India–Denmark 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	25 per cent of the gross amount in all cases other than the qualifying-company case — Art. 11(2)(b). This is the default and, together with Italy, the highest dividend ceiling in the batch.	Two conditions, both required. (i) The recipient must be the beneficial owner of the dividends (chapeau to Art. 11(2)). (ii) The beneficial owner must be A company which owns at least 25 per cent of the shares…	Article 11, paragraph 2
Interest	Two rates, split by lender type, and both subject to a date gateway that is easy to miss. Art. 12(2): 'the tax so charged on interest payable in respect of A loan given or debt created after the date of entry into force of this convention, shall not exceed: (a) 10 per cent of the gross amount, if such interest is paid on any loan of whatever kind granted by A bank, and (b) 15 per cent of the gross amount in all other cases.' Interest on a loan given or debt created on or before 13 june 1989 has no treaty ceiling at all — the first sentence of Art. 12(2) leaves it to be taxed 'according to the laws of' the source State. Note also that the chapeau to Art. 12(2) does not require beneficial ownership; the beneficial-owner concept appears only in Art. 12(5), the PE disapplication rule.	The exemption is in the article itself, at Art. 12(3), and it is drafted as one long sentence with two alternative gateways. Gateway one — interest derived by: the Government of the other Contracting State, a…	Article 12, paragraph 2 and 3
Royalties	20 per cent of the gross amount — a single flat ceiling for royalties and fees for technical services alike, conditional on the recipient being the beneficial owner. Art. 13(2). There is no equipment tier and no split by type.	Art. 13(3) defines royalties in the full wide form including the equipment limb — 'for the use of, or the right to use, industrial, commercial or scientific equipment' — and including cinematograph film or…	Article 13, paragraph 2
Fees for technical services	20 per cent of the gross amount — the same tier as royalties, Art. 13(2).	Art. 13(4): 'fees for technical services' means payments of any amount to any person other than payments to an employee of the person making the payments, in consideration for the services of a managerial…	Article 13, paragraph 2 and 4

Status

In force	13 June 1989 — the Convention and both its Protocols were signed at copenhagen on 8 March 1989 and came into force on the date of the later of the two notifications of completion of constitutional requirements under Art. 30(1)-(2). Effect: in respect of tax for the income year beginning on or after 1 January in the calendar year next following the year of the later notification, and subsequent income years — note the treaty uses a single income-year rule for both States, not the usual split Indian-fiscal-year / Danish-calendar-year formula. Art. 30(3) terminates the earlier India-Denmark Agreement for the Avoidance of Double Taxation of Income signed at Copenhagen on 16 September 1959.
Given effect by	G.S.R. 853(E), dated 25-9-1989 — issued under s.90 of the Income-tax Act 1961. The Convention covers taxes on income and on capital: Art. 2(1)(a) lists the Indian income-tax including surcharge, the surtax under the Companies (Profits) Surtax Act 1964 and the wealth-tax under the Wealth-tax Act 1957; Art. 2(1)(b) lists eleven Danish taxes including the old age pension contribution, the seamen's tax, the church tax, the tax on dividends, the sickness per diem fund contribution, the hydrocarbon tax and the capital tax to the State.
Modified by the MLI	No synthesised text was found for this treaty in the source searched.
Principal purpose test	None. No principal purposes test and no main-purpose test anywhere in the Convention or either Protocol, and no Synthesised Text exists in the sources used here to supply one. India-Denmark is, with Italy, one of the two treaties in this batch with no general anti-abuse rule on the face of the instrument.

