thereof shall
be taxable only in that State.
(b) However, such salaries, wages and other similar
remuneration shall be taxable only in the other Contracting State if
the services are rendered in that 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 subdivision or a local authority
or a statutory body thereof to an individual in respect of services
rendered to that State or political subdivision or local authority or
statutory body 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 State.
3. The provisions of Articles 16, 17, 18 and 19 shall
apply to salaries, wages and other similar remuneration and to pensions
in respect of services rendered in connection with a business carried on
by a Contracting State or a political subdivision or a local authority
or a statutory body thereof.
ARTICLE 21
PROFESSORS, TEACHERS AND RESEARCH SCHOLARS
1. A professor, teacher or research scholar who is or was a
resident of the Contracting State immediately before visiting the other
Contracting State for the purpose of teaching or engaging in research,
or both, at a university, college or other similar 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 2 years from the date of his first arrival in that other
State.
2. This Article shall apply to income from research only
if such research is undertaken by the individual in public interest and
not primarily for the benefit of some private person or persons.
3. For the purposes of this Article, an individual shall
be deemed to be a resident of a Contracting State if he is resident in
that State in the fiscal year in which he visits the other Contracting
State or in the immediately preceding fiscal year.
ARTICLE 22
STUDENTS
1. A student 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 Contracting State solely for the
purpose of his education or training, shall besides grants, loans and
scholarships be exempt from tax in that other 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 which he derives from an
employment which he exercises in the other Contracting State if the
employment is directly related to his studies.
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 six
consecutive years from the date of his first arrival for the purposes of
his education or training in that other State.
ARTICLE 23
OTHER INCOME
1. Items of income of a resident of a Contracting State,
wherever arising, not dealt with in the foregoing Articles of this
Agreement 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 15, as the case may be, shall apply.
3. Notwithstanding the provisions of paragraphs 1 and 2,
items of income of a resident of a Contracting State not dealt with in
the foregoing Articles of this Agreement and arising in the other
Contracting State may also be taxed in that other State.
ARTICLE 24
METHODS FOR ELIMINATION OF DOUBLE TAXATION
1. The laws in force in either of the Contracting States
will continue to govern the taxation of income in the respective
Contracting States except where provisions to the contrary are made in
this Agreement.
2. In the case of India, double taxation shall be eliminated as follows:
Where a resident of India derives income which, in
accordance with the provisions of this Agreement, may be taxed in
Malaysia, India shall allow as a deduction from the tax on the income of
that resident an amount equal to the amount of tax paid in Malaysia
whether directly or by deduction at source. Such amount shall not,
however, exceed that part of the tax (as computed before the deduction
is given) which is attributable to the income which may be taxed in
Malaysia.
3. For the purposes of paragraph 4, the term "tax paid in
Malaysia" shall be deemed to include the tax which would, under the laws
of Malaysia and in accordance with this Agreement, have been payable on
any income derived from sources in Malaysia had the income not been
taxed at a reduced rate or exempted from Malaysian tax in accordance
with the provisions of this Agreement and the special incentives under
the Malaysian laws for the promotion of economic development of Malaysia
which were in force at the date of signature of this Agreement or any
other provisions which may subsequently be introduced in Malaysia in
modification of, or in addition to, those laws so far as they are agreed
by the competent authorities of the Contracting States to be of a
substantially similar character.
4. In the case of Malaysia, double taxation shall be eliminated as follows:
Subject to the laws of Malaysia regarding the allowance as
a credit against Malaysian tax of tax payable in any country other than
Malaysia, tax paid in India under the taxation laws of India and in
accordance with the provisions of this Agreement, by a resident of
Malaysia in respect of income derived from India shall be allowed as a
credit against tax payable in Malaysia in respect of that income. Where
such income is a dividend paid by a company which is a resident of India
to a company which is a resident of Malaysia and which owns not less
than 10 per cent of the voting shares of the company paying the
dividend, the credit shall take into account tax paid in India by that
company in respect of its income out of which the dividend is paid. The
credit shall not, however, exceed that part of the Malaysian tax, as
computed before the credit is given, which is attributable to such item
of income.
