India–Belarus 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	15%	Beneficial owner is a company which holds directly at least 25 per cent of the shares of the company paying the dividends	Article 10, paragraph 2
Interest	10%	Article 11(3)(a) exempts interest at source where it is derived and beneficially owned by the Government, a political sub-division or a local authority of the other State, or by the Central Bank of the other…	Article 11, paragraph 2
Royalties	15%	One combined article covers royalties and fees for technical services at the same 15% ceiling. The royalty definition in Article 12(3) covers equipment rental ("the use of, or the right to use, industrial…	Article 12, paragraph 2
Fees for technical services	15%	Article 12(4): "payment of any kind in consideration for the rendering of any managerial, technical or consultancy services including the provision of services by technical or other personnel but does not…	Article 12, paragraph 2

Status

In force	The Agreement was signed at New Delhi on 27 September 1997 — "done in duplicate at New Delhi, this 27th day of September, 1997, in Hindi, Belarusian and English languages, all the texts being equally authentic. In the case of divergence between any of the texts, the English text shall be the operative one." Entry into force is fixed by Article 30: the States notify each other through diplomatic channels of completion of the required procedures, and "This Agreement shall enter into force thirty days after the receipt of the later of the notifications referred to in paragraph 1 of this Article." The notification records that the Agreement "shall enter into force on the seventeenth day of July, 1998, in accordance with Article 30 of the said Agreement, thirty days after the receipt of later of notifications by both the Contracting States". By Article 30(3)(a) the provisions have effect in India "in respect of income arising in any fiscal year beginning on or after the first day of April next following the calendar year in which the Agreement enters into force" — entry into force falling in calendar 1998, that is the fiscal year beginning 1 April 1999 (assessment year 2000-01); and for capital, in respect of capital held on the last day of any such fiscal year. In Belarus it has effect for tax withheld at source on income derived on or after 1 January 1999 and for other taxes for taxable years beginning on or after that date.
Given effect by	Notification No. GSR 392(E), dated 17-7-1998, made in exercise of the powers conferred by section 90 of the Income-tax Act, 1961 (43 of 1961) and section 44A of the Wealth-tax Act, 1957 (27 of 1957), directing that all the provisions of the said Agreement shall be given effect to in the Union of India. The notification as printed carries no separate file number.
Modified by the MLI	No synthesised text was found for this treaty in the source searched.
Principal purpose test	No principal purpose test in the notified text.

Dividends

Rate	15%
Lower rate on a qualifying holding	10%
The holding that unlocks it	Beneficial owner is a company which holds directly at least 25 per cent of the shares of the company paying the dividends
Where this comes from	Article 10, paragraph 2

Article 10(1) permits residence-State taxation; Article 10(2) caps source tax at 10% on the qualifying holding and 15% otherwise, and only if the recipient is the beneficial owner. The cap does not apply where the holding is effectively connected with a PE or fixed base (Article 10(4)).

Interest

Rate	10%
Exemptions	Article 11(3)(a) exempts interest at source where it is derived and beneficially owned by the Government, a political sub-division or a local authority of the other State, or by the Central Bank of the other State or any other bank or Governmental financial institution mutually agreed between the two States. Article 11(3)(b) adds a further exemption "to the extent approved by the Government of that State" for any other resident of the other State, provided the transaction giving rise to the debt-claim has been approved by the Government of the source State.
Where this comes from	Article 11, paragraph 2

Penalty charges for late payment are excluded from "interest" by Article 11(4).

Royalties

Rate	15%
Where this comes from	Article 12, paragraph 2

One combined article covers royalties and fees for technical services at the same 15% ceiling. The royalty definition in Article 12(3) covers equipment rental ("the use of, or the right to use, industrial, commercial or scientific equipment") and know-how.

Fees for technical services

Rate	15%
Make-available requirement	No
Where this comes from	Article 12, paragraph 2

Article 12(4): "payment of any kind in consideration for the rendering of any managerial, technical or consultancy services including the provision of services by technical or other personnel but does not include payments for services mentioned in Articles 14 and 15 of this Agreement." There is no make-available condition; the carve-out is for independent and dependent personal services.