Dividends

Rate	25 per cent of the gross amount in all cases other than the qualifying-company case — Art. 11(2)(b). This is the default and, together with Italy, the highest dividend ceiling in the batch.
Lower rate on a qualifying holding	15 per cent of the gross amount — Art. 11(2)(a).
The holding that unlocks it	Two conditions, both required. (i) The recipient must be the beneficial owner of the dividends (chapeau to Art. 11(2)). (ii) The beneficial owner must be A company which owns at least 25 per cent of the shares of the company paying the dividends. Note the threshold is 25 per cent, not 10 — materially higher than Italy's 10 per cent and higher than the 10 per cent used in most Indian treaties of the period. A Danish corporate holding of, say, 20 per cent gets no benefit at all and pays the 25 per cent rate.
Where this comes from	Article 11, paragraph 2

Art. 11(2) adds an express requirement that 'the competent authorities of the Contracting States shall by mutual agreement settle the mode of application of these limitations', and then the standard reservation that the paragraph does not affect the taxation of the company on the profits out of which dividends are paid. There is no investment-date condition of the Italian kind (Art. 11(3) here is simply the dividend definition). Art. 11(4) disapplies paras 1 and 2 on a PE or fixed-base connection and routes the income into Article 7 or Article 15. Art. 11(5) is the ordinary bar on extra-territorial taxation. On the Danish side there is no participation exemption in Article 23 — only ordinary credit plus the tax-sparing and deemed-rate rules.

Interest

Rate	Two rates, split by lender type, and both subject to a date gateway that is easy to miss. Art. 12(2): 'the tax so charged on interest payable in respect of A loan given or debt created after the date of entry into force of this convention, shall not exceed: (a) 10 per cent of the gross amount, if such interest is paid on any loan of whatever kind granted by A bank, and (b) 15 per cent of the gross amount in all other cases.' Interest on a loan given or debt created on or before 13 june 1989 has no treaty ceiling at all — the first sentence of Art. 12(2) leaves it to be taxed 'according to the laws of' the source State. Note also that the chapeau to Art. 12(2) does not require beneficial ownership; the beneficial-owner concept appears only in Art. 12(5), the PE disapplication rule.
Exemptions	The exemption is in the article itself, at Art. 12(3), and it is drafted as one long sentence with two alternative gateways. Gateway one — interest derived by: the Government of the other Contracting State, a political sub-division or local authority thereof, the central bank of that other State, or any agency of that government. The words 'any agency of that Government' are open-ended — no schedule of named institutions and no requirement of competent-authority agreement, unlike Sweden's Art. 11(3)(ii)-(iii). Gateway two — interest derived by any other resident of the other Contracting State with respect to debt-claims of that resident which are financed, guaranteed or insured by the Government, a political sub-division or local authority, the Central Bank or any agency of that Government. This is the credit-support limb: a purely commercial Danish lender is exempt in India if the debt-claim is financed, guaranteed or insured by a qualifying Danish body. Three verbs — financed, guaranteed or insured — any one suffices. The consequence of either gateway is that the interest 'shall be exempt from tax in the first-mentioned Contracting State' — a full exemption, not a reduced rate. Art. 12(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 government and credit-support exemptions survive a PE connection — the more generous Spain-style rule, not the Sweden or Netherlands rule.
Where this comes from	Article 12, paragraph 2 and 3

Art. 12(1) is itself made 'Subject to the provisions of paragraph 4 of Article 8 and paragraph 4(a) of Article 9' — the air transport and shipping articles — which pull interest on funds connected with international air and sea operations out of Article 12. Art. 12(4) is the ordinary wide interest definition with penalty charges excluded. Art. 12(6) is the source rule with the PE deemed-source override. Art. 12(7) is the special-relationship rule. For the danish credit, Art. 23(3)(e)(i) read with Protocol paragraph (1) deems Indian tax on interest to have been paid at not less than 10 per cent in the case of banks and 15 per cent in other cases, but capped at the actual Indian withholding rate.

Royalties

Rate	20 per cent of the gross amount — a single flat ceiling for royalties and fees for technical services alike, conditional on the recipient being the beneficial owner. Art. 13(2). There is no equipment tier and no split by type.
Where this comes from	Article 13, paragraph 2

Art. 13(3) defines royalties in the full wide form including the equipment limb — 'for the use of, or the right to use, industrial, commercial or scientific equipment' — and including cinematograph film or films or tapes used for radio or television broadcasting. Equipment hire is therefore inside Article 13 and bears the same 20 per cent (contrast Sweden, where the equipment limb is absent altogether, and Spain, where it carries its own 10 per cent tier). Art. 13(5) disapplies paras 1 and 2 on a PE or fixed-base connection and routes to Article 7 or Article 15. Art. 13(6) is the source rule; Art. 13(7) the special-relationship rule. For the danish credit, Art. 23(3)(e)(ii) read with Protocol paragraph (1) deems Indian tax on royalties and FTS to have been paid at not less than 20 per cent, capped at the actual Indian withholding rate.

Fees for technical services

Rate	20 per cent of the gross amount — the same tier as royalties, Art. 13(2).
Make-available requirement	No
Where this comes from	Article 13, paragraph 2 and 4

Art. 13(4): 'fees for technical services' means payments of any amount to any person other than payments to an employee of the person making the 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 word-for-word the Italy definition. There is no make-available requirement, no ancillary-and-subsidiary limb and no exclusion list. It catches managerial services, tracking s.9(1)(vii) of the Income-tax Act, and 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 15, so an independent Danish consultant's fee can fall within Article 13 as well as Article 15 and the interaction is unresolved on the face of the instrument.

Capital gains on shares

Treatment	Two source-taxing limbs and a residence-only residue. (a) Art. 14(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 percentage-of-value test — the MLI Art. 9(4) modification does not reach this treaty. (b) Art. 14(5): gains from the alienation of shares other than those in paragraph 4, in a company which is a resident of a Contracting State, may be taxed in that State provided that such shares represent at least 10 per cent of the share capital of that company. Note the drafting difference from spain: Spain's Art. 14(5) tests whether the shares alienated 'form part of a participation of at least 10 per cent'; Denmark's tests whether the shares alienated themselves 'represent at least 10 per cent of the share capital'. On the Danish wording a shareholder with a 40 per cent participation who sells a 5 per cent parcel is arguably outside paragraph 5, whereas on the Spanish wording he is inside it. (c) Art. 14(6): gains on any other property are taxable only in the State of residence — no subject-to-tax proviso of the Swedish kind and no emigration tail.
Grandfathering	None. No grandfathering date, no acquisition cut-off, no transitional rate and no limitation-of-benefits gateway attached to Article 14. Contrast the interest article, which does carry a date gateway in Art. 12(2).
Conditions	The only condition on the paragraph 5 limb is the 10 per cent share-capital test, and it is a test of the parcel alienated rather than of the holding. There is no holding-period condition, no beneficial-ownership condition and no subject-to-tax condition anywhere in Article 14.
Where this comes from	Article 14, paragraph 4, 5 and 6