5. For the purposes of paragraph 2, the term "tax paid in
India" shall be deemed to include the tax which would, under the laws of
India and in accordance with this Agreement, have been payable on any
income derived from sources in India had the income not been taxed at a
reduced rate or exempted from Indian tax in accordance with the
provisions of this Agreement and the special incentives under the Indian
laws for the promotion of economic development of India which were in
force at the date of signature of this Agreement or any other provisions
which may subsequently be introduced in India in modification of, or in
addition to, those laws so far as they are agreed by the competent
authorities of the Contracting States to be of a substantially similar
character,
ARTICLE 25
NON-DISCRIMINATION
1. 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, in particular with respect to residence, are or
may be subjected. This provision shall, notwithstanding the provisions
of Article 1, also apply to persons who are not residents of one or both
of the Contracting States.
2. The taxation on a permanent establishment which an
enterprise of a Contracting State has in the other Contracting State
shall not be less favorably levied in that other State than the taxation
levied on enterprises of that other State carrying on the same
activities. 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. This provision shall not be construed as preventing a
Contracting State from charging the profits of a permanent
establishment which a company of the other Contracting State has in the
first mentioned State at a rate of tax which is higher than that imposed
on the profits of a similar company of the first mentioned Contracting
State, nor as being in conflict with the provisions of paragraph 3 of
Article 7.
3. Except where the provisions of paragraph 1 of Article
9, paragraph 7 of Article 11, or paragraph 6 of Article 12, or paragraph
6 of Article 13, apply, interest, royalties, fees for technical
services and other disbursements paid by an enterprise of a Contracting
State to a resident of the other Contracting State shall, for the
purpose of determining the taxable profits of such enterprise, be
deductible under the same conditions as if they had been paid to a
resident of the first-mentioned State.
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 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 the first-mentioned State are or may be subjected.
5. The provisions of this Article shall apply to taxes covered by this Agreement.
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 Agreement, he may,
irrespective of the remedies provided by the domestic law 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 the Agreement.
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 the other Contracting State,
with a view to the avoidance of taxation, which is not in accordance
with the Agreement. 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 Agreement.
They may also consult together for the elimination of double taxation
in cases not provided for in the Agreement.
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 the 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 as is foreseeably relevant for carrying
out the provisions of this Agreement or to the administration or
enforcement of the domestic laws concerning taxes of every kind and
description imposed on behalf of the Contracting States, or of their
political subdivisions or local authorities, insofar as the taxation
thereunder is not contrary to the Agreement. The exchange of information
is not restricted by Articles 1 and 2.
2. Any information received under paragraph 1 by a
Contracting State shall be treated as secret in the same manner as
information obtained under the domestic laws of that State and shall be
disclosed only to persons or authorities (including courts and
administrative bodies) concerned with the assessment or collection of,
the enforcement or prosecution in respect of, the determination of
appeals in relation to the taxes referred to in paragraph 1, or the
oversight of the above. Such persons or authorities shall use the
information only for such purposes. They may disclose the information in
public court proceedings or in judicial decisions. Notwithstanding the
foregoing, information received by a Contracting State may be used for
other purposes when such information may be used for such other purposes
under the laws of both States and the competent authority of the
supplying State authorizes such use.
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 and administrative practice of that or of the
other Contracting State;
(b) to supply information which is 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 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 (ordre public).
4. If information is requested by a Contracting State in
accordance with this Article, the other Contracting State shall use its
information gathering measures to obtain the requested information, even
though that other State may not need such information for its own tax
purposes. The obligation contained in the preceding sentence is subject
to the limitations of paragraph 3 but in no case shall such limitations
be construed to permit a Contracting State to decline to supply
information solely because it has no domestic interest in such
information.
5. In no case shall the provisions of paragraph 3 be
construed to permit a Contracting State to decline to supply information
solely because the information is held by a bank, other financial
institution, nominee or person acting in an agency or a fiduciary
capacity or because it relates to ownership interests in a person.
ARTICLE 28
LIMITATION OF BENEFITS
1. The provisions of this Agreement shall in no case
prevent a Contracting State from the application of the provisions of
its domestic law and measures concerning tax avoidance or evasion,
whether or not described as such.
2. A resident of a Contracting State shall not be entitled
to the benefits of this Agreement if its affairs were arranged in such a
manner as if it was the main purpose or one of the main purposes to
take the benefits of this Agreement.
3. The case of legal entities not having bonafide business activities shall be covered by the provisions of this Article.
ARTICLE 29
MEMBERS OF DIPLOMATIC MISSIONS AND CONSULAR POSTS
Nothing in this Agreement shall affect the fiscal
privileges of members of diplomatic missions or consular posts under the
general rules of international law or under the provisions of special
agreements.
