Multilateral Instrument (MLI) - Practical Aspects

18 April 2020

CA Monika Wadhani

International Fiscal Association –

India Branch

2CA Monika Wadhani

Outcome of OECD / G20 Members BEPS Project - to implement tax treaty related measures to prevent BEPS and tackle tax avoidance

Single instrument facilitating modification of multiple treatiessimultaneously

Likely to impact 3000+ tax treaties

Action Plan 2 – Hybrid mismatches

Action Plan 6 – Treaty Abuse (Minimum standard)

Action Plan 7 – Permanent Establishments

Action Plan 14 – Dispute Resolution (Minimum standard)

MLI to be read alongside tax treaties - does not replace existing tax treaties but only modifies them

MLI applies to a CTA

Terms not defined in MLI shall have meaning as defined under the relevant CTA - MLI to be to be interpreted in accordance with ordinary principles of treaty interpretation

WHAT ISMLI?

BEPS AP INMLI

Interpretation of MLI

1 Overview of MLI

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1 July 2018,MLI

Entry intoForce (After

first five ratifications)

Oct 2015, Release of

BEPSreports(15 AP)

June 2017, signature

of MLI (BEPS AP15)

OECD’sinitiative to tackle

tax avoidance through BEPS

MLI and its explanatory statement finalised to implement

BEPS measures

MLI signed by 67 countries

including India (followed by subsequentsignatories)

By Austria,the Isle of

Man, Jersey,Poland and

Slovenia

25 June2019,

MLI ratified by India

MLI Ratificationand deposit by

India (after Cabinet

approval on 12June 2019)

MLI Notifiedby Ministryof Finance

9 August2019,MLI

Notificationby India

Nov 2016, over 100 jurisdictions (including India)

concluded negotiations and

adopted MLI(BEPS15)

Out of 94 signatories to MLI, 44 countries have ratified MLI (including India)

1 MLI implementation – the journey

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Aids to Interpret MLI

BEPS AP 15 – containing the text of MLI;

Explanatory Statement to MLI – which reflects the agreed understanding of the negotiators with respect to the MLI;

MLI Positions adopted and deposited by various MLI Signatories with OECD - draft MLI positions filed at time of signing MLI and final MLI positions filed at the time of depositing ratified copy of MLI with OECD;

Reports on BEPS AP 2, 6, 7 and 14 - based on which MLI text is developed;

Text of the existing tax treaty along with the protocols (if any) to the existing tax treaty – to which MLI provisions are to be applied / replaced / modified, as the case may be;

OECD Model Convention of Tax Treaty and OECD Commentaries - used for interpretation of tax treaty;

The Synthesized text of MLI between parties to a CTA

MLI matching database available on OECD’s Website

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Reservations Optional provisionsMinimum Standards

• Flexibility to opt out of a provision if it is not a minimum standard

• Option to choose among alternative provisions intended to address the same issue

• Both the countries to choose the same option in order for it to apply

• Possibility of asymmetric application in certain Art

• All countries to meet certain minimum standards (Action 6 -Treaty Abuse; Action 14 – Dispute Resolution)

• No leeway to opt out of the minimum standards, except in limited cases

MLI – Framework

Compatibility clauses

• Defines the relationship / addresses conflict between the MLI and the provisions of a CTA

• MLI provision applies –• ‘in place of’ • ‘applies to’ or ‘modifies’ • ‘in the absence of’• ‘in place of or in the absence of’ –If notified by both CTA,

then gets replaced, else supersedes

Notification clauses

• Notify choice of optional provision

• Also, notify the existing provision of CTA to be modified / replaced To be notified by

both CTA

Article 5 & 8 worded differently

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Articles of MLI – Rules for opt in / opt outExpression

used in the

MLI

compatibility

provisions

Scenarios 1 2 3 4 5 6

Country A

Notified

(opt in)

Notified

(opt in)

Reserved

(opt out)

Notified

(opt in)Silent Silent

Country B

Notified

(opt in)

Reserved

(opt out)

Reserved

(opt out)Silent Reserved

(opt out)Silent

“in place of” Yes No No No No No

“applies to” or “modifies”Yes No No No No No

“in absenceof” Yes No No No No No

“in place of or in absence

of”Yes No No

Yes*No Yes*

• Exception Article 5 (elimination of double taxation), Article 8 (Dividend Transfer Transaction). In absence of full matching, the MLI Article will apply and supersede the provision of CTA to the

extent of incompatibility as against replacement of MLI Article in theCTA

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MLI – Applicability FlowchartWhether the country

is a signatory to MLI?

No

Provisions of existing treaty to

apply

Whether two countries notified treaty with each other as CTA

Provisions of MLI to apply

Reservation made by either of the countries

vis-à-vis the Article

Whether the Article is a minimum

standard?

Yes

No Yes

Yes

No

Optional provision –opted for? Opted by both? Same option

chosen? Any exception

No Yes

YesNo

Impact of Compatibility Clause to be considered

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Articles under MLI, Model Convention and BEPS Action Plan

Parts MLI ArticlesOECD / UN MC Articles

BEPS AP

Part I: Scope and Interpretation of Terms -• Scope of MLI Article 1• Interpretation of MLI Article 2 Part II: Hybrid Mismatches:• Transparent Entities Article 3 Article 1(2) BEPS AP 2• Dual Resident Entities Article 4 Article 4(3) BEPS AP 6

• Methods for elimination of double taxation Article 5Article 23A &

23BBEPS AP 2

Part III: Treaty Abuse

• Purpose of CTA (Preamble) Article 6Preamble -Para above Article 1 BEPS AP 6

• Prevention of Treaty Abuse Article 7 Article 29• Dividend transfer transaction Article 8 Article 10(2)(a)

BEPS AP 6• CG from alienation of share/interest deriving value from IP

Article 9 Article 13(4)

• Anti-abuse rule for PE in third state Article 10 -• Taxing rights for own residents Article 11 Article 1(3)

Minimum Standard India has Opted Out

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Articles under MLI, Model Convention and BEPS Action Plan Parts MLI Articles

OECD / UN MC Articles

BEPS AP

Part IV: Avoidance of PE Status through:• Commissionaire Arrangements Article 12

Article 5BEPS AP 7

• Specific Activity Exemptions Article 13• Splitting up of Contracts Article 14• Definition of closely related Person Article 15Part V: Improving Dispute ResolutionMutual Agreement Procedures Article 16 Article 25 BEPS

