NEW FDI CONSOLIDATED POLICY ISSUED IN INDIA

The consolidated FDI Policy , which is applicable from 1st October 2011 till 31st March 2012 has been issued by the Department of Industrial Policy & Promotion. The present consolidation subsumes and supersedes all Press Notes/Press Releases/Clarifications/ Circulars issued by DIPP, which were in force as on September 30, 2011. The significant changes introduced in this edition of the Policy Circular are summarized below:
   
(i)
Construction-development activities in the education sector and in old-age homes has been exempted from the general conditionalities in the construction-development sector:
FDI into construction development activities in the education sector and in respect of old-age homes has been exempted from the conditionalities imposed on FDI in the construction development sector in general i.e. minimum area and built-up area requirement; minimum capitalization requirement; and lock-in period. These conditionalities perhaps posed a constraint to FDI coming into these areas since educational institutions like schools, colleges, universities etc. as well as old-age homes have their own special requirements which do not necessarily fit these conditionalities. This step should augment the educational infrastructure in the country and bring it up to global standards. Similarly, with growing urbanisation, there is an increasing demand for old-age homes to cater to the needs of senior citizens. The physical infrastructure in this area also is short of the requirements. Hence, it has also been decided to exempt old-age homes also from the general conditionalities applicable to the construction development sector.
   
(ii)
Introduction of 'apiculture', under controlled conditions, under the agricultural activities permitted for FDI:
FDI has been allowed upto 100% under the automatic route in apiculture under controlled conditions. Apiculture is an important agro-based industry and has the potential of bringing in high economic returns with comparatively low levels of investment. Being a decentralized activity, it does not bring pressure on land and can flourish as a household activity in villages. The activity has the potential of large scale income generation with some infusion of capital and technology. This liberalization would not only provide the desired thrust to the sector but would also bring in international best practices to upgrade the product and the methods of production.
   
(iii)
Addition of 'basic and applied R&D on bio-technology pharmaceutical sciences/life sciences', 'as an industrial activity', under industrial parks:
FDI, up to 100%, under the automatic route, is permitted in existing and new industrial parks. Under the existing regime, industrial parks cover specified sectors.


The coverage has been expanded to specifically include research and development in bio-technology, pharmaceutical and life sciences, given the urgent need to augment research and development infrastructure in these areas as also expand the production facilities.
   
(iv)
Notification of the revised limit of 26% for foreign investment in Terrestrial Broadcasting/ FM radio:
The foreign investment limit for FM radio has been enhanced to 26% from the earlier 20%. This change ensures conformity of the foreign investment limit in this sector with other similar activities in the Information & Broadcasting sector.
   
(v)
Liberalisation of conversion of imported capital goods/machinery and pre-operative/pre-incorporation expenses to equity instruments:
Conversion of imported capital goods/machinery and pre-operative/pre-incorporation expenses to equity instruments had been permitted in the last Circular on FDI policy, effective 1 April, 2011. It was stipulated that such conversions must be made within a period of 180 days of the date of shipment of capital goods/machinery or retention of advance against equity and that payments made through third parties would not be allowed. This conveyed the sense that the onus of conversion is on the investor with no allowance for the FIPB process involved. This has been clarified through the present amendment, under which the time limit for making applications for such conversions will be 180 days. Further, payments for pre-operative/incorporation expenses can now be made directly by the foreign investor to the company or through a bank account, opened by the foreign investor, as provided under the FEMA regulations.
   
(vi)
Introduction of provisions on 'pledging of shares' and opening of non-interest bearing escrow accounts, subject to specified conditions:
The policy has been amended to provide for pledge of shares of an Indian company which has raised external commercial borrowings, or that of its associate resident companies for the purpose of securing the ECB raised by the borrowing company, subject to conditions. The policy also now provides for opening and maintaining AD Category – I banks without the prior approval of RBI, non-interest bearing Escrow accounts in Indian Rupees in India, on behalf of non-residents, towards payment of share purchase consideration and/or for keeping securities to facilitate FDI transactions, subject to the terms and conditions specified by RBI. This will streamline the process for bringing in FDI and provide the investors with options.
   
(vii)
Sectoral Classification for better organization of the Circular
The sectoral section of the policy has been re-arranged, to provide for grouping of services under 'financial services', 'other services' and 'information services'. The Circular has also been re-organised, with a view to grouping of similar subjects under common chapters. This is expected to significantly rationalise the organisation of the material in the Circular and further facilitate comprehension and readability.


Find Original Circular at:  http://www.corporateprofessionals.in/fileupload/125-file0.pdf

LED startup Switch Lighting hopes to light the way in valley

Silicon Valley is known for computer chips, software companies and social networks -- but not light bulbs.

Switch Lighting, a San Jose startup, hopes to change that. Later this fall, the venture capital-backed company plans to release a new line of bulbs aimed at replacing the ones consumers typically use in lamps and other fixtures.

Switch's bulbs are among a new generation powered by light-emitting diodes, or LEDs, a technology that many experts bet will finally displace the incandescent bulb that Thomas Edison invented more than a century ago, in part because they're much more energy-efficient. Switch hopes to carve out a place in this emerging market by offering bulbs that look better than competitors', produce better light, are more durable -- and potentially cheaper, too.

"We're going to change the world," said Brad Knight, Switch's interim CEO who will be replaced Monday as CEO by lighting industry veteran Thomas "Tracy" Bilbrough. "We're improving upon Edison."

Unlike incandescent bulbs, there's no standard design for an LED light bulb. While they have a lot of potential, LEDs pose particular problems when used to power a light bulb you'd stick in a lamp. They emit light in a single direction, for example, and generate a lot of heat for their size. And no LEDs emit a pure white light; the closest have a bluish tint.

ED bulb in which the glass is cradled in fins that help diffuse the heat. Philips' new LED bulb looks something like bug light with yellow-colored plastic that glows white when lit.

Bulb manufacturers are experimenting with different designs to cope with these challenges. GE offers an

Switch, which has 25 employees, has its own design that looks more like a standard incandescent. What also distinguishes its bulbs is that they are filled with a liquid that, along with sophisticated electronics and the metal base, helps keep the LED elements cool. Those factors allow Switch to produce more light -- and heat -- with each element than other companies can.

Switch's 60-watt equivalent bulb will use 10 LED elements, compared with 18 in the Philips bulb.