ARTICLE 30
ENTRY INTO FORCE
1. The Contracting States shall notify each other in
writing, through diplomatic channels, of the completion of the
procedures required by the respective laws for the entry into force of
this Agreement.
2. This Agreement shall enter into force on the date of
the later of the notifications referred to in paragraph 1 of this
Article.
3. The provisions of this Agreement shall have effect:
(a) in India, in respect of income derived in
any fiscal year beginning on or after the first day of April next
following the calendar year in which the Agreement enters into force;
and
(b) in Malaysia, in respect of Malaysian tax,
to tax chargeable for any year of assessment beginning on or after the
first day of January in the calendar year following the year in which
this Agreement enters into force.
4. The Agreement between the Government of Malaysia and
the Government of India for the Avoidance of Double Taxation and
Prevention of Fiscal Evasion with respect to Taxes on Income signed at
Putrajaya on the 14th day of May, 2001 shall cease to have effect when
the provisions of this Agreement become effective in accordance with the
provisions of paragraph 3.
ARTICLE 31
TERMINATION
This Agreement shall remain in force indefinitely until
terminated by a Contracting State. Either Contracting State may
terminate the Agreement, through diplomatic channels, by giving notice
of termination at least six months before the end of any calendar year
beginning after the expiration period of five years from the date of
entry into force of the Agreement. In such event, the Agreement shall
cease to have effect:
(a) in India, in respect of income derived in
any fiscal year on or after the first day of April next following the
calendar year in which the notice is given;
(b) in Malaysia, in respect of Malaysian tax,
to tax chargeable for any year of assessment beginning on or after the
first day of January in the calendar year following the year in which
the notice is given.
IN WITNESS WHEREOF the undersigned, duly authorized thereto, have signed this Agreement.
DONE in duplicate at Putrajaya this 9th day of May 2012, each
in the Hindi, Malay and English languages, all texts being equally
authentic. In case of divergence of interpretation, the English text
shall prevail.
PROTOCOL
At the time of signing the Agreement between the
Government of the Republic of India and the Government of Malaysia for
the avoidance of double taxation and the prevention of fiscal evasion
with respect to taxes on income, the undersigned have agreed that the
following provisions shall form an integral part of the Agreement:
1. With reference to paragraph 1 of Article 4, it
is understood that the second sentence of this paragraph is not to
exclude residents of countries adopting a territorial principle in their
taxation law.
2. It is understood that the persons who are
entitled to tax benefits according to the Labuan Business Activity Tax
Act, 1990 are not entitled to benefits of this Agreement. However, the
provisions of this Agreement shall apply to such Labuan companies that
have made an irrevocable election to be charged to tax in accordance
with the Income Tax Act, 1967 of Malaysia.
3. It is understood that the term "may be taxed in
the other State" wherever appearing in the Agreement should not be
construed as preventing the country of residence from taxing the income.
4. It is understood that both the Contracting
States shall review the provisions of Article 24 (Methods for
Elimination of Double Taxation) in order to consider the extension of
benefits in paragraphs 3 and 5 of that Article after the period of 10
years from the date on which this Agreement enters into force.
5. Notwithstanding the provisions of paragraph 2 of
this Protocol, the competent authority of Malaysia will provide
information under Article 27(Exchange of Information) regarding the
persons who are entitled to the benefits of the Labuan Business Activity
Tax Act, 1990.
6. With reference to Article 27(Exchange of
Information), it is understood that the term 'information' includes any
documents or certified copies of the documents.
7. With reference to Assistance in Collection of
Taxes, it is understood that if Malaysia amends its domestic laws for
this purpose, then, the two Contracting States shall consult each other
for the purpose of inserting Article on Assistance in Collection of
Taxes in this Agreement.
8. With reference to Tax Examination Abroad, it is
understood that if Malaysia amends its domestic laws for this purpose,
then, the two Contracting States shall consult each other for the
purpose of inserting Article on Tax Examination Abroad in this
Agreement.
IN WITNESS WHEREOF the undersigned, duly authorized thereto, have signed this Protocol.
DONE in duplicate at Putrajaya this 9th day of May 2012, each
in the Hindi, Malay and English languages, all texts being equally
authentic. In case of divergence of interpretation, the English text
shall prevail.