Capital gains on shares

Treatment	Source-State taxation of share gains. Article 13(4) allows the State where the immovable property is situated to tax gains on shares of a company whose property consists directly or indirectly principally of immovable property there; Article 13(5) then allows gains on any other shares in a company resident of a Contracting State to be taxed in that State. Article 13(6) leaves all other property to residence-State taxation only.
Grandfathering	None. The Agreement as notified contains no grandfathering of pre-existing shareholdings.
Conditions	Article 13(5) turns on the company being a resident of the taxing State, not on the size of the holding.
Where this comes from	Article 13, paragraph 5

Permanent establishment

Construction or installation PE	6 months
Agency PE	Article 5(4): a dependent person who has and habitually exercises authority to conclude contracts in the name of the enterprise, or who without such authority habitually maintains a stock of goods from which he regularly delivers. An agent devoted wholly or almost wholly to the enterprise (or to it and enterprises under common control) is not of independent status (Article 5(5)).
Where this comes from	Article 5, paragraph 2(k)

No service PE. But Article 5(7) deems a PE where the enterprise "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", and Article 5(8) deems an insurance PE on collection of premiums or insuring risks through a non-independent agent. The Article 5(3) exclusions are switched off where the enterprise maintains any other fixed place of business in that State for other purposes.

Anti-abuse: limitation of benefits, and the MLI

LOB	No limitation of benefits article in the notified text.
PPT	No principal purpose test in the notified text.

The Gazette/Income Tax Department text notified under section 90 is what this page carries. Nothing in the pdf shows any MLI modification of this treaty, and the MLI position has not been checked from this source.

The protocols, in order

A treaty read without its protocols is a wrong answer.

A Protocol signed at New Delhi on the same day, 27 September 1997, is annexed and "shall form an integral part of the said Agreement". It does three things: it confines the term "political sub-division" to India; it lists the circumstances relevant to establishing "place of effective management" under Article 4(3) — where the company is actually managed and controlled, where decision-making at the highest level on important policies takes place, the place that plays a leading part in management from an economic and functional point of view, and where the accounting books are kept; and it states that "fixed base" includes an office, room or other place regularly available through which independent personal services are carried on.
No amending notification or later protocol appears in this pdf.

The words themselves

Quoted from the treaty as notified.

10 per cent of the gross amount of the dividends if the beneficial owner is a company which holds directly at least 25 per cent of the shares of the company paying the dividends

Article 10, paragraph 2(a) of the treaty as notified.

interest arising in a Contracting State shall be exempt from tax in that Contracting State to the extent approved by the Government of that State if it is derived and beneficially owned by any person, other than a person referred to in sub-paragraph (a), who is a resident of the other Contracting State, provided that the transaction giving rise to the debt-claim has been approved in this regard by the Government of the first-mentioned Contracting State

Article 11, paragraph 3(b) of the treaty as notified.

the tax so charged shall not exceed 15 per cent of the gross amount of the royalties or fees for technical services

Article 12, paragraph 2 of the treaty as notified.

a building site or construction or assembly project or supervisory activities in connection therewith only if such site, project or activity lasts for more than six months

Article 5, paragraph 2(k) 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 7 of the treaty as notified.

What to watch

The dividend split turns on a 25 per cent direct shareholding, and on shares — not voting power. A 24 per cent holder pays 15 per cent.
Royalties and fees for technical services share one 15 per cent ceiling in Article 12, so the royalty/FTS characterisation argument does not change the rate; it matters only for the source rule in Article 12(6) and for the Article 14/15 carve-out in the FTS definition.
The interest exemptions in Article 11(3) are the practical answer in most cases: government and central-bank interest is exempt outright, and other interest can be exempt to the extent the source-State Government approves the transaction. Approval, not rate, is the question to ask first.
There is no service PE. Services short of a fixed place or an agency PE fall to Article 7 or Article 14; the oil-services deeming rule in Article 5(7) is the main exception and it is not limited by any time threshold.
Article 13(5) lets India tax gains on shares of an Indian company held by a Belarus resident with no threshold and no grandfathering, so the treaty gives no capital-gains shelter on share sales.
The Protocol's Article 4(3) gloss on place of effective management is unusually detailed for a 1997 treaty and is the text to cite in a dual-residence company case.

What this page does not tell you. The text used is the Income Tax Department's pdf of the notification and annexed Agreement, which is machine-readable and complete; no page was illegible. This page does not set out Articles 14 to 29 (personal services, government service, students, capital, elimination of double taxation, non-discrimination, map, exchange of information and assistance in collection) beyond what is noted, and it does not carry the Hindi or Belarusian texts. The MLI position is unchecked: whether either State has listed this Agreement as a Covered Tax Agreement does not appear in this source. No later protocol or amending notification is annexed to this pdf; the absence of one in this file is not proof that none exists.

The India–Belarus tax treaty