India–Austria tax treaty — rates, PE and MLI

The rates, at a glance

Every figure below is taken from the article named beside it, not from a rates table. Read the condition in the same row before you use the rate — in this treaty the condition is usually the whole answer.

Income	Rate	The condition attached to it	Article
Dividends	10 per cent of the gross amount — a single flat ceiling. The condition is that the beneficial owner of the dividends be a resident of the other Contracting State. Art. 10(2).	None. There is no shareholding threshold and no lower tier in Article 10.	Article 10, paragraph 2
Interest	10 per cent of the gross amount, conditional on the beneficial owner of the interest being a resident of the other Contracting State. Art. 11(2).	The exemptions are in the article itself, at Art. 11(3), and the structure closely follows the Spain treaty rather than the Nordic ones. Art. 11(3)(a): interest arising in a Contracting State is exempt from…	Article 11, paragraph 2 and 3
Royalties	10 per cent of the gross amount — Art. 12(2). A single flat ceiling for royalties and fees for technical services alike, with no split by type and no equipment tier.	Art. 12(3) is the full wide royalty definition, including the broadcasting limb ('cinematograph films or films or tapes used for radio or television broadcasting') and the equipment limb ('for the use of…	Article 12, paragraph 2
Fees for technical services	10 per cent of the gross amount — the same flat ceiling as royalties, Art. 12(2).	Art. 12(4): 'fees for technical services' means payments of any amount to any person other than payments to an employee of A person making payments, in consideration for the services of a managerial, technical…	Article 12, paragraph 2 and 4

Status

In force	5 September 2001 — the Convention and its Protocol were both signed at vienna on 8 November 1999 and entered into force thirty days after the exchange of Instruments of Ratification at New Delhi under Art. 28(2). Effect: in India in respect of income arising in any fiscal year beginning on or after 1 April next following the calendar year of the exchange; in Austria in respect of taxes levied for any fiscal year following that calendar year. Art. 28(3) terminates the earlier India-Austria Convention signed at New Delhi on 24 September 1963. MLI entered into force 1 October 2019 for India and 1 july 2018 for Austria; India deposited its instrument of ratification 25 June 2019 and Austria as early as 22 september 2017 — the earliest deposit of any partner in this batch.
Given effect by	G.S.R. 682(E) [No. 271/2001 (F. No. 505/1/82-ftd)], dated 20-9-2001 — issued under s.90 of the Income-tax Act 1961. The Convention covers taxes on income only. Art. 2(3)(b) lists a single Indian tax, 'the income-tax, including any surcharge thereon imposed under the Income-tax Act, 1961'; Art. 2(3)(a) lists only two Austrian taxes, the income-tax (die Einkommensteuer) and the corporation tax (die Körperschaftsteuer). There is no capital article.
Modified by the MLI	Yes — a synthesised text exists. Prepared jointly by the Competent Authorities of India and Austria. No separate publication date is printed. Based on India's MLI position of 25 June 2019 and Austria's of 22 September 2017.
Principal purpose test	Yes — MLI Art. 7(1), in the synthesised text, placed after Article 27. Its operative words are that it 'applies and supersedes the provisions of this Convention'. As with Spain, Belgium, Hong Kong and Cyprus, the box identifies no paragraph that IT replaces — but unlike Spain there is no bilateral anti-abuse article for it to sit alongside, so the PPT is the only general anti-abuse rule in the India-Austria Convention and it is entirely MLI-derived. It is accompanied by the MLI Art. 10 third-jurisdiction-PE rule, which is a targeted anti-abuse rule rather than a general one.

Dividends

Rate	10 per cent of the gross amount — a single flat ceiling. The condition is that the beneficial owner of the dividends be a resident of the other Contracting State. Art. 10(2).
The holding that unlocks it	None. There is no shareholding threshold and no lower tier in Article 10.
Where this comes from	Article 10, paragraph 2

Art. 10(3) is the ordinary dividend definition. Art. 10(4) disapplies paras 1 and 2 on a PE or fixed-base connection and routes to Article 7 or Article 14. Art. 10(5) is the ordinary bar on extra-territorial taxation. On the austrian side the method article matters more than the rate: Art. 23(2)(a) gives Austria an exemption method as its default for Indian-source income, but Art. 23(2)(b) carves out precisely the income covered by Art. 10(2), Art. 11(2), Art. 12(2), Art. 13(4) and (5) and Art. 22(3), for which Austria gives an ordinary credit instead. Dividends, interest, royalties, FTS and share gains are therefore the credit basket; everything else is exempt with progression under Art. 23(2)(c).

