The Republic of India and the Kingdom of Saudi Arabia on signing at New Delhi, on 25th January, 2006, the Convention for the Avoidance of Double Taxation and the Prevention of Tax Evasion with respect to taxes on income have agreed upon the following provisions which shall form an integral part of the said Convention.
(1) With regard to para (2)(d) of Article 3 the term "person" shall include the state, its political sub-division or local authorities and any other entity which is treated as a taxable unit under the taxation laws in force in the respective Contracting States.
(2) It is understood that for the purposes of Article 2, the term "tax" means Indian or Saudi tax, as the context requires, but shall not include any penalty or fine imposed relating to those taxes.
(3) For the purposes of Article 3, the term "fiscal year" means:
- (i) in the case of India: the financial year beginning on the 1st day of April;
- (ii) in the case of Saudi Arabia: taxable year as determined in the law and regulation of the Kingdom of Saudi Arabia.
(4) It is understood that for the purposes of para (1)(b) Article 4, the term 'resident' shall include:
- (a) The legal institutions and agencies of the Government, wholly owned directly, and controlled by the Government.
- (b) In the case of the Kingdom of Saudi Arabia, an individual who is an Indian national and is present in the Kingdom of Saudi Arabia for a period or periods totaling in the aggregate at least 183 days in the fiscal year concerned.
- (c) A legal person organized under the laws of a Contracting State and that is generally exempt from tax in that State and is established and maintained in that State either:
- (i) Exclusively for a religious, charitable, educational, scientific, or other similar purpose; or
- (ii) To provide pensions to employees pursuant to a plan.
(5) For the purposes of para (2) of Article 5, Permanent Establishment shall include the following:
- (a) a sabs outlet;
- (b) a farm, plantation or other place where agricultural, forestry, plantation or related activities are carried on.
(6) For the purposes of paragraph (6) of Article 5, the person, who is not an agent of independent status and whose activities may create a Permanent Establishment for the insurance enterprise, may be either individual or company and need not be resident of nor have a place of business in, the state in which it acts for the enterprise.
(7) With regard to Article 7, the term "business profits" in the case of a Contracting State means the profits from business as defined under the laws of that Contracting State.
(8) In respect of Article 7, it is understood that:
- (i) The business profits derived by an enterprise of a Contracting State whether through a permanent establishment situated in the other Contracting State or otherwise from the exportation of merchandise to the other Contracting State shall not be taxed in that other Contracting State. Where export contracts include other activities carried on in the other Contracting State, profits derived by the Permanent Establishment from such activities may be taxed in the other Contracting State but only so much of the profits as is attributable to the permanent establishment, relating to such other activities and any portion of these activities executed outside the other Contracting State shall not be taken into consideration in determining the profits of the permanent establishment.
- (ii) In the case of contracts for survey, constructions or installations, the profits of a permanent establishment shall not be determined on the total amount of the contract, but shall be determined only on the basis of that part of the contract, which is effectively carried out by the permanent establishment in the state where the permanent establishment is situated and any portion of the contract executed outside the other Contracting State shall not be taken into consideration in determining the profits of the permanent establishment.
(9) For the purposes of Para (3) of Article 7, the deductions of expenses to be allowed by a Contracting State shall be in accordance with the provisions of and subject to the limitations of the tax laws of that Contracting State. In case India removes this restriction in any of its Conventions after the date of signing of this Convention, the two sides shall review this issue.
(10) For the purposes of Article 21, an individual shall be deemed to be a resident of a Contracting State if he is resident in that State in the fiscal year in which he visits the other Contracting State or in the immediately preceding fiscal year.
(11) For the purposes of this Convention, the Zakat shall be treated as a tax on income.
(12) In the case of the Kingdom of Saudi Arabia, the methods for elimination of double taxation in Article 23 will not prejudice the provisions of the Zakat collection regime with regard to Saudi nationals.
(13) It is understood that information referred to in Article 25, will include evidence available with a Contracting State, requested by the other Contracting State.
(14) When Saudi Arabia introduces a provision in its domestic law regarding assistance in collection of taxes to other treaty partners or agrees to extend such assistance to any other treaty partner, then the competent authorities of the two Contracting States shall by mutual agreement settle the mode of application for extending assistance in the collection of tax to each other.
(15) It is understood that the two Contracting States will review the provisions of this Convention after a period of 5 years from the date on which this Convention enters into force in order to consider the inclusion of an Article on "Fees for Technical Services" within the scope of this Convention.
IN WITNESS WHEREOF, the undersigned, duty authorized thereto, have signed this Protocol
DONE in duplicate at New Delhi, this 25th day of January, 2006, corresponding to 25-12-1426 h, each in the Hindi, Arable and English languages, all texts being equally authentic. In case of divergence of interpretation, the English text shall prevail.
FOR THE GOVERNMENT OF THE REPUBLIC OF INDIA:
FOR THE GOVERNMENT OF THE KINGDOM OF SAUDI ARABIA: