ConventionSignatories : India, Zambia
Citations : 93 TNI 82-30; Doc 93-31400
Signed : June 5, 1981
In Force : January 18, 1984
Effective : January 1, 1979. See Article 29.
Status : In Force
Tax Analysts classification : Income
CONVENTION BETWEEN THE GOVERNMENT OF THE REPUBLIC OF INDIA AND THE GOVERNMENT OF THE REPUBLIC OF ZAMBIA FOR THE AVOIDANCE OF DOUBLE TAXATION ANDTHE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME SIGNED AT LUSAKA ON JUNE 5, 1981.
The Government of the Republic of India and the Government of the Republic of Zambia, desiring toconclude a convention for the avoidance of double taxation and the prevention of fiscal evasion withrespect to taxes on income, Have agreed as follows:
CHAPTER I
SCOPE OF 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. The taxes to which this Convention shall apply are :
(a) In the case of India:
(i) the income-tax including any surcharge thereon imposed under the Income-tax Act,
1961 (43 of 1961); and
(ii) the surtax imposed under the Companies (Profits) Surtax Act, 1964 (7 of 1964);
(hereinafter referred to as “Indian tax”)
(b) In the case of Zambia:
(i) the income tax;
(ii) the mineral tax; and
(iii) the personal levy
(hereinafter referred to as “Zambian tax”).
2. 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 1 of this Article.
3. At the end of each year, the competent authorities of the Contracting States shall notify each other of any significant changes which have been made in their respective taxation laws which are the subject ofthis Convention, and furnish copies of relevant enactments and regulations.
CHAPTER II
DEFINITIONS
Article 3
General Definitions
1. In this Convention, unless the context otherwise requires :
(a) the terms “a Contracting State” and “the other Contracting State” mean India or Zambia, as the context requires;
(b) the term “tax” means Indian tax or Zambian 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 Convention applies or which represents a penalty imposed relating to those taxes;
(c) the term “person” includes individuals, companies and all other entities which are treated as
taxable units 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
under the taxation laws in force in the respective Contracting State;
(e) the term “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); and in the case of Zambia, the Commissioner of
Taxes or his authorized representative;
(g) the term “nationals” means:
(i) in respect of India : all individuals possessing the nationality of India and all legal persons,partnerships and associations deriving their status from the law in force in India;
(ii) in respect of Zambia : all individuals possessing the nationality of Zambia and all legal persons, partnerships and associations deriving their status as such from the law in forcein Zambia.
2. In the application of the provisions of this Convention by one of the Contracting States, 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 taxation therein by reason of his domicile, residence, place of
management or any other criterion of similar nature.
2. Where by reason of the provisions of paragraph 1, an individual is a resident of both Contracting States, then his residential status for the purposes of this Convention 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 with which his personal and economic relations are closer (hereinafter referred to as his “centre of vital interest”);
(b) If the Contracting State in which he has his centre of vital interests cannot be determined, or if he does not have 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 States shall settle the question by mutual agreement.
3. Whereby reason of the provisions of paragraph 1, a person other than an individual is a resident of both of 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;
(f) a mine, a quarry, an oil field or other place of extraction of natural resources;
(g) a farm, plantation or other place where, agricultural, forestry plantation or related activities are carried on;
(h) a building site or construction or assembly project or supervisory activities in connection there with where such site, project or supervisory activity continues for a period of more than 9
months;
(i) a warehouse or other facilities for the maintenance of a stock of goods or merchandise belonging to the enterprise from which orders are filled.
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 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, for collecting information, for the enterprise;
(e) the maintenance of a fixed place of business solely for the purpose of advertising, for the supply of information or for scientific research, being activities solely of a preparatory or auxiliary character, in the trade or business of the enterprise.
4. A person acting in a Contracting State for or on behalf of an enterprise of the other Contracting State--other than an agent of an independent status to whom the provisions of paragraph 6 apply--shall be deemed to be a permanent establishment of that enterprise in the first-mentioned State if:
(i) he has, and habitually exercises in that State, an authority to conclude contracts for or on behalf of the enterprise, unless his activities are limited to the purchase of goods or merchandise
for the enterprise; or
(ii) he has no such authority but the habitually maintains in the first-mentioned Contracting State a stock of goods or merchandise belonging to that enterprise from which he regularly fulfills orders
on behalf of the enterprise.
5. 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 an employee or through a representative who is not an agent of independent status within the meaning of paragraph 6.
6. 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 would not be considered an agent of an independent status within the meaning of this paragraph.
7. 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.
8. An enterprise of a Contracting State shall be deemed to have a permanent establishment in the other Contracting State if it carries on a business which consists of providing the services of public entertainers (such as theatre, motion picture, radio or television artistes and musicians) or athletes in that other Contracting State unless the enterprise is directly or indirectly supported wholly or substantially, from the public funds of the Government of the first-mentioned Contracting State in connection with the provision of such services.
CHAPTER III
TAXATION OF INCOME
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 and usage 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 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, oilwells, 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 Contracting State unless the enterprise carried 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 Contracting State but only so much of them as is attributable to that permanent establishment.
