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India; Norway

4 March 2012

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Treaty between India and Norway enters into force

The India - Norway Income and Capital Tax Treaty (2011) entered into force on 20 December 2011. The treaty generally applies in Norway from 1 January 2012 and in India from 1 April 2012.

The treaty was concluded in the Norwegian, Hindi and English languages, each text having equal authenticity. In case of divergence, the English text prevails. The treaty generally follows the OECD Model Convention. The treaty has replaced the income and capital tax treaty of 31 December 1986 between Norway and India with effect from 1 January 2012 (Norway) and 1 April 2012 (India).

The maximum rates of withholding tax are:

-   10% on dividends;
-   10% on interest, subject to exceptions;
-   10% on royalties; and
-   10% on fees for technical services.

Deviations from the OECD Model include that:

-   a building site, a construction, assembly or installation project or supervisory activities in connection therewith, constitute a permanent establishment (PE) if it lasts more than 3 months (article 5(3)(a));
-   the furnishing of services, including consultancy services, by an enterprise through personnel, constitute a PE if such activities continue for the same or a connected project a period or periods aggregating to more than 6 months within any 12-months' period (article 5(3)(b));
-   PE includes also a sales outlet, a warehouse in relation to a person providing storage facilities for others, a farm, plantation or other place where agricultural, forestry, plantation or related activities are carried on (article 5(2)(f)-(h));
-   the term "royalties" includes payments for films or tapes for television or radio broadcasting and for the use of, or the right to use, industrial, commercial or scientific equipment (article 12(3)(a));
-   the term "fees for technical services" means payments of any kind, other than those mentioned in articles 14 and 15, as consideration for managerial, technical or consultancy services, including the provision of services of technical or other personnel (article 12(3)(b);
-   the treaty includes article on independent personal services in line with article 14 of the UN Model Convention (2001);
-   alimony received by a resident of a contracting state and paid by a resident of the other contracting state are tax exempt in the recipient's residence state to the extent such payments are not tax deductible in the payer's residence state (article 18(4));
-   the treaty includes an article on offshore activities (article 21); and
-   the treaty includes a limitation of benefits article according to which the treaty benefits are not available to a resident of a contracting state, or with respect to any transaction undertaken by such a resident, if the main purpose or one of the main purposes of the creation or existence of such a resident or of the transaction undertaken by him, was to obtain the benefits under the treaty that would not otherwise be available (article 29).

Both states provide for exemption-with-progression and credit methods to avoid double taxation.

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