That could eventually allow Switch to sell it less expensively and to bring its costs down faster than its competitors.

"We believe they are producing a light bulb that others cannot," said Alan Salzman, CEO of VantagePoint Capital Partners, which is Switch's sole backer and has invested more than $10 million in the company.

Local connections

Silicon Valley may seem a strange place to be developing a light bulb, but Knight, who graduated from Foothill High School in Pleasanton, insists it makes sense. Lumileds, the pioneering LED company now owned by Philips, is based in San Jose. A collection of other companies that make LED modules or related products are also based in the Bay Area. Because of that, Switch can obtain nearly all components used in its bulbs locally, allowing it to rapidly test new designs or tweaks, Knight said.

"The infrastructure of Silicon Valley makes innovation possible," Knight said.

Future bulbs could be even more dependent on valley technology. Many in the lighting industry expect bulbs to become more like computers that happen to emit light. Such bulbs could turn themselves on when they sense people in the room, warn residents or emergency responders when they detect a fire, change color depending on users' moods or desires, and even alert owners when their lights burn out.

"I think the humble light bulb is going to get remade," said Salzman. "I think there's real legs to this transition we're going to see."

Even if lighting stays dumb, Switch could face a huge opportunity.

The United States and other countries have new laws that in coming years will bar sales of standard incandescent light bulbs because of their high energy consumption. The U.S. Department of Energy estimates that nationally, consumers and businesses have in place about 971 million 60-watt bulbs, one of the primary ones that Switch hopes to replace.

Consumers have numerous alternatives to standard incandescent bulbs, including curlicue-shaped compact fluorescents (CFLs), bright-white halogens and hybrid bulbs that use a combination of technologies. But many lighting experts expect LED-based bulbs to eventually win out.

LEDs address many of the shortcomings of CFL bulbs, which today are the main alternative to incandescents. Unlike many CFL bulbs, LED bulbs turn on instantly, don't contain mercury, are often dimmable and can produce light comparable to that of an incandescent bulb.

Tech push

What's more, as a semiconductor technology, LEDs are undergoing the same rapid improvement as computer chips, with the amount of light generated per given amount of power increasing exponentially. That should push down the prices and the power used by LED bulbs rapidly in coming years.

And utilities such as PG&E are already putting in place incentive programs for LED bulbs that allow retailers to offer them at reduced prices.

Still, Switch faces plenty of challenges. LED bulbs currently are priced at $30 to $40 each, which is beyond the reach of most consumers. To bring prices down, companies will have to produce bulbs with fewer and cheaper parts. That could prove particularly challenging for Switch, said Vrinda Bhandarkar, director of research for LED lighting at market research firm Strategies Unlimited.

"They talk about bringing down the price, but I don't know how they will do it," Bhandarkar said. "There are lot of components in that bulb."

Switch is competing in an industry that has long been dominated by Philips, Osram Sylvania and GE, giant corporations that have huge research, manufacturing and distribution networks already in place. And unlike Switch, those companies already have LED bulbs on stores shelves.

Market of possibilities

Meanwhile, other big electronics corporations such as Vizio and Samsung could eventually enter the market.

"Anytime you go against a big company, it has the appearance of being dangerous and a hard slog," said Jon Guerster, CEO of Groom Energy Solutions, a consulting and contracting firm that works with companies seeking to reduce their energy usage.

While technological shifts can disrupt markets and displace incumbent companies, that doesn't always happen. Florida-based Lighting Science Group (LSG), for example, has been selling various kinds of LED bulbs for more than five years and now produces bulbs that Home Depot sells under its EcoSmart brand. But LSG is losing tens of millions of dollars every quarter and lost nearly $300 million last year.

Still, Switch's executives and backers are confident. The company plans to have contract manufacturers produce its bulbs, which should allow it to have the same scale as behemoths such as Philips without having to make the same investment. And Knight has already identified ways to cut costs that should push down the price of Switch's bulbs.

"If we do that, there's a big opportunity," Salzman said.

By Troy Wolverton

twolverton@mercurynews.com

Posted: 09/25/2011 12:40:00 AM PDT

Updated: 09/25/2011 06:50:22 AM PDT

Switch Lighting

What: LED light bulb designer
Product: LED replacement bulbs for 40-,60-,75-, and 100-watt incandescent bulbs
CEO: Brad Knight (interim)
Headquarters: San Jose
Employees: 25
Investor: VantagePoint Capital Partners
Amount raised: More than $10 million

Source: Switch, VantagePoint

http://www.mercurynews.com/business/ci_18957004?source=rss

How to secure your investment in Nigeria

How to secure your investment in Nigeria

Tue, 20 Sep 2011 08:51

Izumi Kobayashi, executive vice president of MIGA

Investor appetite for political risk insurance is rising. MIGA's executive vice president, Izumi Kobayashi explains how the amendments to MIGA’s convention are facilitating a higher level of FDI.


This year (ending June 30) MIGA issued $2.1-billion in guarantees, a significant increase from 2010’s level of $1.5-billion. What do you think led to this increased level of activity?

There were several factors at play here. First we are seeing that foreign direct investment levels are picking up following a sharp contraction during the financial crisis. Second, much of the business we did this year would not have been possible without the amendments to MIGA’s convention that became effective in November 2010. We have also scaled up our client outreach and increased our focus on investors from emerging markets. A key example of our expanded client outreach is the hub we established in Asia. Our presence in the region will help us be more effective in encouraging more outward investment from Asian investors as well as inbound investment into the region.

How do you see the current landscape for investors focusing on emerging markets?
Emerging markets are driving the world’s economic recovery - that is certain. Many of these economies represent strong consumer markets and have maintained solid macroeconomic policies that underpinned their ability to weather the economic crisis. As liquidity constraints ease, investors are eager to seek out new opportunities in these markets. On the other hand, there are old and new forces at play that make investors from both developed and emerging markets nervous. The research that we conducted this year for our World Investment and Political Risk report indicates that political risk is the most significant medium-term impediment to making new investments in developing countries. Certainly, unrest in North Africa and the Middle East has very acutely reminded investors of the nature of political risk.

