Swiss
Federal Council

Notification
No. G. S. R. 74(E), dated 7th February, 2001.

Whereas
the annexed protocol amending the Agreement’ between the Government of the
Republic of India and the Government of the Swiss Federal Council for the
Avoidance of Double Taxation with respect to taxes on income has come into
force on 20th December, 2000, the date of the later of the notifications by
both the Contracting States to each other, under article 16 of the protocol
amending the agreement, of the satisfaction of all the legal requirements and
procedures for giving effect to the said protocol;

Now,
therefore, in exercise of the powers conferred by section 90 of the Income-tax
Act, 1961 (43 of 1961), the Central Government hereby directs that all the
provisions of the said protocol amending the agreement, shall be given effect
to in the Union of India.

ANNEXURE

PROTOCOL

AMENDING
THE AGREEMENT BETWEEN THE REPUBLIC OF INDIA AND THE SWISS CONFEDERATION FOR THE
AVOIDANCE OF DOUBLE TAXATION WITH RESPECT TO TAXES ON INCOME

THE
GOVERNMENT OF THE REPUBLIC OF INDIA AND THE SWISS FEDERAL COUNCIL.

Desiring
to amend the Agreement between the Republic of India and the Swiss
Confederation for the avoidance of double taxation with respect to taxes on
income, signed at New Delhi on 2nd November, 1994 (hereinafter referred to as
“the Agreement”), have agreed as follows:

Article
1

Sub-paragraph
(a) of paragraph 1 of article 3 of the agreement shall be replaced by the
following:

a.    

‘the
term “India” means the territory of India and includes the
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, including the UN
Convention on the law of the sea.’

Article
2

1.     The first sentence of
sub-paragraph (1) of paragraph 2 of article 5 of the agreement shall be
replaced by the following:

a.     ‘the furnishing of
technical services, other than services as defined in article 12, within a
Contracting State by an enterprise through employees or other personnel, but
only if:…’

1.      

2.     In paragraph 3 of
article 5 of the agreement the following sub-paragraph shall be inserted after
sub-paragraph (e): ‘(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 auxilliary character.’

3.     The following
paragraph shall be inserted after paragraph 3 of article 5 of the agreement:

4.     ‘Notwithstanding the
preceding provisions of this article, an insurance enterprise of a Contracting
State shall, except in regard to re-insurance, be deemed to have a permanent
establishment in the other Contracting State if it collects premiums in the
territory of that other State or insures risks situated therein through a
person other than an agent of an independent status to whom paragraph 6
applies.’

5.     The existing
paragraphs 4 to 6 of article 5 of the agreement shall become paragraphs 5 to 7.

6.     In the first sentence
of paragraph 5 of article 5 of the agreement the words ‘… other than an agent
of an independent status to whom para graph 5 applies…’ shall be replaced by
the words ‘… other than an agent of an independent status to whom paragraph 6
applies… ”

Article
3

Paragraph
1 of article 6 of the agreement shall be replaced by the following:

1.    
‘Income
from immovable property may also be Contracting State in which such property is
situated.’

Article
4

Paragraph
1 of article 8 of the agreement shall be replaced by the following:

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.’

Article
5

1.     ‘1. Article 9 of the
agreement shall become paragraph 1 of article 9.

2.     The following
paragraph shall be inserted after paragraph 1 of article 9 of the agreement:

‘Where
a Contracting State includes in the profits of an enterprise of that
State—and taxes accordingly—profits on which an enterprise of the other
Contracting State has been charged to tax in that other State and the profits
so included are profits which would have accrued to the enterprise of the
first-mentioned State if the conditions made between the two enterprises had
been those which would have been made between independent enterprises, then
that other State shall make an appropriate adjustment to the amount of the tax
charged therein on those profits. In determining such adjustments, due regard
shall be had to the other provisions of this agreement and the competent
authorities of the Contracting States shall, if necessary consult each other.’

Article
6

1.     The first sentence of
paragraph 2 of article 10 of the Agreement shall be replaced by the following:

2.     ‘However, such
dividends may also be taxed in the Contracting State of which the company
paying the dividends is a resident and according to the laws of that State, but
if the beneficial owner of the dividends is a resident of the other Contracting
State, the tax so charged shall not exceed 10 per cent. of the gross amount of
the dividends.’

Paragraph
4 of article 10 of the agreement shall be replaced by the following:

‘The
provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the
dividends, being a resident of a Contracting State, carries on business in the
other Contracting State of which the company paying the dividends is a
resident, through a permanent establishment situated therein, or performs in
that other State independent personal services from a fixed base situated therein,
and the holding in respect of which the dividends are paid is effectively
connected with such permanent establishment or fixed base. In such case the
provisions of article 7 or article 14, as the case may be, shall apply.’

