India–Mongolia 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 per cent of the gross amount of the dividends — Art. 10(2). A single flat ceiling, and high by the standards of India's network.	There is none. No qualifying-holding tier, no minimum percentage of capital or shares, no holding period and no lower rate for a parent company — a controlling shareholder and a portfolio investor are capped…	Article 10, paragraph 2
Interest	15 per cent of the gross amount of the interest — Art. 11(2), conditional on the recipient being the beneficial owner. A single flat ceiling, again high by the standards of India's network.	Art. 11(3) has two sub-paragraphs and they work quite differently; the second is the unusual one and is easily the most distinctive provision in this Agreement. Sub-paragraph (a) is the ordinary list…	Article 11, paragraph 2 and 3
Royalties	15 per cent of the gross amount — Art. 12(2), the same ceiling as for fees for technical services. Both are conditional on the recipient being the beneficial owner.	Royalties and fees for technical services share one article, one rate paragraph, one PE carve-out, one source rule and one excess-payment rule, so the characterisation contest between the two limbs does not…	Article 12, paragraph 2 and 3
Fees for technical services	15 per cent of the gross amount — Art. 12(2), inside the combined Royalties and Fees for Technical Services article and at the same rate as royalties.	This Agreement does have a fees-for-technical-services provision, and it is worth saying so plainly because Article 12 is easy to misread: the heading is "Royalties and fees for technical services", the charge…	Article 12, paragraph 2 and 4

Status

In force	The Agreement was signed on 22 February 1994 — "done in duplicate this 22nd day of February, one thousand nine hundred and ninety-four in the Hindi, Mongolian and English languages, all the texts being equally authentic. In case of divergence between any of the texts, the English text shall be the operative one." The signature clause as printed does not name the place of signature. Entry into force is fixed by Article 29: "Each of the Contracting States shall notify to the other the completion of the procedures required by its law, for the bringing into force of this agreement. This Agreement shall enter into force on the date of the later of these notifications". The notification records that it "has entered into force on the 29th March, 1996". Article 29 then fixes effect by calendar date rather than by reference to the year of entry into force: in India "in respect of income arising in any previous year beginning on or after the 1st April, 1994 and in respect of capital which is held at the expiry of any previous year beginning on or after 1st April, 1994"; in Mongolia from 1 January 1994. The Agreement therefore reaches back to the previous year beginning 1 April 1994 (assessment year 1995-96), two years before it entered into force.
Given effect by	Notification No. SO 635(E), dated 16-9-1996, 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 double invocation is not decorative: this Agreement covers taxes on income and on capital, Article 23 is a distributive rule for capital, and section 44A of the Wealth-tax Act is the power under which the capital limb takes effect in India. Very few of India's treaties are notified under both statutes, and among the treaties in this group only Mongolia and Georgia carry a capital article at all. The notification as printed carries no separate file number and no signatory's name. The recital records that the annexed Agreement "has entered into force on the 29th March, 1996, on the notification by both the Contracting States to each other of the completion of the procedures required under their laws for the bringing into force of the said Agreement in accordance with Article 29 of the said Agreement". The section-90 direction carries no commencement date of its own, so the effective dates are those in Article 29 — which, unusually, are fixed calendar dates rather than dates keyed to entry into force. See in_force.
Modified by the MLI	No synthesised text was found for this treaty in the source searched.
Principal purpose test	There is no principal purpose test and no main-purpose test in this Agreement, from any source. Bilaterally there is none, as set out above. Multilaterally there is none either, because no MLI synthesised text exists for Mongolia (see synthesised_text), so Article 7 of the MLI is not overlaid on this Agreement on the material used here. The practical position is therefore the same as under the Uganda Convention and the Kyrgyz Agreement, and it should be stated without hedging: a treaty-shopping or conduit challenge to a Mongolian structure cannot be run through this Agreement. It has to be run entirely on Indian domestic law — Chapter X-A GAAR, section 94A, or judicial substance doctrine — or on the beneficial-ownership condition inside Art. 10(2), Art. 11(2) and Art. 12(2). Note the limits of that condition here. It is confined to dividends, interest, royalties and technical fees. It does not reach capital gains under Art. 13, which is the article a treaty-shopped structure would most naturally be using and which has no filter of any kind. And it is drafted in the older form — "if the recipient is the beneficial owner" — which requires the beneficial owner to be the recipient but does not separately require the beneficial owner to be a resident of the other Contracting State, so it is a weaker instrument against a conduit than the modern formulation used in the Colombia, Georgia and Syria agreements. Set against that, the rates in this Agreement are high — 15 per cent on dividends, interest, royalties and technical fees alike — so the incentive to route income through Mongolia is correspondingly low, which may be why the parties saw no need for an anti-abuse article in 1994.

