1. Peculiarities of the international tax treaty policy of India
Presentation by D.P. Sengupta
BRICS Law Institute, 2016

2. INDIAN APPROACH IN NEGOTIATING TAX TREATIES
India does not-
follow either OECD or UN model
have a separate published model with technical explanation.
India draws from both OECD and UN model

3. Interest and penalty not covered as taxes
Articles 1&2
Indian position on partnership-Foreign transparent entity not entitled to treaty benefits unless treaty says so. Special provision in some treaties- UK, USA
List of taxes are generally mentioned- Normally only Income Tax in case of India
Interest and penalty not covered as taxes

4. Generally the scope of a PE in Indian treaties is wider.
Article 5
Generally the scope of a PE in Indian treaties is wider.
Addition in Paragraph2 of Sales outlet, Farm, Plantation.
Addition of warehouse in relation to a person supplying storage facility for others.
Replace ‘construction or installation project’ with ‘construction, installation or assembly project or supervisory activities in connection therewith.
Period of time to be negotiated.

5. Omission of ‘delivery’ from preparatory services
Article 5
Furnishing of services including consultancy services through employees or other personnel for a period to be negotiated.
Omission of ‘delivery’ from preparatory services
Habitual maintenance of stock from which delivery is made will constitute agency PE
Habitually securing order wholly or almost wholly for the enterprise will create agency PE
Insurance PE provision

6. Limited force of attraction in some treaties
Article 7
Limited force of attraction in some treaties
Expense deduction in the case of the PE is subject to the limitations of the domestic tax law.

7. Generally no reference to jouissance shares
Article 10
Generally no reference to jouissance shares
Rate negotiated- generally 10%

8. Follows UN Model- rate is not fixed at 10%
Article 11
Follows UN Model- rate is not fixed at 10%
Interest payable to State or specified institutions to be negotiated may be exempt

9. Equipment leasing is treated as royalty
Article 12
Follows UN Model to an extent with secondary right of taxation( withholding on gross basis) to source state
Rate to be negotiated
Equipment leasing is treated as royalty
Mostly contain a separate clause on ‘ fees for technical services’(FTS)

10. Article 12
“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 (Independent Personal Services) and Article 16 (Dependent Personal Services) of this Agreement.”

11. Some treaties have a narrower definition where-(USA/UK)
Article 12
Some treaties have a narrower definition where-(USA/UK)
technology needs to be ‘made available’; or where the services are ancillary or subsidiary to the application of the right, property or information to which they are related.
The rate of taxation on gross basis is slightly higher as compared to where wider definition is adopted.

12. Articles 13&14
Right to tax gains from alienation of shares of companies with the State of which the company is resident ( Mostly)
Article 14 is retained in all the treaties. Mostly follow the UN Model. Normally refers to individual who is a resident rather than resident. But not uniform

13. There is a provision for professors and research scholars
Articles 21,22&23
There is a provision for professors and research scholars
Article 22 generally follows the UN Model
Article 23 sometimes contain the tax sparing clause.

14. No reference to stateless persons
Article 24
No reference to stateless persons
Higher rate of tax for foreign companies- not discriminatory- at times with an upper limit