Interest

Rate	10 per cent of the gross amount, conditional on the beneficial owner of the interest being a resident of the other Contracting State. Art. 11(2).
Exemptions	The exemptions are in the article itself, at Art. 11(3), and the structure closely follows the Spain treaty rather than the Nordic ones. Art. 11(3)(a): interest arising in a Contracting State is exempt from tax in that State provided it is derived and beneficially owned by — both limbs required — (i) the state, a political sub-division or a local authority of the other Contracting State; or (ii) the central bank of the other Contracting State; or (iii) 'in the case of India also the export-import bank of india'; or (iv) 'in the case of Austria also the oesterreichische kontrollbank ag'. Exactly one named institution on each side beyond the State and the central bank — exim Bank for India, Oesterreichische Kontrollbank ag (the Austrian export credit agency) for Austria. There is no open extension mechanism of the Sweden, Norway or Finland kind: the article contains no 'any other institution as may be agreed between the competent authorities' limb. The list is closed. Art. 11(3)(b): an approval-based exemption in the same terms as Spain's. Interest arising in a Contracting State is exempt in that State to the extent approved by the state if it is derived and beneficially owned by any person other than one within (a) who is a resident of the other State, provided that the transaction giving rise to the debt-claim has been approved in this regard by the first-mentioned (source) state. Two separate approvals, both the source State's, and it is not self-executing. There is no guarantee or credit-support limb — nothing corresponding to Sweden's 'extended or endorsed by', Denmark's 'financed, guaranteed or insured by' or Finland's Art. 11(3)(c). Art. 11(5) disapplies paragraphs 1 and 2 only where the debt-claim is effectively connected with a PE or fixed base. Paragraph 3 is not disapplied, so the governmental and approved-transaction exemptions survive a PE connection.
Where this comes from	Article 11, paragraph 2 and 3

Art. 11(4) is the ordinary wide interest definition, with penalty charges for late payment excluded. Art. 11(6) makes interest arise where the payer is A resident of that State, with the PE deemed-source override. Art. 11(7) is the special-relationship rule.

Royalties

Rate	10 per cent of the gross amount — Art. 12(2). A single flat ceiling for royalties and fees for technical services alike, with no split by type and no equipment tier.
Where this comes from	Article 12, paragraph 2

Art. 12(3) is the full wide royalty definition, including the broadcasting limb ('cinematograph films or films or tapes used for radio or television broadcasting') and the equipment limb ('for the use of, or/the right to use, industrial, commercial or scientific equipment' — the stray solidus is as printed in the Annexure). Equipment hire is a royalty here at 10 per cent. A drafting oddity: Art. 12(1) speaks of 'Royalties and fees for technical services', Art. 12(2) of 'royalties or fees for technical services' in the chapeau but 'the royalties and fees for technical services' in the beneficial-ownership condition and in the rate limb. Nothing turns on it, but it should be quoted as it stands. Art. 12(5) disapplies paras 1 and 2 on a PE or fixed-base connection and routes to Article 7 or Article 14. Art. 12(6) is the source rule — payer-residence plus the PE deemed-source override, with no use-or-performance limb of the Finnish kind. Art. 12(7) is the special-relationship rule.

Fees for technical services

Rate	10 per cent of the gross amount — the same flat ceiling as royalties, Art. 12(2).
Make-available requirement	No
Where this comes from	Article 12, paragraph 2 and 4

Art. 12(4): 'fees for technical services' means payments of any amount to any person other than payments to an employee of A person making payments, in consideration for the services of a managerial, technical or consultancy nature, including the provision of services of technical or other personnel. This is the Italy and Denmark definition, not the Sweden, Norway or Finland one. There is no make-available requirement, no ancillary-and-subsidiary limb and no exclusion list. Managerial services are caught. Critically, the only carve-out is for payments to an employee — there is no exclusion for payments to an individual for independent personal services under Article 14, unlike Spain, Sweden, Belgium, Norway and Finland. An independent Austrian consultant's fee can therefore fall within Article 12 as well as Article 14, and the instrument does not resolve the overlap.