What role did MIGA play this year in helping investors manage risk?
Since the onset of the global financial crisis, we have focused heavily on supporting the recapitalisation of banks in Eastern Europe and Central Asia as part of the World Bank Group’s Financial Sector Initiative. This year we wound down those activities as demand subsided and investor needs shifted. Although liquidity constraints have eased somewhat, lenders are still very tentative and there is a good deal of risk aversion in the financial system. Through our guarantees, we can help equity investors gain access to financing and we can provide capital relief to lenders. As a result, this year we supported new investments in agribusiness, infrastructure, and manufacturing. In sub-Saharan Africa, we provided coverage for 15 projects, including our first projects in Liberia and Republic of Congo. Additionally, the amendments to our convention removed certain eligibility restrictions that had long constrained us, so we were able to support developmentally strong projects that we would have had to turn away in the past.

How specifically did the amendments to MIGA’s convention help the agency support a higher level of foreign direct investment?
Many of the projects we supported this year would not have been possible without the amendments to the convention. For example, our new authority to cover existing investments allowed us to support the ProCredit Group Central Bank Mandatory Reserves Coverageproject. Here we are supporting ProCredit Group’s operations in 14 countries - nine of which are among the world’s poorest. Our coverage for expropriation of funds is allowing ProCredit to obtain capital relief, freeing up equity tied up at the parent holding level for regulatory purposes. This equity is being injected into ProCredit’s banks across emerging markets, allowing those banks to provide loans and financial services to very small, small, and medium enterprises.

Our ability to solely cover debt to a project allowed us to support a number of projects, including the expansion of Istanbul’s metro system. This project is also an important milestone for MIGA because we are covering the financial obligations of a sub-sovereign entity, the Metropolitan Municipality of Istanbul. Another key project we were able to support was an Islamic finance transaction underwritten by Deutsche Bank and Saudi British Bank (SABB). Their $450-million Murabaha financing facility is bolstering the expansion of telecommunications services in Indonesia.

What specific challenges will MIGA focus on going forward?
We issued our new strategy for 2012-2014. This reaffirms our commitment to supporting investments into the world’s poorest countries, South-South investments, investments into conflict-affected countries, and complex projects. We felt these areas remain fully relevant and are where we can make the most difference as a development agency. Now we are better equipped to respond in light of our amended convention.

Of course we will continue to react to the most urgent and pressing needs as they arise. This is what we did during the global financial crisis. Right now, supporting investment into the Middle East and North Africa is a top priority for us. We are setting aside our own insurance capacity to support investments into the region and are working with reinsurers to mobilise additional capacity. At the same time, we are reaching out to investors, lenders, and governments around the world to let them know we are open for business in the region and to share our global experience of managing political risks. We are also working closely with our World Bank Group colleagues to help the region attract and retain FDI. Looking ahead, I think our mandate of promoting FDI is more important than ever and we are poised to respond.

Republished with the permission of the Multilateral Investment Guarantee Agency (MIGA). MIGA, a member of the World Bank Group, promotes foreign direct investment by providing political risk insurance to investors and lenders. 

Source: http://www.tradeinvestnigeria.com/feature_articles/1027080.htm

Why I don’t sign Non Disclosure Agreement (NDA) (usually)

Why I don’t sign NDAs (usually)

Too often I am approached by company founders to raise funds for them but first with the proviso that I sign their NDA (Non Disclosure Agreement).

Below are some thoughts and several reasons why I and many in the investment landscape generally do not sign NDAs just to take a look at a business plan, executive summary or pitch deck.

Who is the NDA target?

If the target recipient of your business data is an investor or someone who can get you investment such as a broker or an intermediary, then don’t NDA them.

If they are an investor then they get tens or even hundreds of submissions and they couldn’t possibly sign NDAs for all of them (let alone have time to store, track and cross reference with each new incoming plan and NDA).

If they are a fundraising intermediary, then they need to get your investment proposition in front of the right people and an NDA can hamper that process.

If the target is a supplier, affiliate, commercial partner – someone in the trading mix, then sure, do an NDA but not to someone who is considering either getting you money or giving you money, as you’re tying their hands needlessly.

If with that investor or intermediary you start to move towards further discussions, then at that stage it is quite ok to discuss an NDA but be aware, some individuals  make it their policy to not sign NDAs unless there is an absolute necessity to do so.

‘Secret Sauce’ or just ‘Go-To-Market’ Strategy?

Most people don’t have a ’secret sauce’ in their business plan; no technological breakthrough, ‘key’ IP or an innovation that is the cornerstone of their proposition.

They may have some IP but the essence of the majority of the business plans that I see are about an identified a gap in the market with a go-to-market strategy that requires stealth, speed, momentum and someone else’s money.

Too often I am asked to do an NDA when the essence of the idea is either to squeeze into the market place with what is often called in business as a ‘me too’ offering, or to race your way into virgin territory, known as a ‘first mover advantage’ or a ‘land grab.’

Neither of these usually have a secret sauce (cornerstone IP or some designed, technical or conceptual protectable advantage) that no one else has.

More commonly, it is a business that has identified a gap in a market that is trying to steal a march on their potential competitors.

 I can understand wanting to keep such plans under wraps a little and away from the eyes of competitors but if you want money from strangers, you are going to have to raise your head above the parapet and display the essence of your wares.

Two alternatives to (an immediate) NDA.

Instead of thrusting an NDA before someone, there are one or two steps you could take if you really do feel there are parts of your business plan that should not be seen before an NDA is signed.

1) Initially send out an anonymous executive summary that does not give away who the company is but still outlines the investment proposition and the majority of the business concept.

2) Send out the business plan with full details but take out the core which describes the key innovation. Put a little note in its place saying that it has been removed pending the signing of an NDA.

Times When I Do Sign NDAs.

Generally, I am not going to sign an NDA just to read a business plan.

If the founder believes there is some very commercially sensitive data within their business plan and they want me to assess their proposition without exposing their very tangible innovative core, then just as mentioned above, I usually suggest that they blank out or remove this particular data.

This way I can still get an understanding of the business just as an investment proposition, without understanding the secret sauce.

One time when I may consider signing an NDA is if I am going to work directly with a company for a fee or retainer. It would not be out of place for a company to ask me to NDA if they wanted to pay me for consultancy (but not for fundraising, unless there was the previously mentioned ‘key’ IP).

Too many business plans to sign NDAs.

For those that are involved in getting businesses funded (and I include funding types – angel/VC equity, debt, grants and asset finance, etc) they receive too many businesses plans on a weekly basis to be able to take time to read not only the business plan but also to study the legal terms of a multiplicity of NDAs (each NDA is always different from the last).