Dividends

Rate	15 per cent of the gross amount of the dividends — Art. 10(2). A single flat ceiling, and high by the standards of India's network.
The holding that unlocks it	There is none. No qualifying-holding tier, no minimum percentage of capital or shares, no holding period and no lower rate for a parent company — a controlling shareholder and a portfolio investor are capped identically at 15 per cent. Art. 10(2): "However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident, and according to the laws of that State, but if the recipient is the beneficial owner of the dividends the tax so charged shall not exceed 15 per cent of gross amount of the dividends." The single condition is beneficial ownership, in the older drafting: the requirement is that "the recipient is the beneficial owner", not that the beneficial owner be a resident of the other Contracting State, which is how India's later treaties put it. Residence enters only through Art. 10(1), which frames the article as applying to dividends paid to a resident of the other State. The combination — no threshold and a 15 per cent ceiling — is the reverse of the usual Indian pattern, where a treaty that declines to give a reduced parent rate normally sets the single rate at 10 per cent. Because no MLI applies, no 365-day holding requirement has been imported.
Where this comes from	Article 10, paragraph 2

Art. 10(3) is the ordinary definition — income from shares or from other rights, not being debt-claims, participating in profits, and income from other corporate rights subjected to the same taxation treatment as income from shares by the laws of the distributing company's State. Art. 10(4) switches the cap off where the holding is effectively connected with a permanent establishment or a fixed base, referring the income to Art. 7 or Art. 14; Art. 14 in this Agreement is Independent Personal Services, because royalties and technical fees share Art. 12 and do not displace the numbering. Art. 10(5) is the full extra-territoriality bar: the other State may not tax dividends paid by the company except to its own residents or where the holding is effectively connected with a PE or fixed base there, nor tax the company's undistributed profits. The closing sentence of Art. 10(2) preserves taxation of the company on the profits out of which the dividends are paid, and nothing in Art. 10 turns on whether those profits bore tax.

Interest

Rate	15 per cent of the gross amount of the interest — Art. 11(2), conditional on the recipient being the beneficial owner. A single flat ceiling, again high by the standards of India's network.
Exemptions	Art. 11(3) has two sub-paragraphs and they work quite differently; the second is the unusual one and is easily the most distinctive provision in this Agreement. Sub-paragraph (a) is the ordinary list, exempting interest "provided it is derived and beneficially owned by" — the usual double requirement — "(i) the Government, a political sub-division or local authority of the other Contracting State; or (ii) the Central Bank of the other Contracting State; or (iii) the Trade and Development Bank of Mongolia in case of Mongolia, and the Industrial Development Bank of India in case of India". Note which Indian institution is named: the Industrial Development Bank of India, and no other. The Reserve Bank of India is covered as the central bank under limb (ii), but the Export-Import Bank of India and the National Housing Bank — named in the Georgia and Albania interest articles — are not, and neither are nabard, sidbi or ifci. Idbi is an unusual choice and appears in very few of India's interest articles. Sub-paragraph (b) is where this Agreement departs from every other treaty in this group. Instead of the customary residual limb allowing further institutions to be added by competent-authority agreement, it creates a discretionary, transaction-by-transaction exemption available in principle to any lender: "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." Four features. First, the class of beneficiary is unrestricted — "any person other than a person referred to in sub-paragraph (a)" who is a resident of the other State, so a private commercial lender qualifies, which no other treaty in this group permits. Second, the exemption is partial by design: it operates "to the extent approved", so the source State's Government may approve a reduction rather than a full exemption. Third, approval must attach to "the transaction giving rise to the debt-claim", not to the lender — it is deal-specific, and a lender approved on one loan is not thereby exempt on another. Fourth, the approving authority is "the Government" of the source State, and the Agreement says nothing about which organ of government, in what form, or by what procedure. This is a survival of the older Indian practice of granting section 10(15) style approvals for foreign-currency borrowings, written into a treaty. Practically, it means that the 15 per cent ceiling in Art. 11(2) is not the floor for Indian-source interest paid to a Mongolian resident: a government-approved transaction can carry a lower rate or none, and the question in any given case is whether an approval exists rather than what the treaty rate is. Penalty charges for late payment are excluded from the definition of interest by the closing sentence of Art. 11(4).
Where this comes from	Article 11, paragraph 2 and 3

Art. 11(6) is the source rule in the wide form, including the government-payer limb: "Interest shall be deemed to arise in a Contracting State when the payer is that State itself, a political sub-division, a local authority or a resident of that State", with the usual PE/fixed-base override in the second sentence where the indebtedness was incurred in connection with, and the interest is borne by, a permanent establishment or fixed base. That is wider than the Colombia, Georgia and Syria interest source rules, which omit the government-payer limb, and it needs no protocol repair of the kind the Kyrgyz Agreement required. Art. 11(4) defines interest as income from debt-claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor's profits, expressly including government securities and bonds or debentures with their premiums and prizes; it does not sweep in amounts treated as interest under the source State's domestic law, unlike the Colombia equivalent, so a domestic recharacterisation does not automatically engage Art. 11. Art. 11(5) refers effectively-connected debt-claims to Art. 7 or Art. 14, and Art. 11(7) limits the article to the arm's-length amount, leaving the excess taxable under domestic law with due regard to the other provisions of the Agreement.

Royalties

Rate	15 per cent of the gross amount — Art. 12(2), the same ceiling as for fees for technical services. Both are conditional on the recipient being the beneficial owner.
Where this comes from	Article 12, paragraph 2 and 3

Royalties and fees for technical services share one article, one rate paragraph, one PE carve-out, one source rule and one excess-payment rule, so the characterisation contest between the two limbs does not change the rate — but note that the definitions are in separate paragraphs, Art. 12(3) for royalties and Art. 12(4) for technical fees, rather than in lettered sub-paragraphs (a) and (b) of a single paragraph as in the Uganda, Georgia, Colombia and Kyrgyz treaties. A citation to "Article 12(3)(b)" for the FTS definition, lifted from another Indian treaty, will land on nothing here; the FTS definition is Art. 12(4) and the paragraphs that follow are renumbered accordingly, so the PE carve-out is Art. 12(5), the source rule Art. 12(6) and the excess-payment rule Art. 12(7). Art. 12(3) is the standard wide Indian royalty definition: "payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work, including cinematograph films or films or tapes used for radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience." Films are inside on the copyright limb. The equipment limb repeats "for the use of, or the right to use", so bare equipment rental is a royalty at 15 per cent gross, with no know-how condition of the Namibian kind. There is no express reference to software or computer programmes — contrast the Kyrgyz Agreement of five years later, which names "software" inside its copyright limb — and no satellite, cable or optic-fibre transmission limb. Art. 12(5) refers effectively-connected royalties to Art. 7 or Art. 14, and note that its trigger is wider than most: it applies where "the right, property or contract in respect of which the royalties or fees for technical services are paid is effectively connected" with the PE or fixed base — the word "contract" appears alongside "right" and "property", which most Indian treaties omit and which makes the carve-out easier to satisfy for a service contract that is not tied to any identifiable right or property. Art. 12(6) is the source rule in the wide form, including the government-payer limb. Art. 12(7) limits the article to the amount that would have been paid in the absence of a special relationship — note the drafting, which asks what "would have been paid" rather than, as most treaties do, what would have been agreed having regard to the use, right or information for which the payment is made.