Capital gains on shares

Treatment	Two source-taxing limbs and a residence-only residue — the Spain and Belgium architecture but without any percentage threshold. (a) Art. 13(4): gains from the alienation of shares of the capital stock of a company the property of which consists directly or indirectly principally of immovable property situated in a Contracting State may be taxed in that State — no 365-day look-back and no more-than-50-per-cent-of-value test, because there is no MLI Art. 9 box for Austria. (b) Art. 13(5): 'Gains from the alienation of shares other than those mentioned in paragraph 4 in a company which is a resident of a Contracting State may be taxed in that state' — with no threshold of any kind. This is the Italy formula, not the Spain 'participation of at least 10 per cent' formula or the Denmark 'shares represent at least 10 per cent' formula. Every share gain in a resident company is therefore source-taxable. (c) Art. 13(6): gains on any other property are taxable only in the State of residence.
Grandfathering	None. No grandfathering date, no acquisition cut-off, no transitional rate and no limitation-of-benefits gateway attached to Article 13.
Conditions	None whatever on the paragraph 5 limb beyond the company being a resident of the taxing State. The only overlays are the MLI Art. 7(1) principal purposes test and the MLI Art. 10 third-jurisdiction PE rule. Note the interaction with the Austrian method article: Art. 23(2)(b) puts gains under both Art. 13(4) and Art. 13(5) into Austria's credit basket rather than its exemption basket, so Austria taxes such gains and credits the Indian tax.
Where this comes from	Article 13, paragraph 4, 5 and 6

Permanent establishment

Construction or installation PE	More than six months — Art. 5(2)(i), covering a building site or construction, installation or assembly project or supervisory activities in connection therewith. The aggregation formula is distinctive and narrower than most: the six months is measured across such sites, projects or activities '(for the same or connected project, site or activities)' — that is, aggregation is confined to the same or a connected project, whereas Spain, Italy, Denmark and Belgium aggregate 'together with other such sites, projects or activities, if any' without a connection requirement. There is no rolling twelve-month window, no alternative incidental-to-sale-of-machinery limb, and — because no MLI Art. 14 box applies — no splitting-up-of-contracts rule.
Service PE	There is no service PE limb and no day-count of any kind. What exists instead is Art. 5(3), a freestanding mineral-oils deeming paragraph with no duration threshold whatever: 'An enterprise shall be deemed to have a permanent establishment in a Contracting State and to carry on business through that permanent establishment if it provides services or facilities in connection with, or supplies plant and machinery on hire used for or to be used in the prospecting for, or extraction or exploitation of mineral oils in that State.' This is the Sweden formulation word for word, including 'exploitation' rather than 'production'. A single day of qualifying oilfield activity creates a PE.
Agency PE	Yes — Art. 5(5), three limbs, and entirely pre-MLI because no MLI Article 12 box applies to this treaty: (a) has, and habitually exercises, an authority to conclude contracts in the name of the enterprise, unless the activities are limited to those in paragraph 4; (b) the stock-and-delivery limb; and (c) habitually secures orders wholly or almost wholly for the enterprise itself or for the enterprise and other enterprises controlling, controlled by, or subject to the same control as that enterprise. Art. 5(6), the independent-agent saving, carries the 'devoted wholly or almost wholly' disqualifier extended to enterprises controlling, controlled by or subject to the same common control — note the slight difference in wording between paras 5(c) ('the same control') and 6 ('the same common control'). There is no arm's-length rebuttal. Art. 5(8) is the no-PE-by-control rule.
Where this comes from	Article 5

There is an insurance PE at Art. 5(7): an insurance enterprise, except in regard to re-insurance, is deemed to have a PE in the other State if it collects premiums there or insures risks situated there through a person other than an independent agent. The Art. 5(4) exemption list is in the modern six-item OECD form and — importantly — sub-paragraphs (a) and (b) cover delivery as well as storage and display, unlike Spain, Italy and Denmark. That list is now modified by MLI Art. 13(2), so every exemption requires a preparatory or auxiliary character. But no anti-fragmentation rule applies: the MLI Art. 13(4) box does not appear for Austria and there is no home-grown equivalent of the Italian or Norwegian closing sentence. Austria is therefore the only treaty in this batch to get the preparatory-or-auxiliary overlay without the anti-fragmentation rule that normally accompanies it. Art. 5(2) also lists (g) a sales outlet and (h) a warehouse in relation to a person providing storage facilities for others. Protocol, ad article 7(a): a standstill rule on head-office expenses — the deduction in respect of head office expenses under Art. 7(3) 'shall in no case be less than those allowable under the Indian Income-tax Act as on the date of entry into force of this convention', i.e. As at 5 September 2001.