2. If an enterprise of a Contracting State, which has a permanent establishment in the other Contracting State, sells goods or merchandise of the same or similar kind as those sold by the permanent establishment or renders services of the same or similar kind as those rendered by the permanent establishment, the profits of such activities may be attributed to the permanent establishment unless the enterprise proves that such sales or services are not attributable to the activity of the permanent establishment.
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 the 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 ascertainment thereof presents exceptional difficulties, the profits attributable to the permanent establishment may be estimated on a reasonable basis.
4. 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 3 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.
5. 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, but this does not include any expenses which, under the law of that State, would not be allowed to be deducted by an enterprise of that State.
6. 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.
7. 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.
8. The term “business profits” means income derived by an enterprise from the carrying on of trade or business; but does not include income in the form of rents, royalties (including rents or royalties in respect of cinematographic films or video tapes for television), fees for technical services, management charges, or remuneration or fees for providing services of technical or other personnel, interest, dividends, capital
gains, remuneration for labour or personal (including professional) services or income from the operation of ships or aircraft.
Article 8
Air Transport
1. Profits derived by an enterprise of a Contracting State from the operation of aircraft in international traffic shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.
2. The provisions of paragraph 1 of this Article shall also apply to a share of profits from the operation of aircraft in international traffic derived by an enterprise of a Contracting State through participation in a pooled service, in a joint air transport operation or in an international operating agency.
3. For the purpose of paragraph 1, interest on funds connected with the operation of aircraft in international traffic shall be regarded as income from the operation of such aircraft, and the provisions of Article 11 shall not apply in relation to such interest.
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.
Article 10
Dividends
1. Dividends paid by a company which is resident of a resident of the other Contracting State may be taxed in that other Contracting 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 law of that State, but the tax so charged shall not exceed:
(a) 5 per cent of the gross amount of the dividends if the recipient is a company which owns at least 25 per cent of the shares of the company paying the dividends during the period of six months immediately preceding the date of payment of the dividends;
(b) 15 per cent of the gross amount of the dividends in all other cases.
3. The term “dividends” as used in this Article means income from shares or other rights, not being debtclaims, participating in profits, as well as income from other corporate rights assimilated to income from shares or any other item which is deemed to be a dividend or distribution of a company by the taxation law of the Contracting 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, has in the other Contracting State, of which the company paying the dividends is a resident, a permanent establishment with which the holding by virtue of which the dividends are paid is effectively connected. In such a case, the provisions of Article 7 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 to persons who are not residents of that other State, or subject the company‘s undistributed profits to a tax on undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly or profits or income arising in that other State.
Article 11
Interest
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 law of that State, but 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 and paid to the Government of the other Contracting State or local Authority thereof, the Central Bank of that other Contracting State, or any agency wholly owned by that Government or local authority shall be exempt from tax of the first mentioned Contracting State. The competent authorities of the Contracting States may determine by mutual agreement any other governmental institution to which this paragraph shall apply.
4. The term “interest” as used in this Article means income from Government securities, bonds ordebentures, whether or not secured by mortgage and whether or not carrying a right to participate inprofits, and other debt-claims of every kind as well as all other income assimilated to income from moneylent by the taxation law of the Contracting State in which the income arises.
5. The provisions of paragraphs 1 and 2 shall not apply if the recipient of the interest, being a resident ofa Contracting State, has in the other Contracting State in which the interest arises a permanent
establishment with which the debt-claim from which the interest arises is effectively connected. In such a case the provisions of Article 7 shall apply.
6. Interest shall be deemed to arise in a Contracting State when the payer is that Contracting State itself, a political subdivision, 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 in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by that permanent establishment, then such interest shall be deemed to arise in the Contracting State in which the permanent establishment is situated.
7. Where, owing to a special relationship between the payer and the recipient 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
1. Royalties arising in a Contracting State and paid to a resident of the other Contracting State may betaxed in that other State.
2. However, such royalties may also be taxed in the Contracting State in which they arise, and according to the law of that State, but the tax so charged shall not exceed 10 per cent of the gross amount of theroyalties.
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 and films or tapes for radio or television 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 concerning industrial commercial or scientific experience.
4. The provisions of paragraphs 1 and 2 shall not apply if the recipient of the royalties, being a resident of a Contracting State, has in the other Contracting State in which the royalties arises a permanent establishment with which the right or property giving rise to the royalties is effectively connected. In such a case, the provisions of Article 7 shall apply.
5. Royalties shall be deemed to arise in a Contracting State when the payer is that Contracting State itself, a political subdivision, a local authority or a resident of that State. Where, however, the person paying the royalties, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment in connection with which the liability to pay the royalties was incurred, and such royalties are borne of such permanent establishment, then such royalties shall be deemed to arise in the Contracting State in which the permanent establishment is situated.
6. Where, owing to a special relationship between the payer and the recipient or between both of them and some other person, the amount of royalties paid, 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 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.
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