3.    
In
paragraph 5 of article 10 of the agreement the words ‘or a fixed base’ shall be
inserted after the term ‘permanent establishment’.

Article
7

1.     Paragraph 2 of
article 11 of the agreement shall be replaced by the following:

1.      

2.     ‘ However, such
interest may also be taxed in the Contracting State in which it arises, and
according to the laws of that State, but if the beneficial owner of the
interest is a resident of the other Contracting State, the tax so charged shall
not exceed 10 per cent. of the gross amount of the interest.’

Paragraph
3 of article 11 of the agreement shall be deleted.

The
existing paragraph 4 of article 11 of the agreement shall become paragraph 3.

Sub-paragraph
(a) of paragraph 3 of article 11 of the agreement shall be replaced by the
following:

1.      

2.      

3.     Notwithstanding the
provisions of paragraph 2:

1.      

2.      

3.      

4.     interest arising in
Switzerland and paid to a resident of India shall be taxable only in India if
it is paid in respect of a loan made, guaranteed or insured, or a credit
extended, guaranteed or insured by the Government, a political sub-division, a
statutory body or a local authority of India or the Export-Import Bank of
India, the Reserve Bank of India, the Industrial Finance Corporation of India,
the Industrial Development Bank of India, the National Housing Bank, the Small
Industries Development Bank of India or by any institution specified and agreed
in letters exchanged between the competent authorities of the Contracting
States.’

The
existing paragraphs 5 to 8 of article 11 of the agreement shall become paragraphs
4 to 7.

Paragraphs
5 and 6 of article 11 of the agreement shall be replaced by the following:

1.      

2.      

3.      

4.      

5.     ‘5. The provisions of
paragraphs 1 and 2 shall not apply if the beneficial owner of the interest,
being a resident of a Contracting State, carries on business in the other
Contracting State in which the interest arises, through a permanent
establishment situated therein, or performs in that other State independent
personal services from a fixed base situated therein, and the debt-claim in
respect of which the interest is paid is effectively connected with such
permanent establishment or fixed base. In such a 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 Contracting State when the payer is that State itself, a
political sub-division, a local authority or a resident of that State. Where,
however, the person paying the interest, whether he is a resident of a
Contracting State or not, has in a Contracting State a permanent establishment
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
Contracting State in which the permanent establishment or fixed base is
situated.’

Article
8

1.    
The
heading and paragraphs 1 to 7 of article 12 of the agreement shall be replaced
by the following:

Article
12 ROYALTIES AND FEES FOR TECHNICAL SERVICES

1.     Royalties and fees
for technical services arising in a Contracting State and paid to a resident of
the other Contracting State may be taxed in that other State.

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

3.     The term
“royalties” as used in this article means payments of any kind
received as a consideration for the use of, or the right to use, any copyright
of a literary, artistic, or scientific work, including cinematograph films or
work on film, tape or other means of reproduction for use in connection with
radio or television broadcasting, any patent trademark, design or model, plan,
secret formula or process, or for the use of, or the right to use, any industrial,
commercial, or scientific equipment, or for information concerning industrial,
commercial or scientific experience.

4.     For purposes of this
article the term “fees for technical services” means payments of any
kind to any person in consideration for the rendering of any managerial,
technical or consultancy services, including the provision of services by
technical or other personnel.

5.     Notwithstanding
paragraph 4, “fees for technical services” does not include amounts
paid:

a.     for teaching in or by
educational institutions;

b.    for services covered
by article 14 or article 15, as the case may be.

1.      

2.      

3.      

4.      

5.      

6.     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 Contracting State, carries
on business in the other Contracting State in which the royalties or fees for
technical services arise, through a permanent establishment situated therein,
or performs in that other State independent personal services from a fixed base
situated therein, and the contract 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.

7.     Royalties and fees
for technical services shall be deemed to arise in a Contracting State when the
payer is that State itself, a political sub-division, a local authority or a
resident of that State. Where, however, the person paying the royalties or fees
for technical services, whether he is a resident of a Contracting State or not,
has in a contracting State a permanent establishment or a fixed base in
connection with which the 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 State in which the
permanent establishment or fixed base is situated.’

2.      

3.      

4.      

5.      

6.      

7.      

8.     In paragraph 8 of
article 12 of the agreement the term ‘included services’ shall be replaced by
the term ‘technical services’.

