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Treaty between Iceland and India – details

Details of the income tax treaty and protocol between Iceland and India, signed on 23 November 2007, have become available. The treaty was concluded in the Hindi, Icelandic and English languages, each text having equal authenticity. In the case of divergence, however, the English text prevails. The treaty generally follows the OECD Model Convention but also contains elements of the UN Model Convention.

The maximum rates of withholding tax are:

-   10% on dividends;
-   10% on interest, subject to an exception for interest derived and beneficially owned by (i) the government, a political sub-vision or a local authority of the Contracting State; or (ii) the Reserve Bank of India, the Export-Import Bank of India or the National Housing Bank or the Central Bank of Iceland; or (iii) any other institution agreed on by the Contracting States; and
-   10% on royalties and fees for technical services. The term "royalties" includes, inter alia, payments for the use of films or tapes used for television or radio broadcasting and industrial, commercial or scientific equipment. The term "fees for technical services" means payments as consideration for managerial, technical or consultancy services not falling within the scope of Arts. 14 (independent personal services) and 15 (dependent personal services).

Deviations from the OECD Model include that:

-   a permanent establishment includes, or arises from (i) a sales outlet, (ii) a warehouse in relation to a person providing storage facilities for others, (iii) a farm, plantation or other place where agricultural forestry, plantation or related activities are carried on, (iv) any place of extraction of natural resources, (v) a building site, construction, installation or assembly project or connected supervisory activities if they last more than 9 months, (vi) the furnishing of services by an enterprise through personnel if the same or connected project lasts more than 90 days within any 12 month period, (vii) a person other than an independent agent who acts in one of the states for an enterprise of the other state and who has no authority to conclude contracts in the name of the enterprise but who habitually maintains a stock of goods or merchandise in the first state from which he regularly delivers goods or merchandise or secures orders in the first state wholly or almost wholly for the enterprise, and (vii) an insurance enterprise of a state (except for reinsurance) which collects premiums or insures risks in the other state through persons other than an independent agent;
-   Art. 17 (Artistes and sportspersons) gives the entertainer's or sportsperson's residence state the taxing right of income from activities performed in the other Contracting State if the activities are substantially supported by public funds of one or both of the Contracting States or of political sub-division or local authorities thereof;
-   Art. 20 (Professors, teachers and research scholars) exempts remuneration paid to a professor, teacher or research scholar who is or was a resident of the Contracting State for teaching and/or engaging in research at a university, college or other similar approved institution in the other Contracting State from taxes in the other State. The exemption is limited to 2 years from the date of his arrival in the other State;
-   Art. 22 (Other income) stipulates that income from lotteries, crossword puzzles, races, card games and other games or gambling or betting may be taxed in the source state; and
-   the treaty includes a limitation of benefits clause.

Both states generally provide for the credit method to avoid double taxation.

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