12. Denmark - Agreement for avoidance of double taxation and prevention of fiscal evasion with Denmark

Whereas the annexed Convention between the Government of the Republic of India and the Government of the Kingdom of Denmark for the avoidance of double taxation and the prevention of fiscal evasion, with respect to taxes on income and on capital has come into force on the 13th day of June, 1989, on the notification by both the Contracting States to each other of the completion of the constitutional requirements, as required by paragraph 1 of Article 30 of the said Convention;

Now, therefore, in exercise of the powers conferred by section 90 of the Income-tax Act, 1961 (43 of 1961), section 24A of the Companies (Profits) Surtax Act, 1964 (7 of 1964) and section 44A of the Wealth-tax Act, 1957 (27 of 1957), the Central Government hereby directs that all the provisions of the said Convention shall be given effect to in the Union of India.

Notification : No. GSR 853(E), dated 25-9-1989.

ANNEXURE

CONVENTION BETWEEN THE REPUBLIC OF INDIA AND THE KINGDOM OF
DENMARK FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE
PREVENTION OF FISCAL EVASION WITH RESPECT TO TAxes
ON INCOME AND ON CAPITAL

The Government of the Republic of India and the Government of the Kingdom of Denmark;

Desiring to conclude a Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital:

Have agreed as follows :

Article 1 : Personal scope - The 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 India:

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

  (ii)  the surtax imposed under the Companies (Profits) Surtax Act, 1964 (7 of 1964);

(iii)  the wealth-tax imposed under the Wealth-tax Act, 1957 (24 of 1957);

(hereinafter referred to as Indian tax).

  (b)  in Denmark:

   (i)  the income-tax to the State (ind-komotskatten til staten);

  (ii)  the municipal income-tax (den kormmunal indkomstskat);

(iii)  the income-tax to the country municipalities (den amtskommunale lndkomstskat);

         (iv)  the old age pension contribution (folkepensionsbidreget);

          (v)  the seamens tax (smandsskatten);

         (vi)  the special income-tax (den saerlige indkomstskat);

        (vii)  the church tax (kirkes katten);

       (viii)  the tax on dividends (udbytteskatten);

         (ix)  the contribution to the sickness per diem fund (bidrag til dagpengefonden);

          (x)  the hydrocarbon tax (kulbrinteskatten);

         (xi)  the capital tax to the State (formueskatten til staten);

(hereinafter referred to as Danish 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. The competent authorities of the Contracting States shall notify in each other of any substantial changes which are made in their respective taxation laws.

Article 3 : General definitions - 1. In this Convention, unless the context otherwise requires :

  (a)  the term India means the territory of India and includes territorial sea and the air space above it, as well as any other maritime zone in which India has sovereign rights, other rights and jurisdictions, according to the Indian law and in accordance with international law.

  (b)  the term Denmark means the territory of the Kingdom of Denmark and including the territorial sea of Denmark and the air space above it, as well as any other maritime area to the extent that that area in accordance with international law has been or may hereafter be designated under Danish laws as an area within which Denmark may exercise sovereign rights for the purpose of exploring and exploiting the natural resources of the sea bed or its Sub-soil and the superjacent waters and with regard to other activities for the economic exploitation and exploration of the area; the term does not comprise the Faroe Islands and Greenland;

  (c)  the terms a Contracting State and the other Contracting State mean India or Denmark as the context requires;

  (d)  the term tax means Indian tax or Danish tax, as the contex 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;

  (e)  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;

  (f)  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;

  (g)  the terms enterprise of a Contracting State and enterprise of the other Contracting State mean respectively an enterprise carried on by a resident of a Contracting State and an enterprise carried on by a resident of the other Contracting State;

  (h)  the term competent authority means in the case of India, the Central Government in the Ministry of Finance, (Department of Revenue) or their authorised representative; and in the case of Denmark, the Minister for Inland Revenue, Customs and Excise or his authorised representative;

   (i)  the term national means any individual possessing the nationality of a Contracting State and any legal person, partnership or association deriving its status from the laws in force in a Contracting State;

  (j)  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 Convention by a Contracting State, any term not defined therein shall, unless the context otherwise requires, have the meaning which it has under the law of that State concerning the taxes to which the Convention applies.

ARTICLE 4 - Resident - 1. For the purposes of this Convention, the term resident of a Contracting State means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature. But this term does not include any person who is liable to tax in that State in respect only of income from sources in that State or capital situated therein.

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, or 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 Convention, 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;

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

  (g)  a warehouse in relation to a person providing storage facilities for others;

  (h)  a farm, plantation or other place where agriculture, forestry, plantation or related activities are carried on;

   (i)  a premises used as a sales outlet or for receiving or soliciting orders;

  (j)  an installation or structure used for the exploration of natural resources provided that the activities are carried on for a period or periods of 183 days or more in any twelve-month period;

  (k)  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 183 days or more.

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

  (a)  the use of facilities solely for the purpose of storage or display of goods or merchandise belonging to the enterprise;

  (b)  the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage or display;

  (c)  the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;

  (d)  the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise, or of collecting information, for the enterprise; and

  (e)  the maintenance of a fixed place of business solely for the purpose of advertising; for the supply of information, for scientific research, or for other activities which have a preparatory or auxiliary character, for the enterprise.

4. Notwithstanding the provisions of paragraphs 1 and 2, where a person other than an agent of an independent status to whom paragraph 5 appliesis 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 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 right 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 is attributable to (a) that permanent establishment; (b) sales in that other State of goods or merchandise of the same or similar kind as these 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 amounts charged (otherwise than towards reimbursement of actual expenses) by the permanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of patents, know-how or other rights, or by way of commission or other charges for specific services performed or for management, or, except in the case of a banking enterprise, by way of interest on moneys lent to the head office of the enterprise or any of its other offices.

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 purpose 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 Convention, then the provisions of those Articles shall not be affected by the provisions of this Article.

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 that State.

2. The provisions of paragraph 1 shall also apply to profits from the participation in a pool, a joint business or an international operating agency.

3. The provisions of paragraphs 1 and 2 shall apply to profits derived by the Danish, Norwegian and Swedish air transport consortium, known as the Scandinavian Airlines System (SAS), but only to such part of the profit as corresponds to the shareholding in the consortium held by Det Danske Luftfartsselskab (DDL), the Danish partner of Scandinavian Airlines System (SAS).

4. For the purposes of this Article, interest on funds connected with the operation of aircraft in international traffic shall be regarded as profits derived from the operation of such aircraft, and the provisions of Article 12 shall not apply in relation to such interest.

5. The term operation of aircraft shall mean business of transportation by air of passengers, mail, livestock or goods carried on by the owners or lessees or charterers of aircraft, including the sale of tickets for such transportation on behalf of other enterprises, the incidental lease of aircraft and any other activity directly connected with such transportation.

Article 9 : Shipping - 1. Profits derived from the operation of ships in international traffic shall be taxable only in the Contracting