Fees for technical services

Rate	15 per cent of the gross amount — Art. 12(2), inside the combined Royalties and Fees for Technical Services article and at the same rate as royalties.
Make-available requirement	No
Where this comes from	Article 12, paragraph 2 and 4

This Agreement does have a fees-for-technical-services provision, and it is worth saying so plainly because Article 12 is easy to misread: the heading is "Royalties and fees for technical services", the charge is in Art. 12(2), and the definition is in a paragraph of its own at Art. 12(4) rather than in a lettered sub-paragraph of Art. 12(3) where the other treaties in this group put it. There is no make-available condition. Art. 12(4): "The term 'fees for technical services' as used in this article 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." The words "make available", "enable", "technical plan" and "technical design" appear nowhere in the Agreement, and there is no protocol in which they could appear. A Mongolian service provider cannot argue that nothing was transmitted to the Indian payer. Four features of the definition matter, and the third is the one that distinguishes this article from every other in this group. (i) "Payments of any amount to any person" — the opening is drafted by reference to the payee rather than by cross-reference to other articles, and "any amount" removes any de minimis. (ii) Three categories — managerial, technical or consultancy; "professional" services are not named, so an individual professional's fee is not swept in by the words of the definition itself. (iii) The only carve-out is for "payments to an employee of a person making payments". There is no exclusion for payments falling within Articles 14 and 15 — independent and dependent personal services — which the Uganda, Georgia, Colombia and Kyrgyz definitions all carry. That is a real gap and it cuts in the revenue's favour. Under those other treaties an individual consultant's fee that falls within the independent-personal-services article is taken out of the FTS charge by an express cross-reference; here nothing takes it out. A Mongolian individual providing consultancy services to an Indian payer is within the literal words of Art. 12(4) even though the same income also answers the description in Art. 14, and the Agreement supplies no rule of priority between them beyond the general principle in Art. 7(6) that the specific articles prevail over business profits — which does not resolve a contest between Art. 12 and Art. 14. The practical consequence is that the individual/entity divide that governs the other treaties in this group does not govern this one, and the argument that Art. 14 displaces Art. 12 for an individual has to be run on general principles rather than on the text. (iv) There is no negative list — nothing carved out for services ancillary to a sale of property, for construction, for natural-resources services or for teaching. The interaction with the PE article runs strongly in one direction: there is no service permanent establishment in this Agreement (see pe), so personnel time in India does not create a PE and net-basis taxation, and Indian-source service income is taxed at 15 per cent gross under Art. 12 unless the provider crosses into a fixed place of business under Art. 5(1), a nine-month construction site under Art. 5(2)(g), or an agency PE under Art. 5(4). At 15 per cent gross that is an expensive outcome on a low-margin services contract, and there is no MFN clause anywhere in the Agreement, so no lower rate and no make-available limb can be imported from a later Indian treaty.