Permanent establishment

Construction or installation PE	183 days or more — Art. 5(2)(k), covering a building site or construction, installation or assembly project or supervisory activities in connection therewith, aggregated 'together with other such sites, projects or activities, if any'. Note three points. (i) The threshold is expressed in days, not months, which is unusual — 183 days is marginally shorter than six calendar months. (ii) The test is 'a period of 183 days or more', so exactly 183 days creates a PE, whereas the six-month treaties (Spain, Italy, Sweden) require more than six months. (iii) There is no rolling twelve-month window on this limb and no alternative incidental-to-sale-of-machinery limb of the kind Spain and Italy both carry.
Service PE	There is no service PE limb of any kind, and — unlike Spain, Italy and Sweden — there is no mineral-oils services deeming rule either. Article 5 contains no proviso and no freestanding paragraph deeming a PE from the provision of services or facilities, or the hire of plant and machinery, for prospecting for or extraction of mineral oils. This is a material omission for a treaty whose Art. 2(1)(b)(x) expressly covers the Danish hydrocarbon tax. The nearest thing is Art. 5(2)(j): 'an installation or structure used for the exploration of natural resources provided that the activities are carried on for A period or periods of 183 days or more in any twelve-month period' — note that this limb is confined to exploration and does not extend to exploitation, extraction or production, and that it carries a 183-day threshold within a rolling twelve-month period where the construction limb in (k) has no window at all.
Agency PE	Yes — Art. 5(4), three limbs, pre-MLI: (a) habitually exercises an authority to conclude contracts on behalf of the enterprise, unless activities are limited to purchasing; (b) the stock-and-delivery limb; (c) habitually secures orders wholly or almost wholly for the enterprise itself or for the enterprise and other enterprises under common control. There is no manufacturing-or-processing limb (Italy has one). Art. 5(5) is the independent-agent saving with the 'devoted wholly or almost wholly' disqualifier extended to enterprises controlling, controlled by or under common control — narrower and less taxpayer-friendly than the Sweden equivalent. Art. 5(6) is the no-PE-by-control rule.
Where this comes from	Article 5

Art. 5(2) lists (g) a warehouse in relation to a person providing storage facilities for others, (h) a farm, plantation or other place of agriculture, forestry or plantation activity, and (i) 'a premises used as a sales outlet or for receiving or soliciting orders' — the wider Italian form. The Art. 5(3) specific-activity exemptions are in the old form: (a) and (b) cover storage or display only, not delivery; (d) covers purchasing and information-collecting without any preparatory-or-auxiliary qualifier; and only (e) carries the preparatory-or-auxiliary words. There is no combination clause and — unlike Italy — no home-grown anti-fragmentation sentence, and because there is no MLI overlay there is no MLI Art. 13(4) rule either. There is no insurance PE limb.

Anti-abuse: limitation of benefits, and the MLI

LOB	None. There is no limitation-of-benefits article, no entitlement-to-benefits article, no beneficial-ownership condition outside Articles 11 to 13 and no anti-abuse article of any description. The articles were checked end to end and run article 24 non-discrimination, article 25 mutual agreement procedure, article 26 exchange of information (as substituted in 2015), article 27 assistance in collection, article 28 diplomatic agents and consular officers, article 29 territorial extension, article 30 entry into force, article 31 termination — with nothing in between and no lettered insertions. Neither Protocol contains an anti-abuse provision.
PPT	None. No principal purposes test and no main-purpose test anywhere in the Convention or either Protocol, and no Synthesised Text exists in the sources used here to supply one. India-Denmark is, with Italy, one of the two treaties in this batch with no general anti-abuse rule on the face of the instrument.
Subject to tax	None. Contrast Sweden, whose Art. 13(5) makes the residence-only capital gains residue conditional on the alienator being subject to tax there; Denmark's Art. 14(6) has no such proviso.

No Synthesised Text for Denmark has been identified from the sources used here. So none of the MLI-derived changes apply on the face of the record: no anti-treaty-shopping preamble, no preparatory-or-auxiliary overlay on the specific-activity exemptions, no anti-fragmentation rule, no commissionnaire rule, no 365-day look-back on immovable-property share gains, and no principal purposes test. As with Sweden, this should be treated as a gap in the material rather than a positive finding — Denmark is an MLI signatory and no synthesised text is available here.

The protocols, in order

A treaty read without its protocols is a wrong answer.

