Saudi Arabia

[Now See Agreement vide Notification GSR 645(E), dated 17-10-2006]

Whereas the annexed Agreement between the Republic of India and the Kingdom of Saudi Arabia for avoidance of double taxation by reciprocal exemption of taxes on income on the activities of air transport enterprises of the two countries has entered into force on the 25th September, 1992, after sixty days after the exchange of letters certifying that the proper procedure was fulfilled in each Contracting State, as required by article 6 of the said Agreement;

Now, therefore, in exercise of the powers conferred by section 90 of the Income-tax Act, 1961 (43 of 1961), and section 24A of the Companies (Profits) Surtax Act, 1964 (7 of 1964), the Central Government hereby directs that all the provisions of the said Agreement shall be given effect to in the Union of India.

Notification : No. G.S.R. 950(E), dated 29th December, 1992

ANNEXURE

AGREEMENT BETWEEN THE REPUBLIC OF INDIA AND THE KINGDOM OF SAUDI ARABIA FOR AVOIDANCE OF DOUBLE TAXATION BY RECIPROCAL EXEMPTION OF TAXES ON INCOME ON THE ACTIVITIES OF AIR TRANSPORT ENTERPRISES OF THE TWO COUNTRIES

The Republic of India and the Kingdom of Saudi Arabia desiring to conclude an agreement for avoidance of double taxation by reciprocal exemption of taxes levied on income of enterprises and their employees from operation of air transport in international traffic have agreed as follows :–

ARTICLE 1 - Definitions

1. In this Agreement, unless the context otherwise requires—

(a)  the terms "a Contracting State" and "the other Contracting State" mean India or the Kingdom of Saudi Arabia, as the context requires;

(b)  the term "tax" means "Saudi tax" or "Indian tax" as the context requires;

(c)  the term "air transport enterprise of a Contracting State" means—

 (i)  in the case of the Kingdom of Saudi Arabia, the Saudi Arabian Airlines Corporation or its successor;

(ii)  in the case of India, Air India or its successor;

(d)  the term "operation of air transport" means the business of transportation by air of passengers, baggage, livestock, goods or mail conducted by an enterprise of a Contracting State including sale of tickets and similar documents used for the purpose of transport;

(e)  the term "international traffic" means any transport by aircraft owned, leased or chartered and operated by an air transport enterprise of a Contracting State, except when such transport is made solely between places in the other Contracting State;

(f)  the term "Competent authority" means—

 (i)  in the case of the Kingdom of Saudi Arabia, the Ministry of Finance and National Economy;

(ii)  in the case of India, the Central Government in the Ministry of Finance, Department of Revenue;

(g)  the term "resident of a Contracting State" means any person, who under the law of that State, is liable to taxation therein by reason of his domicile residence, place of management or any other criterion of a similar nature;

(h)  the term "person" includes an individual, a corporation, a company or any other body of persons;

(i)  the term "other payments" means social security insurance, old age annuity or pension, sickness or medical insurance, unemployment insurance or any other payments measured by income levied on the salaries and allowances of the employees by the law of the Contracting State.

2. In the application of the provisions of this Agreement by one of the Contracting States, any term used but not defined herein shall, unless the context otherwise requires, have the meaning which it has under the laws in that State relating to the taxes which are the subject of this Agreement.

ARTICLE 2  -  Taxes Covered

1. This Agreement shall apply to taxes on income imposed on behalf of each Contracting State irrespective of the manner in which they are levied.

2. There shall be regarded as taxes on income all taxes imposed on total income, or on elements of income, including taxes on gains from the alienation of movable property and taxes on the total amounts of wages or salaries paid by enterprises.

3. The existing taxes to which the Agreement shall apply are in particular:

(a)  in the case of the Kingdom of Saudi Arabia, the income-tax,

(hereinafter referred to as "Saudi tax");

(b)  in the case of India:

 (i)  the income-tax including any surcharge thereon;

(ii)  the surtax (hereinafter referred to as "Indian tax").

4. This Agreement shall also apply to any identical or substantially similar taxes as are subsequently imposed in addition to, or in place of, the taxes referred to in paragraph 3 of this article. The competent authorities of the Contracting States shall notify each other of any substantial changes which are made in their respective taxation laws.

ARTICLE 3  -  Taxation of Income

1. Income and profits derived by an air transport enterprise of a Contracting State from the operation of air transport in international traffic shall be exempted from tax in the other Contracting State.

2. The provisions of paragraph 1 shall also apply to income and profits derived by an air transport enterprise of a Contracting State from its participation in a pool or a joint air transport operation.

3. For the purposes of this article, profits derived by an air transport enterprise of a Contracting State from the operation of air transport in international traffic also include income derived from:

(a)  the rental or lease of aircraft or ground equipment to the enterprise of the other Contracting State;

(b)  training schemes, management and other services rendered to the enterprise of the other Contracting State.

4. For the purposes of paragraph 1, interest or similar earnings on funds directly connected with the operation of aircraft in international traffic shall be regarded as income from the operation of aircraft.

ARTICLE 4  -  Remuneration for Personal Services

The two Contracting States undertake to extend exemption of all taxes and other payments levied or to be levied on salaries, wages, allowances and perquisites, wherever received, by an employee belonging to the air transport enterprise of either Contracting State provided that he is a citizen of the other Contracting State.

ARTICLE 5  -  Mutual Agreement Procedure and Settlement of Disputes

1. Consultation may be requested at any time by either Contracting State for the purpose of amendment to this Agreement. Such consultation shall begin within 90 days from the date of receipt of any such request.

2. The competent authorities of the Contracting States shall resolve by mutual agreement any difficulties or doubts regarding the interpretation or application of this Agreement.

ARTICLE 6  -  Entry into Force

1. This Agreement shall be approved or ratified in accordance with the laws in force in each of the Contracting States. It shall enter into force sixty days after the exchange of letters certifying that the proper procedure was fulfilled in each Contracting State. The exchange of letters shall be through diplomatic channels.

2. The provisions of this Agreement shall have effect in respect of income derived on or after the 1st day of January, 1970.

ARTICLE 7  -  Termination

This Agreement shall remain in force indefinitely but may be terminated by either Contracting State by giving notice of termination at least six months before the end of any calendar year, in which case, this Agreement shall cease to have effect from the end of the calendar year in which the notice of termination is given.

IN WITNESS WHEREOF the undersigned duly authorized thereto, have signed this Agreement and have affixed thereto their seal.

Done at New Delhi this 14th day of November, 1991, corresponding to 8th Jamuda 1, 1412, in two originals, in the Hindi, Arabic and English languages, all texts being equally authentic. In case of divergence between the three texts, the English text shall prevail.