Capital gains on shares

Treatment	Full source-State taxing right over share gains, split across two paragraphs. Art. 13(4) is the land-rich limb: "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." It is the narrow bilateral form — shares of the capital stock of a company only, with no extension to interests in a partnership, trust or estate of the kind in the Kenya and Namibia texts, and with no percentage test to give "principally" content. Art. 13(5) is the general limb and is unrestricted: "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." No percentage threshold, no minimum holding, no listing carve-out, no de minimis — India may tax a Mongolian resident's gain on shares of an Indian company whatever the company's asset mix and whatever the size of the stake. Art. 13(6) is the residual: gains from any property other than that in paragraphs 1 to 5 "shall be taxable only in the Contracting State of which the alienator is a resident". Art. 13(1) allows source taxation of gains on immovable property referred to in Art. 6; Art. 13(2) covers movable property of a permanent establishment or fixed base, including gains on alienating the PE itself. Art. 13(3) is the paragraph worth pausing on, and it is drafted unlike any other in this group: "Gains from the alienation of ships, aircraft or land vehicles operated in international traffic or movable property pertaining to the operation of such ships, aircraft or land vehicles shall be taxable only in the Contracting State in which the enterprise is registered and having the headquarters (i.e., effective management)." Two departures. Land vehicles are included alongside ships and aircraft — consistent with Article 8, which is headed "Shipping, air and land transport" and covers land transport in international traffic, a limb reflecting the two countries' landlocked and overland trade concerns and one that almost no other Indian treaty carries. And the connecting factor is composite and conjunctive: the State "in which the enterprise is registered and having the headquarters (i.e., effective management)". That requires registration and headquarters in the same State, with the parenthesis equating headquarters to effective management. Where an enterprise is registered in one State and effectively managed in the other, the test as drafted is satisfied in neither, and Art. 13(3) allocates the gain nowhere — a gap the Agreement does not resolve and no protocol addresses. Compare the clean place-of-effective-management test in the Kenya and Namibia treaties and the plain residence test in Colombia and Georgia.
Grandfathering	None in the notified text, and none has been introduced since. The Agreement fixes no grandfathering date, carries no acquisition-date cut-off for shares and has no transitional paragraph in Article 13. Because no MLI applies, no 365-day look-back has been added to Art. 13(4). What this Agreement has instead of grandfathering is the opposite — retroactive reach. Article 29 fixes effect by hard calendar date: in India "in respect of income arising in any previous year beginning on or after the 1st April, 1994", although the Agreement did not enter into force until 29 March 1996. So the capital-gains rules apply to disposals in previous years beginning 1 April 1994 and 1 April 1995, both of which had closed before the Agreement entered into force and the second of which had closed before the notification issued on 16 September 1996. A disposal is otherwise tested under the same rules whenever the shares were acquired.
Conditions	Art. 13(5) is unconditional: the only requirement is that the company whose shares are alienated is a resident of the taxing State. Nothing turns on the seller's holding percentage, the period of holding, whether the shares are listed, or whether the seller has any other connection with India. Art. 13(4) turns on the undefined word "principally" — the Agreement supplies no percentage, no valuation date and no averaging rule, and there is no protocol to supply them; contrast Colombia, where the equivalent paragraph writes the test into the text as more than 50 per cent of the aggregate value of the company's assets. In an Indian case the distinction between paragraphs 4 and 5 rarely decides anything, because paragraph 5 confers the taxing right anyway wherever the company is resident in India; paragraph 4 matters mainly where the company whose shares are sold is resident in neither State but holds Indian immovable property, since it is drafted by reference to where the property is situated rather than where the company is resident. Beneficial ownership is not required for capital gains; that condition appears only in Articles 10, 11 and 12. And there is no limitation-of-benefits condition attached to Article 13 or anywhere else in the Agreement (see anti_abuse), so a gain falling into Art. 13(6) is protected from Indian tax by the treaty without any qualified-person, main-purpose or bona-fide-business filter to pass. Note separately that this is an income-and-capital treaty: Article 23 allocates capital itself, and Art. 23(4) leaves all elements of capital other than immovable property, PE business property and international-traffic vehicles taxable only in the owner's State of residence.
Where this comes from	Article 13, paragraph 4, 5 and 6