Notification No. 45/2015 [F. No. 503/02/1998-ftd-I] / S.O. 1371(E), dated 22-5-2015 — recorded in the Introduction itself ('as amended by'). The whole treaty was scanned for amendment markers and exactly two were found, both traceable to this notification: (i) article 26 (Exchange of Information) substituted with the modern foreseeably-relevant form, not restricted by Articles 1 and 2, covering taxes of every kind and description imposed on behalf of the Contracting States or their political subdivisions or local authorities; and (ii) a new paragraph (3) inserted in the first protocol, reading 'With reference to Article 26, it is understood that as stated in paragraph 9.1 of OECD commentary on Article 26, the new wordings (as per 2010 version) of Article 26 covers Tax Examinations Abroad.' nothing in the 2015 amendment touches Articles 11, 12, 13 or 14 — the rate and gains articles are untouched since 1989.
There are two Protocols, both dated 8 March 1989 and both signed with the Convention. Neither is an amending instrument: the first Protocol carries three numbered paragraphs (the Art. 23(3)(e) rate cap, the 2000 Danish Crowns de minimis for collection assistance, and the 2015-inserted paragraph on Article 26); the second Protocol is the faroe islands extension.
No MLI modification of this treaty is established here — see synthesised_text.

The words themselves

Quoted from the treaty as notified.

But the tax so charged on interest payable in respect of a loan given or debt created after the date of entry into force of this Convention, shall not exceed :

Article 12, paragraph 2, chapeau of the treaty as notified.

10 per cent of the gross amount, if such interest is paid on any loan of whatever kind granted by a bank, and

Article 12, paragraph 2(a) of 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 provided that such shares represent at least 10 per cent of the share capital of that company.

Article 14, paragraph 5 of the treaty as notified.

15 per cent of the gross amount of the dividends if the beneficial owner is a company which owns at least 25 per cent of the shares of the company paying the dividends;

Article 11, paragraph 2(a) of the treaty as notified.

an installation or structure used for the exploration of natural resources provided that the activities are carried on for a period or periods of 183 days or more in any twelve-month period;

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

For the purposes of Article 27, a request for assistance in collection of taxes due from a taxpayer shall not be made unless such taxes aggregate to 2000 Danish Crowns or its equivalent in Indian currency or more.

Article Protocol (first), paragraph (2) of the treaty as notified.