Anti-abuse: limitation of benefits, and the MLI

LOB	None in the Convention itself. There is no limitation-of-benefits article, no entitlement-to-benefits article and no anti-abuse article of any description in the 1999 text or in either Protocol. The articles were checked end to end and run article 24 non-discrimination, article 25 mutual agreement procedure, article 26 exchange of information (substituted 2020), article 26A assistance in the collection of taxes (inserted 2020), article 27 members of diplomatic missions and consular activities, article 28 entry into force, article 29 termination. Note one quasi-anti-abuse provision: the inserted article 26A(1) frames collection assistance in expressly anti-abuse terms — 'The Contracting States shall lend assistance to each other in the collection of tax to the extent needed to ensure that any exemption or reduced rate of tax granted under this convention shall not be enjoyed by persons not entitled to such benefits.' That is a narrower and more targeted collection-assistance article than the full revenue-claim model in the Norway and Belgium treaties, and its stated purpose is treaty-benefit policing.
PPT	Yes — MLI Art. 7(1), in the synthesised text, placed after Article 27. Its operative words are that it 'applies and supersedes the provisions of this Convention'. As with Spain, Belgium, Hong Kong and Cyprus, the box identifies no paragraph that IT replaces — but unlike Spain there is no bilateral anti-abuse article for it to sit alongside, so the PPT is the only general anti-abuse rule in the India-Austria Convention and it is entirely MLI-derived. It is accompanied by the MLI Art. 10 third-jurisdiction-PE rule, which is a targeted anti-abuse rule rather than a general one.
Subject to tax	None.
Where this comes from	Article MLI Art. 7(1) and MLI Art. 10(1)-(3) only; there is no bilateral anti-abuse article

Four MLI boxes — a light touch, and a very particular selection. (1) Art. 6(1): the anti-treaty-shopping preamble is included in the preamble of the Convention. (2) Art. 13(2) applies with respect to Art. 5(4): the specific-activity exemptions are re-cast in Option A form so that every one of them is now available only where the activity 'is of a preparatory or auxiliary character'. Note that the Austrian Art. 5(4) list already included delivery in sub-paragraphs (a) and (b) and already had a preparatory-or-auxiliary catch-all at (e) and a combination clause at (f); the MLI overlay removes the automatic quality of (a) to (d). (3) MLI Art. 10(1) to (3) apply and supersede the Convention — the anti-abuse rule for permanent establishments situated in third jurisdictions, denying benefits where the third-jurisdiction tax on an item of income is less than 60 per cent of what the residence State would have charged, with an active-business carve-out and a competent-authority discretion. (4) MLI Art. 7(1) — the principal purposes test — 'applies and supersedes the provisions of this Convention', placed after Article 27. There is nothing else. Specifically absent: MLI Art. 13(4) anti-fragmentation (so unlike Spain, Belgium and Norway, Austria's Art. 5(4) as modified has no anti-fragmentation rule at all); MLI Art. 12(1) and (2) commissionnaire and independent-agent boxes (Art. 5(5) and 5(6) are untouched); MLI Art. 14 splitting-up of contracts; MLI Art. 15 closely-related definition; MLI Art. 4 dual-resident replacement (Art. 4(3) still uses place of effective management with a competent-authority fallback); MLI Art. 9 capital-gains box; MLI Art. 11 saving clause; MLI Art. 16 map box; and MLI Art. 17 corresponding adjustments. MLI effect dates: in India, withholding taxes where the event occurs on or after 1 April 2020 and other taxes for taxable periods beginning on or after 1 April 2020; in Austria, withholding taxes from 1 January 2020 and other taxes for taxable periods beginning on or after 1 january 2021.

The protocols, in order

A treaty read without its protocols is a wrong answer.