AP 14Corresponding Adjustments Article 17 Article 9(2)Part VI: Arbitration Article 18-26 Article 25(5)Part VII: Final Provisions• Signature, Ratification, Acceptance or Approval Article 27• Reservations Article 28• Notifications Article 29• Subsequent Modifications of Covered Tax Agreements

Article 30

• Entry into Force Article 34• Entry into Effect Article 35• Entry into Effect of Part VI (Arbitration) Article 36• Withdrawal Article 37• Other Provisions Article 31-33,38 & 39

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Timelines for Applicability of MLI1. Ratification and filing with

OECD

2. Entry into Force (‘EOF’):

First day of the month following:Col. 1 + 3 months

3. Entry into Effect (‘EIF’):

i. Withholding taxes:

First day of the calendar year (taxable period for

India) on or after the later of the EOF

ii. Other taxes:

From taxable periods beginning on or after 6

months from the later of the EOF

India Singapore India Singapore India Singapore India Singapore

25 June 2019

21 Dec 2018

1 Oct2019

1 April 2019

1 Apr 2020

1 Jan 2020 1 Apr 2020

1 Jan 2021

India Canada India Canada India Canada India Canada

25 June 2019

29 Aug 2019

1 Oct 2019

1 Dec2019

1 Apr 2020

1 Jan 2020 1 Apr 2021

1 Jan 2021

India Cyprus India Cyprus India Cyprus India Cyprus

25 June 2019

23 Jan 2020

1 Oct 2019

1 May 2020

1 April2021

1 Jan 2021 1 April2021

1 Jan 2021

Impact / Issues of different EIF dates?

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MLI Article 35 – Entry into EffectPara 1: The provisions of this Convention shall have effect in each CJ with respect to a CTA:a) with respect to taxes withheld at source on amounts paid or credited to non-

residents, where the event giving rise to such taxes occurs on or after the first day of the next calendar year* that begins on or after the latest of the dates on which this Convention enters into force for each of the CJ to the CTA; and

b) with respect to all other taxes levied by that CJ, for taxes levied with respect to taxable periods beginning on or after the expiration of a period of six calendar months (or a shorter period, if all CJ notify the Depositary that they intend to apply such shorter period) from the latest of the dates on which this Convention enters into force for each of the CJ to the CTA

*India has chosen “taxable period” for “calendar year” for purpose of Para 1(a)

Whether Tax Treaty provisions as amended by MLI – can be read differently by payer and payee?

Whether Payer has to deduct tax applying new provisions ( Tax Treaty r.w. MLI) and can payee claim refund by applying old provisions (Tax Treaty without applying MLI)?

Whether WHT rates category to be applied only to categories of income for which tax rates are specified in the Tax Treaty?

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• Any person (being a resident or a non-resident)Payer / Deductor

• Any interest or

• Any “other sum chargeable” under IT Act

• Supreme Court in case of GE Technology Centre (P) Ltd v/s CIT [(2010) 327 ITR 456] – has held that if ‘sum not chargeable to tax’ in hands of payee, withholding tax is not required to be done by Payer

• Excluding interest u/s 194LB, 194LC, 194LD; Salary; Dividend u/s 115-O

Nature of payment

• Payment or credit whichever is earlier

Time of Deduction

• Rates in force – The rates of income tax as specified in the Finance Act of the relevant year or as specified in Tax Treaty, as the case may be

Rate of Deduction

Section 195(1) – Scope and applicability

• Non-resident or a foreign company

Payee / Deductee

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Obligation of Indian Payer vis-à-vis Payment to Non ResidentsA] If withholding tax obligations as per section 195 are not complied with by Indian Payer:

• To be treated as assesse in default;

• Disallowance of expenditure as per provisions under sec 40(a)(i);

• Interest liability under section 201(1A) of the Act @ 1% / 1.5% per month or part of the month, as the case may be;

• Various penal exposure, etc.

B] Indian Payer treated as ‘Representative Assessee’ under sec 160, r.w. sections 161, section 163, etc.

• All proceedings under the Act and recovery of tax from such representative assessee can be made in the like manner akin to the person represented by him

Some Important Rulings:

Aditya Birla Nuvo Ltd v/s Dy. DIT (International Taxation), 4(2), Mumbai [2011] 12 taxmann.com 141 (Bombay HC) - Parallel proceedings on representative assessee and on the person represented by him can be invoked;

Poompuhar Shipping Corporation Ltd v/s ITO, International Taxation - II, Chennai, [2013] 38 taxmann.com 150 (Madras HC) – Parallel proceedings under sec 201, 201A, 160 and 163 can be invoked

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S. No. Country S. No. Country S. No. Country1 Australia* 11 Israel 21 Russia2 Austria* 12 Japan* 22 Serbia*3 Belgium* 13 Latvia* 23 Singapore*4 Canada 14 Lithuania* 24 Slovak Republic*5 Denmark 15 Luxembourg* 25 Slovenia6 Finland* 16 Malta 26 Sweden7 France 17 Netherlands 27 Ukraine8 Georgia* 18 New Zealand 28 United Arab Emirates*9 Iceland 19 Norway 29 United Kingdom*

10 Ireland* 20 Poland*

# No impact on India’s treaties with few major partners like U.S., Mauritius, Germany* Synthesized Text available for 17 Indian Tax Treaties – Singapore, UK, Luxemburg, Japan, UAE, Australia, Austria, Finland, Ireland, Poland, Lithuania, Slovak Republic, Serbia, Belgium, Georgia, Latvia, etc.

3Indian tax treaties impacted by MLI w.e.f. 1 April 2020

US Investments through above jurisdictions, likely to be impacted by MLI w.e.f 1 Apr 2020

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OECD MLI Matching Databasehttps://www.oecd.org/tax/treaties/

mli-matching-database.htm

Status as of 18 June 2019 India SingaporeSignature MLI 6/7/2017 6/7/2017

Ratification instrument deposited 12/21/2018Mock-up date of ratification

Status of List Provisional Definitivepublished by India

published by Singapore

Jump to the top

in India with respect to taxes withheld Notification(s) under Article 35(7)(b) have(has) not been made.in India with respect to other taxes Notification(s) under Article 35(7)(b) have(has) not been made.in Singapore with respect to taxes withheld Notification(s) under Article 35(7)(b) have(has) not been made.in Singapore with respect to other taxes Notification(s) under Article 35(7)(b) have(has) not been made.

Article 35 | Entry into Effect MLI For the purposes of the application by India, 'taxable period' would apply. Entry into effect depending on completion of internal procedures in India would apply.