What to watch

The article numbers are offset by one, as in Spain and Italy. Dividends is Article 11, Interest Article 12, Royalties and FTS Article 13, Capital Gains Article 14, Independent Personal Services Article 15. Article 10 is Associated Enterprises, Article 8 is Air Transport and Article 9 is Shipping (separate articles, unlike Sweden's combined Article 8).
The interest cap has A date gateway. Art. 12(2) caps the tax only on interest payable in respect of a loan given or debt created after 13 june 1989. Older borrowings sit outside the cap entirely. Thirty-seven years on this is largely spent, but it remains a live point for long-dated instruments and for any restructuring that is characterised as continuing an old debt rather than creating a new one.
The bank rate is 10 per cent and IT turns on who granted the loan, not who receives the interest. Art. 12(2)(a) reads 'if such interest is paid on any loan of whatever kind granted by A bank'. The 'of whatever kind' words are deliberate and wide; the qualifying feature is the identity of the grantor.
The dividend threshold is 25 per cent — the highest in this batch. Most Indian treaties of the period use 10 per cent. A Danish parent must clear a quarter of the shares before the 15 per cent tier opens, and everything else pays 25 per cent.
The capital gains share test is A parcel test, not A participation test. Art. 14(5) requires that the shares alienated 'represent at least 10 per cent of the share capital'. This is a different and narrower trigger from the Spanish 'forming part of a participation of at least 10 per cent', and the difference bites where a large holder disposes in tranches.
There is no oilfield services deeming rule, despite the treaty covering the Danish hydrocarbon tax. Art. 5(2)(j) reaches only an installation or structure used for exploration, and only where activities run 183 days or more in any twelve-month period. Services, facilities and plant hire for extraction or production create no deemed PE under this treaty — a marked contrast with Spain (30 days), Italy (no threshold) and Sweden (no threshold).
The article 5(3) exemptions are in the old form and do not cover delivery. Sub-paragraphs (a) and (b) protect storage or display only. A fixed place used for delivery of goods is therefore not within the exemption list at all and falls to be tested under the general Art. 5(1) definition.
Article 21(3) gives the source state A taxing right over unclassified income. Paragraph 1 is residence-only, but paragraph 3 overrides it: items of income not dealt with in the foregoing Articles and arising in the other Contracting State may be taxed in that other State. The residence-only rule in paragraph 1 is therefore effective only for income arising in third countries.
The danish credit is floored at deemed rates and then capped. Art. 23(3)(e) requires Denmark to treat Indian tax on interest as paid at not less than 10 per cent for banks and 15 per cent otherwise, and on royalties and FTS at not less than 20 per cent — but Protocol paragraph (1) then provides that those rates 'shall in no case exceed the rate of withholding tax applicable to such categories of income under the Indian tax laws'. The floor is therefore itself ceilinged by actual Indian law. Read either half alone and the answer is wrong.
Tax sparing is one-way and open-ended. Art. 23(3)(d) obliges denmark alone to deem Indian tax paid where exempted or reduced under the listed 1961 Act provisions (ss. 10(4), 10(4A), 10(4B), 10(6)(viia), 10(15)(iv), 10A, 32A, 80HH, 80-I, 80J and 80L as in force at signature) or under later provisions the competent authorities agree to be for the economic development of India. Unlike Spain and Sweden, there is no ten-year sunset on it.
The treaty extends to the faroe islands by A second protocol, and the extension is total: the Convention applies 'in its entirety' to the Faroe Islands, the terms 'the Kingdom of Denmark' and 'Denmark' include them unless the context otherwise requires, six named Faroese taxes are brought within Article 2 (the provincial income-tax, the communal income-tax, the Church tax, the tax on dividends, the tax on profit from real estate and the tax on royalty), and the competent authority is the Faroe Local Government or its authorised delegate. Article 29 separately permits extension by common agreement to any part of Danish territory specifically excluded from the Convention — Greenland is not brought in by the second Protocol and would require such an agreement.
The assistance-in-collection article is unusually detailed and has A de minimis. Art. 27 names the transmitting authorities on both sides with postal addresses, permits interim protective measures where the claim is not yet final (para 5), requires that the requesting State first exhaust the taxpayer's assets in its own territory (para 6), and Protocol paragraph (2) bars any request where the taxes aggregate less than 2000 danish crowns or the Indian equivalent.
Article 17 is wider than the usual directors' fees article — it is headed 'directors' fees and remuneration of top level managerial officials', so senior management remuneration is taken out of the ordinary employment article.

What this page does not tell you. The effective date of the 2015 substitution of Article 26 and of the inserted Protocol paragraph (3). The Introduction records Notification No. 45/2015 / S.O. 1371(E) dated 22-5-2015 as amending the notification, but no w.e.f. Date or the date of signature or entry into force of the underlying amending Protocol, and no separate text of that Protocol is available here. Whether the competent authorities have ever settled 'the mode of application of these limitations' as Art. 11(2) requires them to do. No such mutual agreement appears in the sources used here, and the paragraph does not say what happens if they do not. Which bodies qualify as 'any agency of that Government' for the Art. 12(3) interest exemption. The phrase is open-ended, no institution is named on either side, and there is no competent-authority agreement mechanism to resolve it — unlike Sweden, which names eleven institutions and provides for more to be added. The full text of Article 23 paragraph 3(e) as it interacts with Protocol paragraph (1) where Indian domestic withholding rates have since fallen below the deemed floors. The instrument gives the rule but not the arithmetic. Why no Synthesised Text for India-Denmark has been identified from the sources used here. Denmark is an MLI signatory; nothing in the primary material read establishes whether this is a gap in the material or the correct legal position, and the MLI position statements were not read. Whether the Convention has been extended under Article 29 to Greenland or to any other part of Danish territory. The second Protocol covers only the Faroe Islands, and no exchange of notes under Article 29 is available here.

The India–Denmark tax treaty