Notification No. 349/2001, dated 19-11-2001 — a correction to G.S.R. 682(E), recorded in the Introduction as 'As Corrected by'. Its content was not separately reproduced.
Notification No. S.O. 1370 [No. 22 / F. No. 505/01/1982-ftd-I (Pt.)], dated 24-4-2020 — recorded in the Introduction as 'As Amended by'. It gives effect to the protocol amending the convention signed at new delhi on 6 february 2017, whose four Articles were read in full. Under Article 4 of that Protocol it enters into force on the first day of the third month next following the date of receipt of the later of the notifications, and its provisions have effect with regard to taxable periods beginning on or after 1 january of the calendar year next following the year of entry into force — note that this is a calendar-year rule applying to both States, unusual in an Indian treaty. The whole treaty was scanned for amendment markers and three were found, all traceable to this Protocol: article 26 (Exchange of Information) substituted with the modern foreseeably-relevant form including the use-for-other-purposes permission, the obtain-even-if-no-domestic-interest obligation and the bank-secrecy override; article 26A (Assistance in the Collection of Taxes) inserted; and a set of new paragraphs added to the protocol under the heading 'Ad Article 26', setting out the five items of information an applicant State must supply to demonstrate foreseeable relevance. Nothing in the 2017 Protocol touches Articles 10, 11, 12 or 13.
The MLI modifies the Convention; see synthesised_text.

The words themselves

Quoted from the treaty as notified.

Gains from the alienation of shares other than those mentioned in paragraph 4 in a company which is a resident of a Contracting State may be taxed in that State.

Article 13, paragraph 5 of the treaty as notified.

An enterprise shall be deemed to have a permanent establishment in a Contracting State and to carry on business through that permanent establishment if it provides services or facilities in connection with, or supplies plant and machinery on hire used for or to be used in the prospecting for, or extraction or exploitation of mineral oils in that State.

Article 5, paragraph 3 of the treaty as notified.

However, the difference in tax rate shall not exceed 15 percentage points.

Article Protocol (of 8 November 1999), paragraph Ad Article 24, closing sentence of the treaty as notified.

The Contracting States shall lend assistance to each other in the collection of tax to the extent needed to ensure that any exemption or reduced rate of tax granted under this Convention shall not be enjoyed by persons not entitled to such benefits.

Article 26A, paragraph 1 of the treaty as notified.

It is understood that the deductions in respect of the head office expenses as referred to in paragraph 3 of Article 7 shall in no case be less than those allowable under the Indian Income-tax Act as on the date of entry into force of this Convention.

Article Protocol (of 8 November 1999), paragraph Ad Article 7(a) of the treaty as notified.

a building site or construction, installation or assembly project or supervisory activities in connection therewith, where such site, project or activities (for the same or connected project, site or activities) continue for a period of more than six months.

Article 5, paragraph 2(i) of the treaty as notified.