Article 36 | Entry into Effect of Part VIEntry into Effect MLI Article 35(5) would not apply. The notification(s) of the comepletion of internal procedures for the entry

into effect of the provisions of the MLI has(have) not been received by the Depositary.

Part

Article 18 | General applicability ofPart VI (Arbitration) Part VI would not apply.Article 19 | Mandatory Binding ArbitrationArticle 23 | Type of Arbitration ProcessArticle 24 | Agreement on a Different Resolution

Article 28 | Reservations on the scope

MA

P Article 16 | Mutual Agreement ProcedureThe first sentence of Article 16(1) would not apply. The second sentence of Article 16(1) would not apply. The first sentence of Article 16(2) would not apply. The second sentence of Article 16(2) would not apply. The first sentence of Article 16(3) would not apply. The second sentence of Article 16(3) would not apply.

Article 17 | Corresponding Adjustments Article 17 would not apply.

Article 11 | Application of Tax Agreements to Restrict a Party’s Right to Tax its Own Residents Article 11 would not apply.Article 12 | Artificial Avoidance of Permanent Establishment Status through Commissionnaire Arrangements and Similar

Article 12 would not apply.

PE

Article 13 | Artificial Avoidance of Permanent Establishment Status through the Specific Activity Exemptions

Article 13(4) would not apply. Neither Option would apply.

Article 14 | Splitting-up of Contracts Article 14 would not apply.Article 15 | Definition of a Person Closely Related to an Enterprise Article 15 would not apply.

Article 8 | Dividend Transfer Transactions Article 8 would not apply.Article 9 | Capital Gains from Alienation of Shares or Interests of Entities Deriving their Value Principally from Immovable Property

Article 9(1) would not apply. Article 9(4) would not apply.

Article 10 | Anti-abuse Rule for Permanent Establishments Situated in Third Jurisdictions Article 10 would not apply.

Article 5 | Application for methods for Elimination of Double Taxation Article 5 would not apply.

Article 6 | Purpose of a Covered Tax Agreement

The preamble text described in Article 6(1) would be included in addition to the existing preamble language. Article 6(3) would not apply.

Article 7 | Prevention of Treaty AbuseArticle 7(1) would apply and supersede the provisions of the agreement to the extent of incompatibility. Article 7(4) would not apply. The Simplified Limitation on Benefits Provision would not apply.

Article 2 | Covered Tax Agreement The agreement would be a 'Covered Tax Agreement'.Article 3 | Transparent Entities Article 3 would not apply.Article 4 | Dual Resident Entitities Article 4 would not apply.

Jump to entry into effect MLI

Synthesised text Not available yetNot available yet

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Tax Treaty Eligibility – Existing Conditions / Requirements Qualification as ‘Person’ under Article 1 of OECD MC / UN MC / respective tax

treaty;

Qualification as ‘ Resident’ under Article 4 of OECD MC / UN MC / / respective tax treaty’

Availability of Tax Residency Certificate (‘TRC’) / Form 10F – Whether necessary and / or sufficient evidence – explained in next slide;

Recipient to be the ‘Beneficial Owner’ of passive income like dividend, interest, royalty, FTS;

Satisfaction of ‘Limitation of Benefit’ clause – if mentioned in respective tax treaty; etc.

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TRC – Whether Necessary and / or Sufficient Evidence?

The CBDT vide Circular No 789 dated 13 April 2000 - clarified that a valid TRC held by a Mauritian entity would be considered as sufficient evidence of it being a resident of Mauritius for treaty purposes and accordingly, would be eligible for treaty benefits

The Hon’ble SC in case of Union of India v. Azadi Bachao Andolan [2003] 132 Taxman 373 (SC) upheld the validity of Circular No.789 (supra)

Section 90(2) of the Act provides that provisions of the treaty shall apply over the provisions of the Act to the extent they are more beneficial to the assesse

Section 90(2A) of the Act provides that - Notwithstanding anything contained in sub-section (2), the provisions of Chapter X-A of the Act shall apply to the assessee even if such provisions are not beneficial to him.”

The Finance Act 2012 introduced sub-section (4) to section 90 of the Act, w.e.f AY 2013-14, to provide that treaty benefits shall be allowed only to those NR assessees holding a valid TRC

The Memorandum to the Finance Act 2012, while explaining the purpose of introducing section 90(4) mentions that ….submissions of TRC containing prescribed particulars, as a necessary but not sufficient condition for availing treaty benefits…..

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TRC – Whether Necessary and / or Sufficient Evidence?

The Finance Bill 2013, proposed to further amend section 90 by inserting sub-section (5) as under:

‘(5) The certificate of being a resident in a country outside India or specified territory outside India, as the case may be, referred to in sub-section (4), shall be necessary but not a sufficient condition for claiming any relief under the agreement referred to therein’

Based on the proposed language of sub-section (5) to section 90, clarificationswere sought from Finance Ministry as to whether TRC could be questioned bythe Indian Income Tax Authorities ;

Vide press release dated 01 March 2013, the Finance Minister clarified thatIndian Income Tax Authorities will not go behind the TRC and question theresident status of NR, and that it will accept the TRC

The Finance Act 2013, suitably modified section 90(5) of the Act to read asunder:

“(5) The assessee referred to in sub-section (4) shall also provide suchother documents and information, as may be prescribed.”

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TRC – Whether Necessary and / or Sufficient Evidence?

In case of Skap Industries India (P) Ltd v. ITO Ahmedabad [2018] 94taxmann.com 448 (Ahmedabad Tribunal), where assesse was not able to submitTRC, it was held by the Hon’ble Tribunal that, section 90(4) of the Act does notstart with a non-obstante clause vis-à-vis section 90(2) of the Act, unlike section90(2A) of the Act which overrides the provisions of section 90(2) of the Act.

Accordingly, the Tribunal held that section 90(4), in the absence of a non-obstante clause, cannot be read as a limitation to the treaty superiority undersection 90(2), and an eligible assessee cannot be declined the treaty protectionunder section 90(2) on the ground that the said assessee has not been able tofurnish a TRC

In case of Sreenivasa Reddy Cheemalamarri v. ITO, Hyderabad (ITA No.1463/Hyd/2018), where assessee was not able to reproduce TRC and hadwritten to AO of his inability to produce the same, it was held by the Hon’bleTribunal:

‘11. Normally it is a herculean task to obtain certificates from alien countries for compliance of domestic statutory obligations. In such circumstances the taxpayer cannot be obligated to do impossible task and penalized for the same. If the assessee provides sufficient circumstantial evidence in such cases, the requirement of section 90(4) ought to be relaxed.’

