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Date: 19-Mar-2024 Category: Extra Ordinary State: Union Government Country: India

Notification in exercise of the powers conferred by section 90 of the Income tax Act 1961

Issued by Ministry of Finance · Department of Revenue

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Executive Summary & Key Takeaways

What it means

  • The notification amends the Double Taxation Avoidance Agreement (DTAA) between India and Spain. Specifically, it modifies Article 13 concerning the taxation of Royalties and Fees for Technical Services.
  • The amendment reduces the tax rate on royalties and fees for technical services to a maximum of 10% of the gross amount, provided the recipient is the beneficial owner.

Key Changes

  • Paragraph 2 of Article 13 of the India-Spain DTAA is replaced.
  • The new paragraph 2 stipulates that royalties and fees for technical services may be taxed in the country where they arise, but the tax shall not exceed 10% of the gross amount if the recipient is the beneficial owner.
  • This amendment is effective from the assessment year 2024-25.

Impact Analysis

Impact on Indian Companies

  • Indian companies receiving royalties or fees for technical services from Spanish entities will be subject to tax in Spain as per Spanish law, but the DTAA ensures that double taxation is avoided. The maximum tax that can be levied in Spain is 10% if the Indian company is the beneficial owner.

Impact on Spanish Companies

  • Spanish companies paying royalties or fees for technical services to Indian entities will be subject to tax in India as per Indian law, but the DTAA ensures that double taxation is avoided. The maximum tax that can be levied in India is 10% if the Spanish company is the beneficial owner.

Suggested Action Items

  • Consult with tax advisors to determine the optimal tax planning strategies in light of the amended DTAA.