What to watch

Austria is A flat-ten treaty with no MFN clause. Dividends, interest, royalties and FTS all bear 10 per cent as notified in 2001, and there is no clause by which anything narrower could be imported. The rates need no MFN help; the FTS definition would, and cannot get it.
The FTS definition has no article 14 carve-out. Art. 12(4) excludes only payments to an employee of the payer. Spain, Sweden, Belgium, Norway and Finland all additionally exclude payments to an individual for independent personal services; Austria, like Italy and Denmark, does not. An independent Austrian professional's fee can be both FTS under Article 12 and independent personal services income under Article 14.
All share gains are source-taxable and there is no threshold. Art. 13(5) uses the Italian sweep-up formula, not the 10 per cent participation formula found in Spain, Denmark and Belgium. A 1 per cent holding is caught.
Austria'S method article is exemption-by-default with A named credit basket, and the basket is exactly the income a practitioner cares about: Art. 23(2)(b) puts Art. 10(2) dividends, Art. 11(2) interest, Art. 12(2) royalties and FTS, Art. 13(4) and 13(5) share gains, and Art. 22(3) other income into ordinary credit. Everything else Austria exempts with progression under Art. 23(2)(a) and (c). Reading the rate without the method article gives half the answer for an Austrian investor.
The PE exemptions now require A preparatory or auxiliary character but there is no anti-fragmentation rule. Austria is the only treaty in this batch to take MLI Art. 13(2) without MLI Art. 13(4). A group can still split activities between related entities at different places without triggering the fragmentation test — the only constraint is that each fixed place must itself be preparatory or auxiliary.
The commissionnaire and independent-agent rules are untouched by the MLI. No MLI Article 12 box applies, so Art. 5(5)(a) still requires an authority to conclude contracts in the name of the enterprise, and Art. 5(6) still uses the 'devoted wholly or almost wholly' test rather than the closely-related exclusivity test. This is a materially more taxpayer-friendly agency position than Spain, Belgium or Norway.
The construction aggregation clause is narrower than most. Art. 5(2)(i) aggregates only sites, projects or activities 'for the same or connected project, site or activities'. Unconnected Austrian projects in India are not added together, and there is no MLI splitting-up rule to change that.
The oilfield deeming rule in art. 5(3) has no time limit at all, and it reaches both the provision of services or facilities and the hire of plant and machinery for prospecting, extraction or exploitation of mineral oils.
The interest exemption list is closed. Only the State, its political sub-divisions and local authorities, the central bank, the Export-Import Bank of India and the Oesterreichische Kontrollbank ag. There is no competent-authority extension mechanism and no guarantee limb — so a commercially guaranteed loan gets nothing, unlike under the Sweden, Denmark and Finland treaties.
The protocol caps the PE rate differential at 15 percentage points. Ad Article 24 permits a higher rate of tax on a PE's profits than on a domestic company's, but caps the gap at fifteen percentage points. That is a hard numerical limit found in no other treaty in this batch, and it is a standstill rather than a most-favoured-nation provision.
The MLI art. 10 third-jurisdiction PE rule applies to austria. Where an Austrian enterprise attributes Indian income to a PE in a third jurisdiction and Austria exempts that PE's profits, treaty benefits are denied if the third-jurisdiction tax is under 60 per cent of the Austrian tax that would otherwise apply. Given that Austria's method is exemption by default, this rule has real work to do here — more than it does in the Spain treaty, where it also appears.
Protocol, ad articles 6 and 13, preserves indian taxing rights expressly: in the case of India, income from immovable property and capital gains on alienation of immovable property may be taxed in both Contracting States, subject to Art. 23(3) — the Indian credit rule.
Protocol, ad article 7(b), is an austrian-side definition worth noting: 'profits' in Article 7 includes profits derived by a partner from a partnership or other body treated the same way for tax purposes, and from a participation in a sleeping partnership (Stille Gesellschaft) created under Austrian law.
The 2017 protocol'S effect rule is calendar-year for both states — taxable periods beginning on or after 1 January of the year following entry into force — which departs from the usual Indian fiscal-year formula and needs care when dating the substituted Article 26.
The 2020 notification added A foreseeable-relevance checklist to the protocol. The applicant State must supply the identity of the person under examination, a statement of the information sought and the form required, the tax purpose, and further items, before an Article 26 request is properly made. The 1999 Protocol separately limits Article 26 disclosure by reference to personal-data confidentiality and treats data-protection basic rights as within the ordre public exception in Art. 26(2)(c).

What this page does not tell you. The content of Notification No. 349/2001 dated 19-11-2001, described in the Introduction only as a correction to G.S.R. 682(E). What was corrected is not stated anywhere in the sources used here and the notification's own text is not reproduced. The date on which the 2017 amending Protocol actually entered into force. Article 4 of that Protocol gives the mechanism — the first day of the third month following the later notification — but neither the Protocol text nor the Indian notification S.O. 1370 dated 24-4-2020 as printed states the resulting date, and therefore the first taxable period to which the substituted Article 26 and the new Article 26A apply is not established. The text of the asterisk footnote on Notification G.S.R. 682(E) in the Introduction, which was visible but has not been read. The remaining sub-paragraphs of the foreseeable-relevance checklist added to the Protocol 'Ad Article 26' by the 2017 Protocol. Items (a) to (c) were captured; the text continues beyond what has been read. The full text of Article 26A beyond paragraph 1. Its opening anti-abuse purpose statement was read but the mechanics of the collection assistance were not transcribed. Whether Austria's very early MLI ratification (22 September 2017) combined with India's later one produces any provision-specific entry-into-effect date different from the general dates stated in the synthesised text. The document says 'unless it is stated otherwise elsewhere in this document' and no such statement was found, but the four boxes were not individually checked for their own effect clauses.

The India–Austria tax treaty