It is not realistic to ask your fundraiser or potential investor to sign an NDA (at least not at the review stage). VCs and angels may well sign an NDA once they are interested in doing a deal and in getting you locked into exclusive discussions. If you were to stand up and pitch at an angel network event, would it be realistic to turn to everyone in the audience and ask that they sign an NDA before they heard your pitch or saw your business data?

If we’re gonna get legal, let’s do it properly!

I’ve heard one individual say to a founder after being presented with an NDA “If you want me to help you and insist that I sign your NDA then you should cover my legal bill to get the NDA reviewed by a solicitor.” This is not a very realistic scenario or at all likely to happen but when you think about it, if you want someone to represent/fund you and speculate on your success, why should they be locked in to some sort of legal terms when it is you asking for their assistance.

Some NDA Demands look amateurish or arrogant

Most VCs certainly do not sign NDAs just to look at a business plan.

There can be the perception that if a founder approaches, barking “NDA me, NDA me” then it can actually make you look a little amateurish, or worse still, arrogant.

Amateurish for some of the reasons above, or just that perhaps you’ve heard a solicitor once say “always get an NDA signed,” without realising things don’t work exactly like that in the real world.

Arrogant because you presume your business plan somehow warrants special treatment and the overriding of their ‘no review-stage NDAs’ policy.

NDAs do have a use in the investment landscape and I have signed a few in my time but knowing when and how to submit them is the trick.

_________________________________
Aristos PetersPost author, Aristos Peters is a strategic advisor who undertakes fundraising, strategic growth development and NED advisory roles within early-stage companies looking to work up the steps of the investment ladder towards an exit. He works closely with angel investors, High-net-worth individuals With experience especially within the areas of digital, online, technology and media. His background prior to operating in the equity finance sector has been in b2b business development, sales and marketing/brand communications.

He is currently putting together a business angel investment syndicate / accelerator, The Big Bang Syndicate and blogs at: http://weklik.wordpress.com/

Source:   http://www.ibusinessangel.com/2011/08/why-i-dont-sign-ndas-usually/

Is the new U.S. Startup Visa Entrepreneurial Friendly?

Fremont: The dream of U.S. to become the world's best startup hub is currently a dream as their current immigration policies have prevented many foreign-born startup founders from remaining in the U.S. The policy is forcing foreign-born startup founders with venture capital and employees out of the country, effectively sending thousands of high paying knowledge jobs overseas for no reason. 

However, the U.S. government is trying new ways to attract these foreign-born startups. They have come up with a new "Startup Visa" - a process through which establishing businesses in the U.S. will become more easier for foreign entrepreneurs. The visa will allow the entrepreneurs to keep their companies and their jobs in the U.S.

The new visa will be provided under certain conditions:

1. Entrepreneurs living outside the U.S. qualify for the visa if an American investor agrees to fund their entrepreneur ventures with a minimum investment of $100,000. Two years later, the startup must have created five new American jobs and either have raised more than $500,000 in financing or be generating more than $500,000 in yearly revenue.

2. Workers on H- 1B visas or graduates from the U.S. universities in science, technology, engineering, mathematics or computer science are eligible if they have an annual income of at least $30,000 or assets of at least $60,000 and have had an American investor commit investment of at least $20,000 in their ventures. After two years, the startup must have created three new American jobs and either have raised more than $100,000 in financing or be generating more than $100,000 in yearly revenue.

3. Foreign entrepreneurs whose business has generated at least $100,000 in sales from the U.S. After two years, the startup must have created three new American Jobs and either have raised more than $100,000 in financing or be generating more than $100,000 in yearly revenue.

Every job being created by such startups will contribute towards fulfilling the global competition for talent and investment in the U.S. This visa act will enable the foreign students and workers who are already in the U.S. to qualify for a visa with a reasonable requirement, where they should have the potential with enough savings so as not to burden the American taxpayers and get a qualified investor or a government entity.

Yet, there is a huge risk involved with this visa. If their entrepreneurial venture fails or does not take a fly, they must start again or leave the U.S. These factors do not suit entrepreneurship, as entrepreneurship means risk taker with no guarantee of success or failure. However, the fact remains that the skilled immigrants create jobs and they have to do so if they want to remain in the U.S. This is future, what about the present? Presently, these entrepreneurs have no other option than taking their ideas home and give a competition to the U.S.
Source: http://bit.ly/ru6jmK

Agreement between India-Taipei Association

Section 90A of The Income-Tax Act, 1961- Double Taxation Agreement – Adoption by Central Government of agreement between specified associations for double taxation relief – Specified territory and specified association – Taipei

NOTIFICATION NO. 48/2011 [F.NO. 500/02/2001-FTD-II], DATED 2-9-2011

WHEREAS the agreement between India-Taipei Association in Taipei and Taipei Economic and Cultural Center in New Delhi for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income (hereinafter referred to as the “agreement”) was signed in India on the 12th day of July, 2011.

WHEREAS in terms of article 29 of the agreement, both India-Taipei Association in Taipei and Taipei Economic and Cultural Center in New Delhi are required to communicate to each other about the completion of the procedures required by the laws in their respective territories for the entry into force of the agreement.

WHEREAS the said agreement shall come into force on the 12th day of August, 2011, being the date of the later of the notifications after completion of the procedures as required by the laws of the respective territories for the entry into force of the agreement, in accordance with the provisionsspecified in article 29 of the agreement.

Whereas sub-section (1) of section 90A of the Income-tax Act, 1961 empowers the Central Government to make such provisions as may be necessary for adopting and implementing the agreement made between any specified association in India and any specified territory outside India.

Now, therefore, in exercise of the powers conferred by sub-section (1) of section 90A of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby adopts the agreement between India-Taipei Association in Taipei and Taipei Economic and Cultural Center in New Delhi for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and notifies that all the provisions of the said agreement annexed hereto shall be given effect to in the Union of India with effect from the 1st day of April, 2012.

AGREEMENT BETWEEN INDIA-TAIPEI ASSOCIATION IN TAIPEI AND TAIPEI ECONOMIC AND CULTURAL CENTER IN NEW DELHI FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME

India-Taipei Association in Taipei and Taipei Economic and Cultural Center in New Delhi, desiring to conclude an Agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, have agreed as follows:

Article 1 : PERSONS COVERED – This Agreement shall apply to persons who are residents of one or both of the territories.