Article
9

1.    
Paragraph
2 of article 13 of the agreement shall be replaced by the following:

‘Gains
from the alienation of movable property forming part of the business property
of a permanent establishment which an enterprise of a Contracting State has in
the other Contracting State, or of movable property pertaining to a fixed base
available to a resident of a Contracting State in the other Contracting State
for the purpose of performing independent personal services, including such
gains from the alienation of such a permanent establishment (alone or with the
whole enterprise) or of such fixed base, may also be taxed in that other
State.’

1.      

2.     Paragraph 5 of
article 13 shall be replaced by the following:

‘Gains
from the alienation of shares other than those mentioned in paragraph 4, of a
company which is a resident of a Contracting State:

a.     shall be taxable only
in the Contracting State of which the alienator is a resident;

b.    notwithstanding the
provision of sub-paragraph (a), India may tax gains from the alienation of
shares in a company which is a resident of India.

In
this case the provisions of sub-paragraph (b) of paragraph 1, of article 23
shall apply.’

Article
10

1.    
The
following article 14 relating to independent personal services shall be
inserted after article 13 relating to capital gains:

Article
14 INDEPENDENT PERSONAL SERVICES

1.     Income derived by a
resident of a Contracting State in respect of professional services or other
activities of an independent character shall be taxable only in that State
except in the following circumstances, when such income may also be taxed in
the other Contracting State—

a.     if he has a fixed
base regularly available to him in the other Contracting State for the purpose
of performing his activities; in that case, only so much of the income as is
attributable to that fixed base may be taxed in that other State; or

b.    if his stay in the
other State is for a period or periods aggregating 183 days or more in any 12
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 State may be taxed in that other State.

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.’

1.      

2.     The existing article
14 shall be renumbered as article 15 and replaced by the following article:

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 Contracting State in respect of an
employment shall be taxable only in that State unless the employment is
exercised in the other Contracting State. If the employment is so exercised,
such remuneration as is derived therefrom may be taxed in that other State.

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

a.     the recipient is
present in the other State for a period or periods not exceeding in the
aggregate 183 days in any 12 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 State,
and

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

Notwithstanding
the preceding provisions of this article, remuneration derived in respect of an
employment exercised abroad a ship or aircraft operated in international
traffic, by an enterprise of a Contracting State may be taxed in that State.’

1.      

2.      

3.     Articles 15 to 20 of
the agreement shall become articles 16 to 21.

Article
11

The
following article shall be inserted after article 21 of the agreement:

Article
22 OTHER INCOME

1.     Items of income of a
resident of a Contracting State, wherever arising, not dealt within the
foregoing articles of this agreement shall be taxable only in that State.

2.     The provisions of
paragraph 1 shall not apply to income, other than income from immovable
property as defined in paragraph 2 of article 6, if the recipient of such
income, being a resident of a Contracting State, carries on business in the
other Contracting State through a permanent establishment situated therein, or
performs in that other State independent personal services from a fixed base
situated therein, and the right or property in respect of which the income is
paid is effectively connected with such permanent establishment or fixed base.
In such case the provisions of article 7 or article 14, as the case may be,
shall apply.

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

Article
12

1.     Article 21 of the
agreement shall become article 23.

2.     In sub-paragraph (a)
of paragraph 2 of renumbered article 23 of the agreement the reference made to
sub-paragraph (d) shall be deleted.

3.     In sub-paragraph (b)
of paragraph 2 of renumbered article 23 of the agreement, the term ‘included
services’ shall be replaced by the term ‘technical services’.

4.     Sub-paragraph (c) of
paragraph 2 of renumbered article 23 of the agreement shall be deleted.

5.     Sub-paragraph (d) of
paragraph 2 of renumbered article 23 of the agreement shall be replaced by the
following:

‘(c)
Where a resident of Switzerland derives interest dealt with in sections 10(4),
10(4B), 10(15)(iv) and 80L of the Indian Income-tax Act of 1961 (43 of 1961),
and referred to in sub-paragraph (d) of paragraph 3 of article 11, Switzerland
shall allow, upon request, a relief to such resident of an amount equal to 10
per cent. of the gross amount of the interest.’

Article
13

1.     Article 22 of the
agreement shall become article 24.

2.     Paragraph 1 of
renumbered article 24 of the agreement shall be replaced by the following:

‘Nationals
of a Contracting State shall not be subjected in the other Contracting State to
any taxation or any requirement connected therewith which is other or more
burdensome than the taxation and connected requirements to which nationals of
that other State in the same circumstances and under the same conditions are or
may be subjected. This provision shall, notwithstanding the provisions of
article 1, also apply to persons who are not residents of one or both of the
Contracting States.’

1.      

2.      