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MLI Impact Areas and Case Studies

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Some of the MLI proposals may have far reaching implications on tax treaties

Key proposals of MLI

Preventing treaty abuse

Avoidance of PE status

1

23

PREVENTING TREATY ABUSE

Preventing treaty shopping (PPT and/or LOB)

AVOIDANCE OF PE STATUS

Expanding scope of Agency PE

DISPUTE RESOLUTION

Dispute resolution

Access to MAP process

Restricting Preparatory and Auxiliary exemptionsAnti-fragmentation rulesAvoiding artificial contract splitting

Dividend stripping

Corresponding adjustmentsArbitration - Optional

Shares deriving value from immovable propertyThird country PEs

Red = Minimum standard

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Prevention of Treaty Abuse

LOB RulePreamble

PPT Rule

Article 7 of MLI -allows to opt for any of the following alternatives:

PPT Only PPT + LOB (Detailed

or simplified) Detailed LOB +

mutually negotiated anti-conduit Rule

Article 6 of MLI –mandates inclusion

of preamble as a minimum standard:

BEPS Action Plan 6

Three-pronged approach to address treaty shopping

India has accepted to apply PPT as an interim measure along with SLOB and intends where possible to adopt LOB provision, in addition or replacement of PPT, through

bilateral negotiations

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MLI Article 6 – Purpose of CTA [Preamble]Para 1: A CTA shall be modified to include following preamble text:“Intending to eliminate double taxation with respect to taxes covered by this agreement without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance (including though treaty-shopping arrangements aimed at obtaining reliefs provided in this agreement for the indirect benefit of residents of third jurisdictions)”

Para 2: Para 1 to apply ‘in place of or in absence of’…..

Para 3: Optional provision to include preamble text -“Desiring to further develop their economic relationship and to enhance their co-operation in tax matters”- Not opted by India

Para 4: Right of reservation to Opt out of Para 1, if similar preamble language exists – (None by India)

Para 5 and 6: Notifications

Article 31 of Vienna Convention: The context for the purpose of the interpretation of a treaty shall comprise the text, preamble and annexes

SC in case of Azadi Bachao Andolan [(263 ITR 706)(SC)], acknowledged treaty shopping by considering the preamble as under:

“……….that the preamble of the Indo-Mauritius DTAC recites that it is for the "encouragement of mutual trade and investment" and this aspect of the matter cannot be lost sight of while interpreting the treaty”

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Country Existing Preamble Additional Preamble

Singapore, Netherlands, UK

The Government of ……….., 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

Preamble language to get widened with new preamble which provides for ‘without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance’ (including through treaty shopping arrangements…..)

Luxembourg

The Government of ..…., desiring to conclude an Agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital and with a view to promoting economic co-operation between the two countries, have agreed as follows

Object of economic cooperation is already part of existing treaty, it will continue to remain in the preamble with Luxembourg.

The Preamble to get widened to include avoidance of non-taxation / reduced taxation and targeting treaty shopping

MLI Article 6 – Purpose of CTA [Preamble] -Few Examples

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MLI Article 7 – Principal Purpose Test (PPT] Para 7(1):

“Notwithstanding any provisions of a CTA, a benefit under the CTA shall not be

granted in respect of an item of income or capital if it is reasonable to conclude,

having regard to all relevant facts and circumstances, that obtaining that benefit

was one of the principal purposes of any arrangement or transaction that resulted

directly or indirectly in that benefit (‘reasonable purpose test’)

Unless

it is established that granting benefit in these circumstances would be in

accordance with the object and purpose of the relevant provisions of the CTA”

(‘object and purpose test’)

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MLI Article 7 PPT – Interpretation of Reasonable Purpose TestBEPS AP 6, Para 9 of Commentary to Para 7 of Article X [PPT]: The terms“arrangement or transaction”:

should be interpreted broadly and include any agreement, understanding, scheme,transaction or series of transactions, whether or not they are legally enforceable.

In particular they include the creation, assignment, acquisition or transfer of theincome itself, or of the property or right in respect of which the income accrues.

BEPS AP 6, Para 7 of Commentary to Para 7 of Article X [PPT]: The term “benefit”includes

All limitations (e.g. a tax reduction, exemption, deferral or refund) on taxationimposed on the COS under Articles 6 through 22 of the Convention, the relief fromdouble taxation provided by Article 23, and the protection afforded to residents andnationals of a Contracting State under Article 24 or any other similar limitations.

Example – Lower rate of WHT on dividend, interest, royalty and FTS, restricteddefinition of royalty / FTS, beneficial Permanent Establishment provisions, Capitalgain tax exemption, tax sparing provisions, etc.

‘But for Test’ – Tax Benefit would not have been derived but for the arrangement or transaction or scheme

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MLI Article 7 PPT – Interpretation of Object and Purpose Test

Article 31 of Vienna Convention - A treaty shall be interpreted in good faith inaccordance with the ordinary meaning to be given to the terms of the treaty intheir context and in the light of its object and purpose

Article 32 of Vienna Convention – Recourse to supplementary means ofinterpretation, including the preparatory work of the treaty and thecircumstances of its conclusion, to confirm the meaning resulting from theapplication of Article 31, or to determine the meaning when the interpretationaccording to Article 31….

Question arises, the Object and Purpose, at which particular period of time is to beanalysed? – When Original treaty / Protocol / MLI was entered into?

SC in case of Azadi Bachao Andolan (supra) observed : …..treaty shopping,though at first blush might appear to be evil , but is tolerated in a developingeconomy, in the interest of long term development.

“…..Despite the sound and fury of the respondents over the so called 'abuse' of 'treaty shopping', perhaps, it may have been intended at the time when Indo-Mauritius DTAC was entered into. Whether it should continue, and, if so, for how long, is a matter which is best left to the discretion of the executive as it is dependent upon several economic and political considerations…...”