Article 2 : TAXES COVERED – 1. This Agreement shall apply to taxes on income imposed on behalf of each territory or of its sub-divisions 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 to which the Agreement shall apply are in particular:

 (a)  in the territory in which the taxation law administered by the Ministry of Finance of India is applied : the income-tax, including any surcharge thereon;

 (b)  in the territory in which the taxation law administered by the Ministry of Finance in Taipei is applied :

  (i)  the profit seeking enterprise income-tax;

 (ii)  the individual consolidated income-tax; and

(iii)  the income basic tax, including the supplements levied thereon.

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 territories 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 “territory” means the territory referred to in paragraph 3(a) or 3(b) of Article 2, as the case may be. The terms “other territory” and “territories” shall be construed accordingly;

 (b)  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 territories;

 (c)  the term “company” means any body corporate or any entity that is treated as a body corporate for tax purposes;

 (d)  the term “enterprise” applies to the carrying on of any business;

 (e)  the terms “enterprise of a territory” and “enterprise of the other territory” mean respectively an enterprise carried on by a resident of a territory and an enterprise carried on by a resident of the other territory;

 (f)  the term “international traffic” means any transport by a ship or aircraft operated by an enterprise of a territory, except when the ship or aircraft is operated solely between places in the other territory;

 (g)  the term “competent authority” means:

  (i)  in the case of the territory in which the taxation law administered by the Ministry of Finance of India is applied, the Finance Minister of India or his authorized representative;

 (ii)  in the case of the territory in which the taxation law administered by the Ministry of Finance in Taipei is applied, the Finance Minister or his authorized representative;

 (h)  the term “tax” means the tax referred to in paragraph 3(a) and 3(b) of Article 2 as the case may be, but shall not include any amount which is payable in respect of any default or omission in relation to the taxes to which this Agreement applies or which represents a penalty or fine imposed relating to those taxes; (i) the term “fiscal year” means:

  (i)  in the territory referred to in paragraph 3(a) of Article 2: the financial year beginning on the first day of April;

 (ii)  in the territory referred to in paragraph 3(b) of Article 2: the financial year beginning on the first day of January.

2. As regards the application of the Agreement at any time by a territory, 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 territory for the purposes of the taxes to which the Agreement applies, any meaning under the applicable tax laws of that territory prevailing over a meaning given to the term under other laws of that territory.

Article 4 : RESIDENT – 1. For the purposes of this Agreement, the term “resident of a territory” means any person who, under the laws of that territory, is liable to tax therein by reason of his domicile, residence, place of incorporation, place of management or any other criterion of a similar nature, and also includes that territory and any sub-division or local authority thereof.

2. A person is not a resident of a territory for the purposes of this Agreement if that person is liable to tax in that territory in respect only of income from sources in that territory, provided that this paragraph shall not apply to individuals who are residents of the territory referred to in paragraph 3(b) of Article 2, as long as resident individuals are taxed only in respect of income from sources in that territory.

3. Where by reason of the provisions of paragraph 1 an individual is a resident of both territories, then his status shall be determined as follows:

 (a)  he shall be deemed to be a resident only of the territory in which he has a permanent home available to him; if he has a permanent home available to him in both territories, he shall be deemed to be a resident only of the territory with which his personal and economic relations are closer (centre of vital interests);

 (b)  if the territory 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 territory, he shall be deemed to be a resident only of theterritory in which he has an habitual abode;

 (c)  if he has a habitual abode in both territories or in neither of them, the competent authorities of theterritories shall settle the question by mutual agreement.

4. Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both territories, then it shall be deemed to be a resident only of the territory in which its place of effective management is situated. If the territory in which its place of effective management is situated cannot be determined, then the competent authorities of the territories shall 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 270 days.

 (b)  The furnishing of services, including consultancy services, by an enterprise through employees or other personnel engaged by the enterprise for such purpose, but only where activities of that nature continue (for the same or connected project) within the territory for a period or periods aggregating more than 182 days within any 12 month period constitutes a permanent establishment.

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, display or delivery 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, display or delivery;

 (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 sub-paragraphs (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 territory on behalf of an enterprise of the other territory, that enterprise shall be deemed to have a permanent establishment in the first-mentioned territory in respect of any activities which that person undertakes for the enterprise, if such a person:

 (a)  has and habitually exercises in that territory 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; or

 (b)  habitually secures orders in the first-mentioned territory, wholly or almost wholly for the enterprise itself.

6. Notwithstanding the preceding provisions of this Article, an insurance enterprise of a territory shall, except in regard to re-insurance, be deemed to have a permanent establishment in the other territory if it collects premiums in that other territory 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 territory merely because it carries on business in that territory 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, 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 territory controls or is controlled by a company which is a resident of the other territory, or which carries on business in that other territory (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 territory from immovable property situated in the other territory may be taxed in that other territory.

2. The term “immovable property” shall have the meaning which it has under the law of the territory 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 territory shall be taxable only in that territory unless the enterprise carries on business in the other territory 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 territory 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 territory carries on business in the other territory through a permanent establishment situated therein, there shall in each territory 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 territory in which the permanent establishment is situated or elsewhere, in accordance with the provisions of and subject to the limitations of the tax laws of that territory. 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, 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 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 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 territory 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 territory 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 territory from the operation of ships or aircraft in international traffic shall be taxable only in that territory.

2. For the purpose of this Article, profits derived by a transportation enterprise from the operation of ships or aircraft in international traffic include :

 (a)  profits derived from the rental on a full (time or voyage) basis of ships or aircraft; and

 (b)  profits from the use, maintenance or rental of containers (including trailers and other equipment for the transport of containers) used for the transport of goods or merchandise, unless the containers are used solely within the other territory;

where such rental or such use, maintenance or rental, as the case may be, is incidental to the operation of ships or aircrafts in international traffic.

3. 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.

4. 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 territory participates directly or indirectly in the management, control or capital of an enterprise of the other territory, or

 (b)  the same persons participate directly or indirectly in the management, control or capital of an enterprise of a territory and an enterprise of the other territory,

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 territory includes in the profits of an enterprise of the territory – and taxes accordingly – profits on which an enterprise of the other territory has been charged to tax in that other territory and the profits so included are profits which would have accrued to the enterprise of the first-mentioned territory if the conditions made between the two enterprises had been those which would have been made between independent enterprises, then that other territory shall 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 territories shall if necessary consult each other.