3.     The following
paragraph shall be inserted after paragraph 2 of renumbered article 24 of the
agreement:

‘Except
where the provisions of article 9, paragraph 7 of article 11, or paragraph 8 of
article 12, apply, interest, royalties and other disbursements paid by an
enterprise of a Contracting State to a resident of the other Contracting State
shall, for the purpose of determining the taxable profits of such enterprise,
be deductible under the same conditions as if they had been paid to a resident
of the first-mentioned State.’

1.      

2.      

3.      

4.     The existing
paragraphs 3 and 4 of renumbered article 24 of the agreement shall become
paragraphs 4 and 5.

Article
14

Articles
23 to 27 of the agreement shall become articles 25 to 29.

Article
15

A.    In the first
sub-paragraph of paragraph 1 of the protocol to the agreement the words ‘… in
paragraph 2, sub-paragraph (a) of article 12′ shall be replaced by the
words’… in paragraph 2 of article 12.’.

B.    In the third
sub-paragraph of paragraph 1 of the Protocol to the Agreement the words ‘with
respect to paragraph 4 of article 5…’ shall be replaced by the words ‘with
respect to paragraph 5 of article 5…’.

C.    In the protocol to
the agreement the following paragraph shall be inserted after paragraph 2:

‘With
reference to paragraph 2 of article 9.—-It is understood that Switzerland
shall only make an appropriate adjustment after consultation with the competent
authority of India and after reaching an agreement on the adjustments of
profits in both Contracting State.’

A.     

B.     

C.     

D.    The existing
paragraph 3 of the protocol to the agreement shall be replaced by the
following:

‘With
reference to articles 10, 11 and 12.—If after the signature of the protocol
of 16th February, 2000, under any Convention, Agreement or Protocol between
India and a third State which is a member of the OECD India should limit its
taxation at source on dividends, interest, royalties or fees for technical
services to a rate lower or a scope more restricted than the rate or scope
provided for in this agreement on the said items of income, then, Switzerland
and India shall enter into negotiations without undue delay in order to provide
the same treatment to Switzerland as that provided to the third State.’

A.     

B.     

C.     

D.     

E.    In the Protocol to
the agreement the following paragraph shall be inserted after paragraph 4:
“5. With reference to sub-paragraph (b) of paragraph 5 of article 13.—It
is understood that if at a later stage Switzerland shall introduce a capital
gains tax on the alienation of shares of a Swiss company other than shares of a
company mentioned in paragraph 4, paragraph 5 of article 13 shall be replaced
by the following:

“Gains
from the alienation of shares other than those mentioned in paragraph 4 in a
company which is a resident of a Contracting State may be taxed in that
State”.

In
this case sub-paragraph (b) of paragraph 1 of article 23 of the agreement shall
be deleted.’

A.     

B.     

C.     

D.     

E.     

F.    The existing
paragraph 4 of the protocol to the agreement shall become paragraph 6.

G.    In the protocol to
the agreement the following paragraph shall be inserted after paragraph 6:

‘With
reference to paragraph 4 of article 24.—It is understood that this provision
shall not be construed as preventing a Contracting State from charging the
profits of a permanent establishment which a company of the other Contracting
State has in the first mentioned State at a rate of tax which is higher than
that imposed on the profits of a similar company of the first-mentioned
Contracting State nor as being in conflict with the provisions of paragraph 3
of article 7 of this agreement.’

A.     

B.     

C.     

D.     

E.     

F.     

G.     

H.    The existing
paragraph 5 of the protocol to the agreement shall become paragraph 8 and its
heading shall be replaced by the following:

‘With
reference to article 25’.

Article
16

1.     The Governments of
the Contracting States shall notify each other through diplomatic channels that
all legal requirements and procedures for giving effect to this protocol have
been satisfied.

2.     The protocol, which
shall form an integral part of the agreement, shall enter into force on the
date of the later of the notifications referred to in paragraph I and its
provisions shall have effect:

a.     in India, in respect
of income arising in any fiscal year beginning on or after the first day of
April next following the calendar year in which the protocol entered into
force; and

b.    in Switzerland, in
respect of income arising in any fiscal year beginning on or after the first
day of January next following the calendar year in which the protocol entered
into force.

In
witness whereof

the undersigned, duly authorised thereto by their respective Governments, have
signed this protocol.

Done
in
duplicate at New Delhi this 16th day of February, 2000, in German, Hindi and
English languages, all the texts being equally authentic, In case of divergence
of interpretation the English text shall prevail.

For
the Government of the Republic of India………………………………….

(Yashwant
Sinha)

For
the Swiss Federal Council…………………………………

(Pascal
Couchepin)

[Notification
No. 35/F. No. 501/7/73-FTD]

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