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MLI Article 7 PPT – Interpretation of Object and Purpose Test In case of Abdul Razak A. Meman, In re [2005] 146 Taxman 115 (AAR), AAR held

that NRI who has settled down in Dubai, was not eligible for availing beneficialprovisions of India- UAE Tax Treaty (as it read before amendment in 2007), since hewas not liable to tax in Dubai and did not qualify as resident for the purpose ofArticle 4(1) of said treaty (as it stood then)

While pronouncing aforesaid ruling, AAR called for and perused the recordsrelating to the discussions between the parties to the treaty held in February, 1992,which led to the signing of the India-UAE tax treaty as under:

“15. Having regard to the principle outlined in article 32 of the Vienna Conventionon the Law of Treaties* and in view of the fact that the applicability of the treaty toindividuals has been the centre of controversy for over a decade, we called for andperused the records relating to the discussions between the parties to the treatyheld in February, 1992, which led to the signing of the treaty… The notes furtherdisclose that the UAE Government was in process of codifying tax laws for bothindividuals and corporations on recommendation of International Monetary Fund& it was estimated that process would take 2-3 months… It is evident that partiesproceeded on the assumption that a new codified law bringing individual withinthe income-tax net of UAE was in pipeline and same would be enacted withinabout three months. This explains as to why the definition of expression 'residentof a contracting State' was adopted as in article 4(1)…

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MLI Article 7 PPT – Interpretation of Object and Purpose Test28. …. we would observe that the intention of the parties to the treaty asreflected in the speeches delivered by Shri Manmohan Singh, Hon'ble Ministerof Finance (as he then was) and His Highness Sheik Hamdan Bin Rashid Al-Maktoum, Minister of Finance & Industry…. as well as in the press note was toextend the benefit of the treaty to the individual also. It is only due to thefortuitous circumstance of the anticipated codified tax law not coming intoforce in UAE, the individuals have to be denied the benefit of the treaty

While pronouncing aforesaid ruling, AAR also placed reliance on the HonourableSC ruling in case of Azadi Bachao Andolan (supra) for interpretation of treaty.

Intention of Indian Government and UAE Government, the records, notes exchanged, speeches of Finance Ministers, etc. were considered to determine the

object and purpose of both the Governments for entering into India-UAE Tax Treaty and whether benefits should be granted to Individual residents of UAE

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Case Study 1- Interpretation of Object and Purpose Clause, Grandfathering under PPT, Interplay between GAAR and PPT

Facts:

I Co 1 is a WOS of S Co and S Co is a WOS of US Co

S Co’s investments in shares of I Co were made before 1 April 2017

S Co has invested in CCDs of I Co post 1 April 2017

S Co to transfer certain shares of I Co before 31March 2020 (Tranche 1)

S Co to transfer balance shares along with CCDs of I Co after March 2020, say in 2021 (Tranche 2)

Questions:

Whether CG exemption would be available to S Co as per India – Singapore Tax Treaty which is modified by provisions of MLI? Whether PPT can apply to GAAR grandfathered investments?

How to interpret object and purpose of latest protocol to India- Singapore Tax Treaty and MLI events

If Tax Authorities invokes reasonable purpose test of PPT, can it be argued that as per object and purpose test of PPT, grandfathering of CG for transfer of shares of I Co 1 which were acquired by S Co before 1 April 2017, should be available?

US Co

S Co

I Co 1

Singapore

USA

India

100%

100%

I Co 2

Equity + CCD

Sale

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Case Study 1- Interpretation of Object and Purpose Clause, Grandfathering under PPT, Interplay between GAAR and PPT

Assets of S Co.

Acquisition Sale GAAR

applies?

PPT

applies?

Points to Ponder

I Co Shares(Tranche 1)

Pre April 2017 Pre March2020

No** No***

I Co shares(Tranche 2)

Pre April 2017 In 2021 No** Yes (?)##(Analysis given in

next slide)

Can PPT apply to GAAR grandfathered investments or GAAR overrides PPT?*****

CCDs of I Co(Tranche 2)

Post April2017

In 2021 Yes Yes Can PPT and GAAR apply simultaneously?*****

**GAAR not to apply in respect of income from transfer of investment made before 31 March 2017 [Rule 10U(1)(d)]

***W.r.t India – Singapore Tax Treaty, MLI has come into effect w.e.f.1 April 2020 (from India’s perspective)

*****Applicability of sec 95(1) versus sec 90(2) and sec 90(2A)

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Case Study 1- Interpretation of Object and Purpose Clause, Grandfathering under PPT, Interplay between GAAR and PPT

## Whether Grandfathering of CG tax under India-Singapore Tax Treaty available? Flow of Events:• In Oct 2015, total 15 BEPS AP Reports were finalized and released, which also

contained MLI as BEPS AP Report No. 15• In Nov 2016, over 100 jurisdictions concluded negotiations on MLI (India and

Singapore participated) • In Dec 2016, India and Singapore signed Protocol to India-Singapore Tax Treaty

grandfathering shares acquired before 1 April 2017;• In June 2017, 67 jurisdictions (including India and Singapore) formally signed MLI

which was principally agreed in Nov 2016;• Singapore ratified MLI on 21 Dec 2018 and India ratified MLI on 25 June 2019

By placing reliance on following, whether grandfathering of capital gains tax exemption under India-Singapore Tax Treaty should be available?i) Observation of SC in case of Azadi Bachao Andolan (supra) – ‘it may have been intended at the time when Indo-Mauritius DTAC was entered into….’ii) Factors and documents considered by AAR in Abdul Razak’s case (supra) – for entering into India-UAE Tax Treaty & whether benefits should be granted to Individual residents of UAEiii) Article 31 and 32 of Vienna Conventioniv) Flow of above mentioned Events for India-Singapore latest Protocol and MLI

33CA Monika Wadhani

A Co

I Co

Supply of copyrighted

software

Case Study 2- Payment of Royalty / FTS from India Netherlands

India

Payment for purchase of copyrighted software

Facts: Iteration 1 - Royalty

A Co, company incorporated in Netherlands owns IPR in the software and is engaged in business of selling copy of such software

I Co, an Indian company buys copy of software from A Co

A Co does not have any PE in India

Transaction takes place on 15 April 2020

Questions:

Whether payment by I Co to A Co towards purchase of copy of software is taxable in India in hands of A Co under India-Netherlands Tax Treaty r.w. MLI?