Article 10 : DIVIDENDS – 1. Dividends paid by a company which is a resident of a territory to a resident of the other territory may be taxed in that other territory.

2. However, such dividends may also be taxed in the territory of which the company paying the dividends is a resident and according to the laws of that territory, but if the beneficial owner of the dividends is a resident of the other territory, the tax so charged shall not exceed 12.5 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 on 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 territory 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 territory, carries on business in the other territory of which the company paying the dividends is a resident, through a permanent establishment situated therein, or performs in that other territory 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 14, as the case may be, shall apply.

5. Where a company which is a resident of a territory derives profits or income from the other territory, that other territory 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 territory 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 territory, 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 territory.

Article 11 : INTEREST – 1. Interest arising in a territory and paid to a resident of the other territory may be taxed in that other territory.

2. However, such interest may also be taxed in the territory in which it arises, and according to the laws of that territory, but if the beneficial owner of the interest is a resident of the other territory, 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 territory shall be exempt from tax in that territory, provided that it is derived and beneficially owned by:

 (a)  the authority administering a territory, a sub-division or a local authority of the other territory; or

 (b)  Central Banks and Export-Import Banks of the territories referred to in paragraph 3(a) and 3(b) of Article 2; or

 (c)  any other institution as may be identified and accepted from time to time by the competent authorities of both of the territories referred to in paragraph 3(a) and 3(b) of Article 2.

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 territory, carries on business in the other territory in which the interest arises, through a permanent establishment situated therein, or performs in that other territory independent personal services from a fixed base situated therein, and the debt-claims 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 14, as the case may be, shall apply.

6. Interest shall be deemed to arise in a territory when the payer is a resident of that territory. Where, however, the person paying the interest, whether he is a resident of a territory or not, has in a territory 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 territory 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 territory, due regard being had to the other provisions of this Agreement.

Article 12 : ROYALTIES AND FEES FOR TECHNICAL SERVICES – Royalties or fees for technical services arising in a territory and paid to a resident of the other territory may be taxed in that other territory.

2. However, such royalties or fees for technical services may also be taxed in the territory in which they arise, and according to the laws of that territory, but if the beneficial owner of the royalties or fees for technical services is a resident of the other territory, the tax so charged shall not exceed 10 per cent of the gross amount of the royalties or fees for technical services.

3.(a) 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 concerning industrial, commercial or scientific experience.

(b) The term “fees for technical services” as used in this Article means payments of any kind, other than those mentioned in Articles 14 and 15 of this Agreement as consideration for managerial or technical or consultancy services, including the provision of services of technical or other personnel.

4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties or fees for technical services, being a resident of a territory, carries on business in the other territory in which the royalties or fees for technical services arise, through a permanent establishment situated therein, or performs in that other territory independent personal services from a fixed base situated therein, and the right or property in respect of which the royalties or fees for technical services are paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

5.(a) Royalties or fees for technical services shall be deemed to arise in a territory when the payer is a resident of that territory. Where, however, the person paying the royalties or fees for technical services, whether he is a resident of a territory or not, has in a territory a permanent establishment or a fixed base in connection with which the liability to pay the royalties or fees for technical services was incurred, and such royalties or fees for technical services are borne by such permanent establishment or fixed base, then such royalties or fees for technical services shall be deemed to arise in the territory in which the permanent establishment or fixed base is situated.

(b) Where under sub-paragraph (a) royalties or fees for technical services do not arise in one of the territories, and the royalties relate to the use of, or the right to use, the right or property, or the fees for technical services relate to services performed, in one of the territories, the royalties or fees for technical services shall be deemed to arise in that territory.

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 or fees for technical services, 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 territory, due regard being had to the other provisions of this Agreement.

Article 13 : CAPITAL GAINS – 1. Gains derived by a resident of a territory from the alienation of immovable property referred to in Article 6 and situated in the other territory may be taxed in that other territory.

2. Gains from the alienation of movable property forming part of the business property of a permanent establishment which an enterprise of a territory has in the other territory or of movable property pertaining to a fixed base available to a resident of a territory in the other territory 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 territory.

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 territory of which the alienator is a resident.

4. Gains derived by a resident of a territory from the alienation of shares deriving more than 50 per cent of their value directly or indirectly from immovable property situated in the other territory may be taxed in that other territory.

5. Gains from the alienation of shares other than those mentioned in paragraph 4 in a company which is a resident of a territory may be taxed in that territory.

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 territory of which the alienator is a resident.

Article 14 : INDEPENDENT PERSONAL SERVICES – 1. Income derived by an individual who is a resident of a territory from the performance of professional services or other activities of an independent character shall be taxable only in that territory except in the following circumstances, when such income may also be taxed in the other territory:

 (a)  if he has a fixed base regularly available to him in the other territory 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 territory; or

 (b)  if his stay in the other territory is for a period or periods amounting to or exceeding in the aggregate 183 days in any twelve-month period 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 territory may be taxed in that other territory.

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 15 : DEPENDENT PERSONAL SERVICES – 1. Subject to the provisions of Articles 16, 18, 19, 20 and 21, salaries, wages and other similar remuneration derived by a resident of a territory in respect of an employment shall be taxable only in that territory unless the employment is exercised in the other territory. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other territory.

2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a territory in respect of an employment exercised in the other territory shall be taxable only in the first-mentioned territory if:

 (a)  the recipient is present in the other territory for a period or periods not exceeding in the aggregate 183 days in any twelve-month 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 territory, and

 (c)  the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other territory.

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 territory may be taxed in that territory.

Article 16 : DIRECTORS’ FEES – Directors’ fees and other similar payments derived by a resident of a territory in his capacity as a member of the board of directors of a company which is a resident of the other territory may be taxed in that other territory.

Article 17 : ARTISTES AND SPORTSPERSONS – 1. Notwithstanding the provisions of Articles 14 and 15, income derived by a resident of a territory as an entertainer, such as a theatre, motion picture, radio or television artiste, or a musician, or as a sportsperson, from his personal activities as such exercised in the other territory, may be taxed in that other territory.

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, 14 and 15, be taxed in the territory 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 territory by entertainers or sportspersons if the activities are substantially supported by public funds of one or both of the territories or of sub-divisions or local authorities thereof. In such a case, the income shall be taxable only in the territory of which the entertainer or sportsperson is a resident.