Key Entities Referenced

Government of the Republic of India: One of the signatory parties to the Double Taxation Avoidance Agreement (DTAA). Kingdom of Spain: One of the signatory parties to the Double Taxation Avoidance Agreement (DTAA). Income-tax Act, 1961: Indian legislation that empowers the Central Government to enter into and implement DTAAs. Section 90 of the Income-tax Act, 1961: The specific section of the Income-tax Act, 1961, that grants powers to the Central Government regarding DTAAs. Notification No. G.S.R. 356 (E), dated the 21st April, 1995: The original notification that implemented the India-Spain DTAA. Organisation for Economic Co-operation and Development (OECD): An international organization whose member countries' agreements with India can trigger Most Favoured Nation (MFN) clauses in existing DTAAs. Convention between India and Germany: A DTAA between India and Germany that provided for a lower tax rate on royalties and fees for technical services, triggering the MFN clause in the India-Spain DTAA.
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रजिस्ट्री स.ं डी.एल.- 33004/99 REGD. No. D. L.-33004/99 सी.जी.-डी.एल.-अ.-19032024-253229 xxxGIDHxxx CG-DLxx-xEG-I1D9E0x3x2x0 24-253229 असाधारण EXTRAORDINARY भाग II—खण् ड 3—उप-खण्ड (ii) PART II—Section 3—Sub-section (ii) प्राजधकार स ेप्रकाजित PUBLISHED BY AUTHORITY स.ं 1415] नई दिल्ली, मगं लिार, माच च19, 2024/फाल्ग नु 29, 1945 No. 1415] NEW DELHI, TUESDAY, MARCH 19, 2024/PHALGUNA 29, 1945 जित्त मत्रं ालय (रािस्ट्ि जिभाग) अजधसचू ना नई दिल्ली, 19 माचच, 2024 (आयकर) का.आ.1484(अ).—िबदक, आय और पूंिी पर करों के संबंध में िोहरे कराधान के पररहार और रािस्ट्ि अपिंचन को रोकन े के जलय े भारत गणराज्य सरकार और स्ट्पने राििाही के बीच करार, उक्त करार को लागू करन े के जलए अपन े कानूनों के तहत आिश्यक प्रदियाओं को पूरा करन े के बारे म ें िोनों संजििाकारी राज्यों द्वारा एक-िसू रे को अजधसूचना लाग ू करने के बाि दिनांक 12 िनिरी, 1995 को लागू हुआ; और िबदक, केंद्र सरकार न े आयकर अजधजनयम, 1961 (1961 का 43) की धारा 90 द्वारा प्रित्त िजक्तयों का प्रयोग करते हुए जनिेि दिया था दक जित्त मंत्रालय (रािस्ट्ि जिभाग) संख्या सा.का.जन. 356 (अ), दिनांक 21 अप्रलै , 1995 की भारत सरकार की अजधसूचना में सलं ग्न उक्त करार के सभी प्रािधानों को, भारत संघ में लागू दकया िाएगा; और िबदक, उपरोक्त करार के दिनांक 8 फरिरी, 1993 के नयाचार के पैराग्राफ 7 में प्रािधान ह ै दक यदि भारत और दकसी ऐस े तीसरे राज्य के बीच दकसी करार या समझौत े के तहत, िो आर्थचक सहयोग और जिकास संगठन का सिस्ट्य ह,ै िो 1 िनिरी, 1990 के बाि लागू होता ह,ै भारत उसकी रॉयल्टी या तकनीकी सेिाओं के जलए िुल्क पर स्रोत पर कराधान को आय की उक्त िस्ट्तुओं पर इस करार में प्रिान की गई िर से कम िर तक सीजमत करता ह,ै तो आय की उक्त िस्ट्तुओं पर उस समझौते या करार में प्रिान की गई िही िर इस करार के अतं गतच भी लाग ूहोगी; 2115 GI/2024 (1)2 THE GAZETTE OF INDIA : EXTRAORDINARY [PART II—SEC. 3(ii)] और िबदक, भारत और िमचनी के बीच करार में, िो 26 अक्टूबर, 1996 को लाग ू हुआ, और भारत के साथ करार में प्रिेि के समय िमचनी आर्थचक सहयोग और जिकास संगठन का सिस्ट्य था, भारत सरकार न े रॉयल्टी और तकनीकी सेिाओं के जलए िल्ु क पर स्रोत पर कराधान को आय की उक्त िस्ट्तुओं पर भारत और स्ट्पेन के बीच करार में प्रिान की गई िर से कम िर तक सीजमत कर दिया ह;ै अत:, अब, आयकर अजधजनयम, 1961 (1961 का 43) की धारा 90 द्वारा प्रित्त िजक्तयों का प्रयोग करत े हुए, केंद्र सरकार एतिद्वारा यह जनििे िेती ह ै दक उक्त अजधसूचना सख्ं या सा.का.जन. 356 (अ), दिनांक 21 अप्रलै , 1995 द्वारा अजधसूजचत करार म ें जनम्नजलजखत संिोधन दकया िाएगा, िो भारत और स्ट्पने के बीच उक्त करार को लागू करने के जलए आिश्यक ह,ैं अथाचत:्--- उक्त अजधसूचना म,ें भारत गणराज्य और स्ट्पने राििाही के बीच संलग्न करार म,ें रॉयल्टी और तकनीकी सेिाओं के जलए िुल्क स े संबंजधत अनुच्छेि 13 म,ें पैराग्राफ 2 के जलए, जनम्नजलजखत परै ाग्राफ को प्रजतस्ट्थाजपत दकया िाएगा, अथाचत:् -- “2. हालााँदक, ऐसी रॉयल्टी और तकनीकी सेिाओं के जलए िुल्क उस संजििाकारी राज्य जिसमें िे उद्भूत होत े ह ैं में और उस राज्य के कानून के अनुसार भी कर लगाया िा सकता ह,ै लेदकन यदि प्राजिकताच रॉयल्टी या तकनीकी सेिाओं के जलए िल्ु क का लाभकारी स्ट्िामी ह,ै तो लगाया िाने िाला कर रॉयल्टी या तकनीकी सेिाओं के जलए िुल्क की कुल राजि के िस प्रजतित से अजधक नहीं होगा।“ 2. इस अजधसूचना द्वारा संिोजधत उक्त करार के अनच्ु छेि 13 का पैराग्राफ 2, जनधाचरण िर्च 2024-25 से लाग ूहोगा। [अजधसूचना स.ं 33/2024 फा.स.ं 503/2/1986-एफटीडी-I] सुखि चतुिेिी, अिर सजचि MINISTRY OF FINANCE (Department of Revenue) NOTIFICATION New Delhi, the 19th March, 2024. (Income- Tax) S.O. 1484(E).—Whereas, the Convention between the Government of the Republic of India and the Kingdom of Spain for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital came into force on the 12th January, 1995, after the notification by both the Contracting States to each other of the completion of the procedures required under their laws for bringing into force the said Convention; And whereas, the Central Government in exercise of the powers conferred by section 90 of the Income-tax Act, 1961 (43 of 1961), had directed that all the provisions of the said Convention annexed to the notification of the Government of India in the Ministry of Finance (Department of Revenue) number G.S.R. 356 (E), dated the 21st April, 1995, shall be given effect to in the Union of India; And whereas, paragraph 7 of the Protocol dated the 8th February,1993, to the aforesaid Convention provides that if under any Convention or Agreement between India and a third State which is a Member of the Organisation for Economic Cooperation and Development , which enters into force after the 1st January, 1990, India limits its taxation at source on royalties or fees for technical services to a rate lower than the rate provided for in this Convention on the said items of income, the same rate as provided for in that Convention or Agreement on the said items of income shall also apply under this Convention; And whereas, in the Convention between India and Germany, which entered into force on the 26th October, 1996, and Germany was a member of the Organisation for Economic Co-operation and Development at the time of entering into the Convention with India, the Government of India has limited the taxation at source on royalties and fees for technical services to a rate lower than that provided in the Convention between India and Spain on the said items of income; 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 the following modification shall be made in the Convention notified vide said notification number G.S.R. 356 (E), dated the 21st April, 1995, which are necessary for implementing the said Convention between India and Spain, namely:---[भाग II—खण् ड 3(ii)] भारत का रािपत्र : असाधारण 3 In the said notification, in the Convention annexed therewith between the Republic of India and Kingdom of Spain, in Article 13 relating to Royalties and Fees for Technical Services, for paragraph 2, the following paragraph shall be substituted, namely:--- “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 law of that State, but if the recipient is the beneficial owner of the royalties or fees for technical services, the tax so charged shall not exceed ten per cent of the gross amount of royalties or fees for technical services.”. 2. The paragraph 2 of Article 13 of the said Convention, as amended by this notification, shall be applicable with effect from the assessment year 2024-25. [Notification No. 33/2024 F.No. 503/2/1986-FTD-I] SUKHAD CHATURVEDI, Under Secy. Uploaded by Dte. of Printing at Government of India Press, Ring Road, Mayapuri, New Delhi-110064 and Published by the Controller of Publications, Delhi-110054.

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