34CA Monika Wadhani

Case Study 2- Payment of Royalty / FTS from India Royalty earned by a non-resident Company, A Co in this case, if not connected to PE

in India, taxable under the Act @ 10% (as per rate under section 115A) plus applicable surcharge and cess

Royalty definition under the Act expanded by the Finance Act, 2012 with introduction of explanation 4 to Section 9(1)(vi) of the Act which is effective retrospectively from 1 June 1976 – to include payment towards….. transfer of all or any right for use or right to use a computer software (including granting of a license) irrespective of the medium through which such right is transferred

Article 12(2) of India – Netherlands Tax Treaty provides concessional tax rate of 10 per cent for taxation of royalties in COS if recipient is the beneficial owner of such royalty;

Plethora of rulings** upholding the principle that where ‘royalty’ has been categorically defined in a particular tax treaty, then the amendment expanding the definition of royalty under the Act, cannot be read into the tax treaty and beneficial provisions of tax treaty continue to apply if other conditions are satisfied for eligibility of said tax treaty

**ADIT (IT) v. Baan Global BV [(2016) (71 taxmann.com 213) (Mumbai Tribunal)], AVEVA Information Technology India (P.) Ltd. v. ITO (Intl. Taxn.) (TDS)-Range-1 [2017] 85 taxmann.com 14 (Mumbai Tribunal), B4U International Holdings Ltd. Vs DCIT (2012) (21 taxman.com 529) (Mumbai Tribunal), DIT Vs Nokia Networks OY (2012) (25 Taxmann.com 225) (Delhi HC), CIT v. Halliburton Exports Inc. [ITA No. 365 of 2016] (Delhi HC)

35CA Monika Wadhani

Case Study 2- Payment of Royalty / FTS from India As per Finance Act 2020, if taxes are paid in India on Royalty at minimum tax

rate prescribed under section 115A of the Act, then non-resident company, A Co, is not required to file any return of income in India

Thus pertinent to analyze, availability of treaty benefits, especially post MLI being effective

Implications of MLI on the facts of the case:

India- Netherlands Tax Treaty stands modified by MLI Provisions w.e.f. 1 April 2020

In order to avail beneficial tax rate of taxation of computer software under Article 12(2) of India-Netherlands Tax Treaty, apart from satisfaction of treaty eligibility conditions like satisfaction of beneficial ownership test, residence test, etc., post MLI being effective, additionally Preamble Test and PPT Test is also to be satisfied

Iteration 2: FTS: What would be the answer if A Co provides ‘Fees for Technical Services’ as mentioned under Article 12(5) r.w. Article 12(6) of India- Netherlands Tax Treaty and is desirous of taking benefit of make available clause?

36CA Monika Wadhani

A Co

I Co

6% Holding since 1

April 2016

B Co

7% Holding since 1

April 2016

Case Study 3 – Payment of Dividend from IndiaSlovenia

India

Merger w.e.f 1 Jan

2020

13% Holding

Post Merger

Dividend declared on 15 Apr 2020

Facts:

A Co and B Co, unrelated companies incorporated in Slovenia are engaged in undertaking similar business industry and beneficially holds 6% and 7% stake respectively in I Co, since 1 April 2016;

As part of corporate reorganisation, B Co gets merged into A Co w.e.f 1 Jan 2020 and correspondingly, A Co’s stake in I Co increases to 13%

I Co declared dividend on 15 April 2020

Questions:

At what rate dividend income taxable in hands of A Co - whether concessional rate of dividend tax under India-Slovenia Tax Treaty available? Whether MLI has any impact on this transaction?

37CA Monika Wadhani

Case Study 3 – Payment of Dividend from India Article 10(2)(a) of India –Slovenia Tax Treaty Benefits provides for concessional tax rate of 5

per cent of the gross amount of the dividends if the beneficial owner is a company which holds directly at least 10 per cent of the capital of the company paying the dividends;

India-Slovenia Tax Treaty stands modified by MLI Provisions w.e.f. 1 April 2020; MLI Article 8 reads as under:

Para 1: “Provisions of a CTA that exempt dividends paid by a co which is a resident of a CJ from tax or that limit the rate at which such dividends may be taxed… shall apply only if the ownership conditions described in those provisions are met throughout a 365 day period that includes the day of the payment of dividends…(for purpose of computing that period, no account shall be taken..of corporate reorganization, such as merger/divisive reorganization..)Para 2: Para 1 to apply ‘in place of or in absence of’..Para 3: Right to Reservations –No impact on Indian tax treaties containing higher threshold (i.e > 365 days)Para 4: Notifications – Para 1 to apply only if both CJ have made notification w.r.t existing provisions

Implications of MLI Article 8 on the facts of the case: Both India and Slovenia has opt in for MLI Article 8 and have notified each other for the

purpose of applicability of said Dividend Article Considering facts of the instant case, as corporate reorganization is to be ignored for

computing holding period, the prescribed holding period of 365 day in shares of I Co is met and since post merger shareholding of A Co into I Co would be 13% i.e. more than minimum participation of 10% stake in I Co, dividend to be declared by I co to qualify for 5% treaty rate

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Case Study 4 - Capital Gains from alienation of shares deriving value from Immovable Property

Facts:

A Co holds 100% stake in I Co, an Indian Company, since 2016

I Co owns substantial immovable property in India since 2011 (Shares of I Co derive 60% value from Immovable property)

I Co has sold its immovable property to ABC Co in India on 1 Mar 2020

A Co is desirous of selling its stake in I Co to another Indian company say XYZ Co on 15 Apr 2020 (45 days later)

Question:

Whether capital gains on sale of shares of I Co shall be taxable in India in hands of A Co according to provisions of India-France Tax Treaty r.w. MLI?

I Co

A CoFranceSale of Shares of I Co after 45 days of Step 1

India

Immovable Property

1

2

Sale of Immovable Property

ABC Co.

XYZ Co

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Case Study 4 - Capital Gains from alienation of shares deriving value from Immovable Property Article 10(4) of India – France Tax Treaty provides rights of taxation of capital

gain from sale of shares to COS, where shares derive value principally from immovable property situated in COS

India – France Tax Treaty stands modified by MLI Provisions w.e.f. 1 April 2020;

MLI Article 9 reads as under:

Para 1: Provisions of a CTA providing that gains derived by a resident of a CJ from the alienation of shares or other rights of participation in an entity may be taxed in the other CJ provided that these shares or rights derived more than a certain part of their value from immovable property (real property) situated in that other CJ….shall apply,

• if the relevant value threshold is met at any time during the 365 days preceding the alienation; and

• to shares or comparable interests, such as interests in a partnership or trust (to the extent that such shares or interests are not already covered) in addition to any shares or rights already covered by the provisions.

Para 2: Para 1 to apply ‘in place of or in absence of’…..

Para 3: Option to choose Para 4

40CA Monika Wadhani

Case Study 4 - Capital Gains from alienation of shares deriving value from Immovable Property MLI Article 9 reads as under:

Para 4: ….. gains derived by a resident of a Contracting Jurisdiction from the alienation of shares or comparable interests,………if, at any time during the 365 days preceding the alienation, these shares or comparable interests derived more than 50 per cent of their value directly or indirectly from immovable property (real property) situated in that other Contracting Jurisdiction.