Article 18 : PENSIONS – Subject to the provisions of paragraph 2 of Article 19, pensions and other similar remuneration paid to a resident of a territory in consideration of past employment shall be taxable only in that territory.

Article 19 : GOVERNMENT SERVICE 1.(a) Salaries, wages and other similar remuneration, other than a pension, paid by a territory or a sub-division or a local authority thereof to an individual in respect of services rendered to that territory or sub-division or authority shall be taxable only in that territory.

(b) However, such salaries, wages and other similar remuneration shall be taxable only in the other territory if the services are rendered in that territory and the individual is a resident of that territory who:

  (i)  is a national of that territory; or

 (ii)  did not become a resident of that territory solely for the purpose of rendering the services.

2.(a) Any pension paid by, or out of funds created by, a territory or a sub-division or a local authority thereof to an individual in respect of services rendered to that territory or sub-division or authority shall be taxable only in that territory.

(b) However, such pension shall be taxable only in the other territory if the individual is a resident of, and a national of, that other territory.

3. The provisions of Articles 15, 16, 17 and 18 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 territory or a sub-division or a local authority thereof.

Article 20 : PROFESSORS, TEACHERS AND RESEARCH SCHOLARS – 1. A professor, teacher or research scholar who is or was a resident of the territory immediately before visiting the other territory for the purpose of teaching or engaging in research, or both, at a university, college or other similar approved institution in that other territory shall be exempt from tax in that other territory on any remuneration for such teaching or research for a period not exceeding two years from the date of his arrival in that other territory.

2. This Article shall apply to income from research only if such research is undertaken by the individual in the public interest and not primarily for the private benefit of a person or persons.

3. For the purposes of this Article, an individual shall be deemed to be a resident of a territory if he is resident in that territory in the fiscal year in which he visits the other territory or in the immediately preceding fiscal year.

Article 21 : STUDENTS – 1. A student who is or was a resident of one of the territories immediately before visiting the other territory and who is present in that other territory solely for the purpose of his education or training, shall besides grants, loans and scholarships be exempt from tax in that other territory on:

 (a)  payments made to him by persons residing outside that other territory for the purposes of his maintenance, education or training; and

 (b)  remuneration which he derives from an employment which he exercises in the other territory 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 in that other territory.

Article 22 : OTHER INCOME – 1. Items of income of a resident of a territory, wherever arising, not dealt with in the foregoing Articles of this Agreement shall be taxable only in that territory.

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 territory, carries on business in the other territory through a permanent establishment situated therein, or performs in that other territory 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 14, as the case may be, shall apply.

3. Notwithstanding the provisions of paragraph 1, if a resident of a territory derives income from sources within the other territory in form of lotteries, crossword puzzles, races including horse races, card games and other games of any sort or gambling or betting of any nature whatsoever, such income may be taxed in the other territory.

Article 23 : METHODS FOR ELIMINATION OF DOUBLE TAXATION – Double taxation shall be eliminated as follows:

1. In the territory referred to in paragraph 3(a) of Article 2:

 (a)  Where a resident of the territory referred to in paragraph 3(a) of Article 2 derives income which, in accordance with the provisions of this Agreement, may be taxed in the territory referred to in paragraph 3(b) of Article 2, the territory referred to in paragraph 3(a) of Article 2 shall allow as a deduction from the tax on the income of that resident, an amount equal to the tax paid in the territory referred to in paragraph 3(b) of Article 2.

        Such deduction shall not, however, exceed that part of the tax as computed before the deduction is given, which is attributable, as the case may be, to the income which may be taxed in the territory referred to in paragraph 3(b) of Article 2.

 (b)  Where in accordance with any provision of the Agreement income derived by a resident of the territory referred to in paragraph 3(a) of Article 2 is exempt from tax in the territory referred to in paragraph 3(a) of Article 2, the territory referred to in paragraph 3(a) of Article 2 may nevertheless, in calculating the amount of tax on the remaining income of such resident, take into account the exempted income.

2. In the territory referred to in paragraph 3(b) of Article 2:

 (a)  Where a resident of the territory referred to in paragraph 3(b) of Article 2 derives income from the other territory, the amount of tax on that income paid in that other territory (but excluding, in the case of a dividend, tax paid in respect of the profits out of which the dividend is paid) and in accordance with the provisions of this Agreement, shall be credited against the tax levied in the first-mentioned territory on that resident.

        The amount of credit, however, shall not exceed the amount of the tax in the first-mentioned territory on that income computed in accordance with its taxation laws and regulations.

 (b)  Where in accordance with any provision of the Agreement income derived by a resident of the territory referred to in paragraph 3(b) of Article 2 is exempt from tax in the territory referred to in paragraph 3(b) of Article 2, the territory referred to in paragraph 3(b) of Article 2 may nevertheless, in calculating the amount of tax on the remaining income of such resident, take into account the exempted income.

Article 24 : NON-DISCRIMINATION – 1. Nationals of a territory shall not be subjected in the other territory 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 territory 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 territories.

2. The taxation on a permanent establishment which an enterprise of a territory has in the other territory shall not be less favorably levied in that other territory than the taxation levied on enterprises of that other territory carrying on the same activities. This provision shall not be construed as obliging a territory to grant to residents of the other territory 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 territory from charging the profits of a permanent establishment which a company of the other territory has in the first-mentioned territory at a rate of tax which is higher than that imposed on the profits of a similar company of the first mentioned territory, 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, apply, interest, royalties and other disbursements paid by an enterprise of a territory to a resident of the other territory 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 territory.

4. Enterprises of a territory, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other territory, shall not be subjected in the first-mentioned territory 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 territory are or may be subjected.

5. The provisions of this Article shall apply to taxes which are covered by this Agreement.

Article 25 : MUTUAL AGREEMENT PROCEDURE : 1. Where a person considers that the actions of one or both of the territories 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 territories, present his case to the competent authority of the territory of which he is a resident or, if his case comes under paragraph 1 of Article 24, to that of the territory 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 territory, 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 territories.

3. The competent authorities of the territories 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 territories 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 an agreement to have an oral exchange of opinions, such exchange may take place through a commission consisting of representatives of the competent authorities of the territories.