Para 6: Reservation (None by India)

Para 7 and 8 : Notifications

Implications of MLI Article 9 on the facts of the case:

Both India and France has opt in for MLI Article 9, para 4 and have notified each other for the purpose of said MLI Article

Considering facts of the instant case, since shares of I Co which derived more than 50% value from Immovable Property are sold within 45 days of sale of immovable property by I Co, capital gains on sale of I Co’s shares shall be taxable in India under Article 10(4) of India – France Tax Treaty as modified by MLI Article 9

41CA Monika Wadhani

Case Study 5 - Expansion of Agency PEFacts: Say Business Model from April 2020

F Co1 sells products and F Co2 provides services to Indian customers, for which solicitation of orders by Group Company in India

Group Co identifies customers in India, makes calls, sends e-mails, visits customers office to convince them to buy product, also negotiates and indicates price of product and explains standard terms of contract of F Co1 and F Co2

Contracts with customers concluded remotely by F Co1 and F Co2 for quantity agreed and pricediscussed by Indian agent with such customers

Group Co does not have authority to vary standard terms of contract, including prices fixed by F Co1/F Co2.

Group Co is remunerated on arms length basis (say cost plus mark-up)

Questions: Whether DAPE shall get constituted in India as per Article 5(7) of India – Japan Tax Treaty r.w. MLI, even if Group Co does not have formal authority to conclude contracts?

Recent Contradictory rulings: Daikin Industries ([2018] 94 taxmann.com 299 (Delhi Tribunal) – Even though Indian WOS didn’t had authority to conclude contract, basis the activities carried out by it, held that DAPE was constituted

Nokia Networks OY [2018] 94 taxmann.com 111 (Delhi Tribunal) (SB) –Provision of Market support services, without any authority to conclude contracts, do not constitute DAPE

Sale of goods

F Co 2

CustomersGroup Co

IndiaSolicit and

receive orders

Services

F Co 1

Japan

42CA Monika Wadhani

Case Study 5 - Expansion of Agency PE Article 5(7) of India – Japan Tax Treaty deals with DAPE

India – Japan Tax Treaty stands modified by MLI Provisions w.e.f. 1 April 2020;

MLI Article 9 reads as under:

Para 1: Notwithstanding the provisions of CTA, where a person acting in a CJ on behalf of an enterprise, habitually concludes contracts, or habitually plays the principal role leading to the conclusion of contracts that are routinely concluded without material modification by the enterprise, and these contracts are:

a) in the name of the enterprise; or

b) for the transfer of the ownership of, or for the granting of the right to use, property owned by that enterprise or that the enterprise has the right to use; or

c) for the provision of services by that enterprise,

that enterprise shall be deemed to have a PE in that CJ in respect of any activities which that person undertakes for the enterprise unless these activities, if they were exercised by the enterprise through a fixed place of business of that enterprise situated in that CJ, would not cause that fixed place of business to be deemed to constitute a PE

Para 2: Para 1 not to apply where the person acting in a CJ on behalf of an enterprise of the other CJ carries on business as an independent agent and acts for the enterprise in the ordinary course of that business. Where, however, a person acts exclusively or almost exclusively on behalf of one or more enterprises to which it is closely related, that person shall not be considered to be an independent agent** within the meaning of this para..

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Case Study 5 - Expansion of Agency PEPara 3: Para 1 and para 2 to apply ‘in place of’…..

Para 4: Right to Reservations (None by India)

Para 5 and 6 : Notifications…... Para 1 and 2 to apply in place of existing provision only where both the countries have notified the same

Implications of MLI Article 12 on the facts of the case: Both India and Japan have opt in for MLI Article 12 and have notified existing

provisions contained in Article 5(7) of India-Japan Tax Treaty, which is to be replaced by MLI provisions.

In given facts, agent could be regarded as playing the principal role leading to the conclusion of contracts that are routinely concluded without material modificationand hence constitute DAPE under Article 5(7) of India – Japan Tax Treaty read with MLI Article 12;

** In case of Varian India (P.) Ltd [2013] 33 taxmann.com 249 (Mumbai Tribunal), where Indian Branch provided marketing and distribution activities for various overseas group cos, it was held that since Indian branch represents many group entities, its activities cannot be said to be devoted wholly or almost wholly on behalf of one particular enterprise....

44CA Monika Wadhani

Case Study 6- Restricted exemptions – Preparatory / Auxiliary activities

Facts:

F Co, a Netherlands company has WOS in India- I Co and has also hired leased warehouse

F Co’s sales executives visits India once in a month for client meetings and negotiating contracts and are based at I Co’s office

I Co undertakes market research, supplies market information to F Co, based on which F Co enters into contract with Indian customers who places online order on F Co

I Co also manages purchase on behalf of F Co and places procurement order as per requirement in India

Purchase orders placed by I Co are stocked in the eased Warehouse from where delivery is made to Indian customers as per instructions from I Co

Question: Whether F Co shall constitute Fixed Place PE in India as per India – Netherlands Tax Treaty r.w. MLI and whether exemption towards specific activities and P/A activities available?

F Co

Netherlands

IndiaLeased

WarehouseI Co

• Stock Goods

• Delivery of Goods to Customers as per instructions from I Co

Indian Customers

Places order online

• Market Research

• Placing Purchase Orders

• Co-ordination with Leased warehouse and customers

45CA Monika Wadhani

Case Study 6- Restricted exemptions – Preparatory / Auxiliary activities Article 5(4) of India – Netherlands Tax Treaty lays down specific list of activities which

would not constitute fixed place PE under Article 5(1) of said treaty

India – Netherlands Tax Treaty stands modified by MLI Provisions w.e.f. 1 April 2020;

Provisions of MLI Article 13:

Para 1: Provides choice to select between option A (para 2) or option B (para 3) or neither of the options

Para 2: Option A replaces existing treaty provisions to the extent that

(i)all activities currently included in the treaty (whether or not they are or a P/A nature);

(ii)any other activity not already mentioned in the treaty; and

(iii)any combination of activities in (i) and (ii),

shall fall within the specific activity exemptions only if all such activity (or the overall activity of the fixed place of business from a combination of activities) is of a P/A character

Para 3: Option B provides that all activities (or combinations of activities) not already mentioned in the existing tax treaty must be of a P/A nature to qualify under the specific activity exemption

This option provides a carve out for any activity already existing in the tax treaty which is not specifically required to be of a P/A nature. Such activity may continue to fall within the specific activity exemptions under Option B, even if it not a P/A activity

46CA Monika Wadhani

Case Study 6- Restricted exemptions – Preparatory / Auxiliary activities

Para 4: Anti-fragmentation Rule: The specific activity exemptions that deem a fixed place of business to not amount to a PE shall not apply where the relevant enterprise, or a closely related enterprise, carries on business activities at the same fixed place or a different place in the same CJ and (i) such place constitutes a PE; or (ii) the overall activity resulting from the combined business activities of either a) one enterprise or two CRE operating in two fixed places or b) two enterprises operating in one fixed place, is not of a P/A character. ..

Para 5: Para 2 or para 3 to apply ‘in place of’…..

Para 6: Right to Reservations (None by India)

Para 7 and 8 : Notifications…... India adopts Option A

Implications of MLI Article 13 on the facts of the case:

Both India and Netherlands have selected Option A for MLI Article 13 and have notified existing provisions contained in Article 5(4) of India - Netherlands Tax Treaty

Accordingly, provisions of MLI Article 13 will replace the existing provisions of Article 5(4) of India - Netherlands Tax Treaty

As per provisions under Option A of MLI Article 13, each and every activity specified under Article 5(4) of India - Netherlands Tax Treaty has to meet the test of P/A character, independently and in combination

Thus, under given facts, considering various activities carried out in India, it may not answer the test of P/A character, independently and in combination and thus could not qualify for exemption under Article 5(4) of India - Netherlands Tax Treaty

47CA Monika Wadhani

Case Study 7- Expansion of Construction / Installation PEFacts:

• F Co1 and F Co2, group companies of F Co Group from Netherlands has entered into two separate contracts each with I Co for construction of a project at same site

• Presence of each F Co1 and F Co2 in India for FY 2020-21 would be 100 days each

Questions:

• Whether construction / installation PE could get constituted as per provisions of Article 5(3) of India- Netherlands Tax Treaty r.w. MLI Article 14

F Co

Netherlands

India

F Co 2F Co 1

I Co

Each Contract by F Co1 & F Co 2 of 100 days each

48CA Monika Wadhani

Article 5(3) of India – Netherlands Tax Treaty deals with Construction / Installation PE and provides a threshold of presence of at least 6 months in COS

India – Netherlands Tax Treaty stands modified by MLI Provisions w.e.f. 1 April 2020;

Provisions of MLI Article 14:

Para 1: To determine whether the period (or periods) referred to in a provision of a CTA that stipulates a period (or periods) of time after which specific projects or activities shall constitute a PE has been exceeded:

a) where an enterprise of a CJ carries on activities in the other CJ at a place that constitutes a building site, construction project, installation project or other specific project or carries on supervisory or consultancy activities in connection with such a place, and these activities are carried on during one or more periods of time that, in the aggregate, exceed 30 days without exceeding the period or periods referred to in the relevant provision of the CTA; and

b) where connected activities are carried on in other CJ at (or, where the relevant provision of the CTA applies to supervisory or consultancy activities, in connection with) the same building site, construction or installation project, or other place identified in the relevant provision of the CTA during different periods of time, each exceeding 30 days, by one or more enterprises closely related to the first-mentioned enterprise;

these different periods of time shall be added to the aggregate period of time during which the first-mentioned enterprise has carried on activities at that building site, construction or installation project, or other place identified in relevant provision of CTA

Case Study 7- Expansion of Construction / Installation PE

49CA Monika Wadhani

Case Study 7- Expansion of Construction / Installation PEPara 2: Para 1 to apply ‘in place of or in absence of’…..

Para 3: Right to Reservations – opt out entirely or for subset of CTA relating to the exploration for or exploitation of natural resources (None by India)

Para 4: Notifications…... (None by India)

Implications of MLI Article 14 on the facts of the case:

India is silent on its position on MLI Article 14. It has neither expressed any reservation nor made any notifications under MLI Article 14.

Netherlands has opt out only for subset of CTA relating to the exploration for or exploitation of natural resources

Thus, provisions of MLI Article 14 shall supersede the existing provisions contained in Article 5(3) of India - Netherlands Tax Treaty, to the extent of incompatibility

In given facts, as per the provisions of MLI Article 14, construction / installation PE could be constituted in India by disregarding splitting-up of contracts between F Co1 and F Co 2 since:

- Installation activities are performed by closely related enterprises i.e. F Co1 and F Co 2;and

- Duration of each such activity (i.e. of F Co1 and F co 2) exceeds 30 days

50CA Monika Wadhani

Whether revised indemnities arerequired? Whether changes

in reps and warranties arerequired?

If payer is aware of expanded PE definition -Whether no PE declaration to beaccepted?

Evaluate if the declaration from payee (like no PE, satisfaction of PPT etc.) needs to bebroadened

Check whether payment is to be made to related party or third party

Analyze nature of payment & whether relevant Article under Treaty ismodified

List the foreign payments where treaty rates are applied

List payees in countries where MLI is effective

5 Way forward

51CA Monika Wadhani

GlossaryTerms Abbreviations Terms Abbreviations

Base Erosion and Profit Shifting Action Plan

BEPS AP Multilateral Instrument MLI

Competent Authorities CAs Organization for Economic Co-operation and Development

OECD

Contracting jurisdiction CJ Preparatory and Auxiliary P/A

Capital Gains CG Permanent Establishment PE

Covered Tax Agreement CTA Place of Effective Management

POEM

Double Taxation Avoidance Agreement

DTAA Principal Purpose Test PPT

Entry into Force EOF Research and Development R&D

Entry Into Effect EIF Tax Residency Certificate TRC

Fees for Technical Services FTS Supreme Court SC

Intellectual Property IP Simplified LOB SLOB

Limitation of Benefit LOB Withholding Tax WHT

Model Convention MC United Nations UN

52

Thank YouMonika Wadhani Mobile +91 9920494385

Email monikawadhani@yahoo.co.in

mwadhani@kpmg.comDisclaimer:

This Presentation is intended to provide certain general information existing as at the time of production and is not intended to address the circumstances of any particular individual or entity. The views contained in this presentation are personal in natureand should not be relied upon to form any opinion.

This Presentation does not purport to identify all the issues or developments. This presentation should neither be regarded as comprehensive nor sufficient for the purposes of decision-making. The views mentioned in this presentation are not binding on any authority or court, and so, no assurance is given that a position contrary to that expressed herein will not be asserted by any authority and ultimately sustained by an appellate authority or a court of law.

The presenter does not take any responsibility for accuracy of contents. The presenter does not undertake any legal liability for any of the contents in this presentation. The information provided is not, nor is it intended to be an advice on any matter and should not be relied on as such. Professional advice should be sought before taking action on any of the information contained in it. Without prior permission of the presenter, this document may not be quoted in whole or in part or otherwise.