Article 26 : EXCHANGE OF INFORMATION – 1. The competent authorities of the territories shall exchange such information (including documents or certified copies of the documents) 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 territories, or of their sub-divisions 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 territory shall be treated as secret in the same manner as information obtained under the domestic laws of that territory 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 territory may be used for other purposes when such information may be used for such other purposes under the laws of both territories and the competent authority of the supplying territory authorizes such use.

3. In no case shall the provisions of paragraphs 1 and 2 be construed so as to impose on a territory the obligation:

 (a)  to carry out administrative measures at variance with the laws and administrative practice of that or of the other territory;

 (b)  to supply information (including documents or certified copies of the documents) which is not obtainable under the laws or in the normal course of the administration of that or of the other territory;

 (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 territory in accordance with this Article, the other territory shall use its information gathering measures to obtain the requested information, even though that other territory 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 territory 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 territory 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 27 : ASSISTANCE IN THE COLLECTION OF TAXES – 1. Each of the territories shall endeavour to collect, as if it were its own tax, any tax referred to in Article 2, which has been imposed by the other territory and the collection of which is necessary to ensure that any exemption or reduction of tax granted under this Agreement by that other territory shall not be enjoyed by persons not entitled to such benefits.

2. In no case shall the provisions of this Article be construed so as to impose on a territory the obligation:

 (a)  to carry out administrative measures at variance with the laws and administrative practice of that or of the other territory;

 (b)  to carry out measures which would be contrary to public policy (ordre public);

 (c)  to provide assistance if the other territory has not pursued all reasonable measures of collection or conservancy, as the case may be, available under its laws or administrative practice;

 (d)  to provide assistance in those cases where the administrative burden for that territory is clearly disproportionate to the benefit to be derived by the other territory.

Article 28 : LIMITATION OF BENEFITS – 1. Notwithstanding the provisions of any other Article of this Agreement, a resident of a territory shall not be entitled to the benefits of this Agreement if the primary purpose or one of the primary purposes of such resident or a person connected with such resident was to obtain the benefits of this Agreement.

2. The cases of legal entities not having bona fide business activities shall be; covered by the provisions of this Article.

Article 29 : ENTRY INTO FORCE – 1. India-Taipei Association in Taipei and Taipei Economic and Cultural Center in New Delhi shall notify each other in writing, about the completion of the procedures required by the laws in their respective territories for the entry into force of this Agreement.

2. This Agreement shall enter into force on the date of the later of these written notifications referred to in paragraph 1 of this Article.

3. The provisions of this Agreement shall have effect:

 (a)  In the territory referred to in paragraph 3(a) of Article 2, 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 the territory referred to in paragraph 3(b) of Article 2, in relation to income derived in any year of income beginning on or after the first day of January in the calendar year next following that in which the Agreement enters into force.

Article 30 : TERMINATION – This Agreement shall remain in force indefinitely until terminated by either the India-Taipei Association in Taipei or the Taipei Economic and Cultural Center in New Delhi by giving a written notice of termination to the other at least six months before the end of any calendar year beginning after the expiration 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 the territory referred to in paragraph 3(a) of Article 2, 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 the territory referred to in paragraph 3(b) of Article 2, in relation to income derived in any year of income beginning on or after the first day of January in the calendar year next following that in which the notice of termination is given.

IN WITNESS WHEREOF the undersigned, being duly authorized thereto, have signed this Agreement.

DONE in duplicate at New Delhi this 12th day of July, 2011, each in the Hindi, Chinese and English languages, all texts being equally authentic. In case of divergence of interpretation, the English text shall prevail.

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PROTOCOL

India-Taipei Association in Taipei and Taipei Economic and Cultural Center in New Delhi on signing at New Delhi on the 12th day of July, 2011, the Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income, have agreed upon the following provisions which shall be an integral part of the Agreement:

1. It is understood that if the domestic law of a territory is more beneficial to a resident of the other territory than the provisions of this Agreement, then the provisions of the domestic law of the first-mentioned territory shall apply to the extent they are more beneficial to such a resident.

2. With respect to Article 2, in the territory referred to in paragraph 3(b) of Article 2, it is understood that nothing in the Agreement will affect the imposition of the Land Value Increment Tax under Land Tax Act.

3. In respect of sub-paragraphs (a) and (b) of paragraph 4 of Article 5 on ‘Permanent Establishment’, it is understood that if the Agreement for the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to taxes on income between the Republic of India and the People’s Republic of China is revised and the revised Agreement between the Republic of India and the People’s Republic of China omits the words ‘or delivery’ from these two sub-paragraphs, then, a corresponding revision of these two sub-paragraphs shall be automatically effected in this Agreement and the words ‘or delivery’ shall stand omitted from these two sub-paragraphs, with effect from the date on which the revised Agreement for the Avoidance of Double Taxation and Prevention of Fiscal Evasion between the Republic of India and the People’s Republic of China enters into force.

4. It is further understood that in respect of paragraph 5 of Article 5 on “Permanent Establishment”, if the Agreement for the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to taxes on income between the Republic of India and the People’s Republic of China is revised and the revised Agreement between the Republic of India and the People’s Republic of China includes provisions to the effect that a person other than an agent of in independent status to whom paragraph 7 applies acting in a Contracting State on behalf of an enterprise of the other Contracting State shall constitute a permanent establishment in the first-mentioned Contracting State in respect of activities he undertakes for the enterprise, if he 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, then a corresponding revision of paragraph 5 of Article 5 shall be automatically effected in this Agreement by inserting similar provision with effect from the date on which the revised Agreement between the Republic of India and the People’s Republic of China enters into force. The exact formulation of the provisions to be inserted in this Agreement shall be finalized by exchange of letters.

5. With respect to Article 23, it is understood that the laws in force in either of the territories shall continue to govern the taxation of income in the respective territories except when express provision to the contrary is made in this Agreement. When income is subject to tax in both territories, relief from double taxation shall be given in accordance with the provisions of Article 23.

6. With respect to Article 23, it is further understood that the territory referred to in paragraph 3(a) of Article 2 shall not allow as a deduction from the tax on the income of its resident, Land Value Increment Tax under Land Tax Act imposed in the territory referred to in paragraph 3(b) of Article 2.

In witness whereof, the undersigned, being duly authorized thereto, have signed this Protocol.

DONE in duplicate at New Delhi this 12th day of July, 2011, each in the Hindi, Chinese and English languages, all texts being equally authentic. In case of divergence of interpretation, the English text shall prevail.