Permanent establishment

Construction or installation PE	More than nine months, and the threshold is not where a reader expects to find it. It is the last item of the inclusive list, Art. 5(2)(g): "a building site or a construction or an assembly project or supervisory activities in connection therewith; but only where such site, project or activity continues for a period of more than nine months." Three points. First, nine months is long — longer than the six months in the Colombia, Kyrgyz, Namibia and Albania treaties and far longer than the ninety days in Georgia — and it is one of the more generous construction thresholds in India's network. Second, the paragraph reference is wrong if lifted from another Indian treaty: in Colombia, Georgia, Syria and Albania the construction test is Art. 5(3)(a), and here it is Art. 5(2)(g), buried as the last of seven sub-paragraphs in the inclusive list. Third, and substantively, the list of covered works is short: "a building site or a construction or an assembly project or supervisory activities in connection therewith". An installation project is not named — Colombia, Georgia, Kyrgyzstan and Albania all say "building site or construction, installation or assembly project", and Mongolia omits "installation", as does the Uganda Convention. Whether a pure installation contract falls inside the nine-month rule at all, or has to be tested from scratch against the fixed-place test in Art. 5(1) with no minimum duration, is a question this text does not answer on its face and no protocol answers. The clock runs on the continuation of the site, project or activity; the Agreement says nothing about when it starts, so there is no equivalent of the Kenya protocol's exclusion of purely preparatory mobilisation time. There is no anti-splitting rule — no protocol paragraph aggregating related-enterprise time as in Colombia, and no MLI Article 14, because no synthesised text exists. A nine-month threshold with no aggregation rule is the most taxpayer-favourable construction position of any treaty in this group.
Service PE	None. There is no service permanent establishment in this Agreement. Article 5 contains no furnishing-of-services limb of any kind — no "furnishing of services, including consultancy services, by an enterprise through employees or other personnel" paragraph, and no day or month threshold for service activity. Services performed in India by a Mongolian enterprise create an Indian permanent establishment only through a fixed place of business under Art. 5(1), one of the Art. 5(2) places, the nine-month construction rule in Art. 5(2)(g), or a dependent agent under Art. 5(4). Personnel time in India, however long, does not by itself create a PE. But do not read the absence as generous: because Art. 12 taxes fees for technical services at 15 per cent of the gross amount from the first rupee, the practical effect is a high gross charge rather than exemption, and on a low-margin services contract that is worse than net-basis taxation under Art. 7 would have been. For an individual, Art. 14 supplies the only time test in the Agreement that bites on services, and it is drafted in the oldest form of any treaty in this group: a fixed base regularly available, or a stay "for a period or periods amounting to or exceeding in the aggregate 183 days in the relevant fiscal year". Note two things about that. The threshold is "amounting to or exceeding", so exactly 183 days is enough. And the window is "the relevant fiscal year", not a rolling twelve-month period commencing or ending in the fiscal year — so unlike the Uganda, Kyrgyz, Colombia, Georgia and Syria equivalents, presence is counted within the fiscal year alone and a stay straddling two fiscal years may fail the test in both. Art. 14(2) also closes its list of professional services with "and other such professions", which the parallel definitions in this group do not.
Agency PE	Yes, but it is the narrowest agency limb of any treaty in this group — a single limb only. Art. 5(4): "Notwithstanding the provisions of paragraphs 1 and 2, where a person — other than an agent of independent status to whom paragraph 5 applies — is acting on behalf of an enterprise and has, and habitually exercises, in a Contracting State an authority to conclude contracts on behalf of the enterprise, that enterprise shall be deemed to have a permanent establishment in that State in respect of any activities which that person undertakes for the enterprise, unless the activities of such person are limited to those mentioned in paragraph 3 of this Article, which if exercised through a fixed place of business would not make this fixed place of business a permanent establishment under the provisions of that paragraph." That is the whole of the deeming rule. There is no stock-maintenance limb — no "has no such authority, but habitually maintains a stock of goods or merchandise from which he regularly delivers" — and no order-securing limb, whether confined to the enterprise itself or extended to group companies. Every other treaty in this group has at least two of the three limbs and most have all three: Uganda and Kyrgyzstan have all three with the group extension, Colombia, Georgia and Syria have all three confined to the enterprise itself, Namibia has the first two. Mongolia has the first alone. The practical consequence is substantial: a dependent agent in India who holds no contracting authority but maintains a stock and delivers from it, or who habitually secures orders, is not a permanent establishment of a Mongolian enterprise under this Agreement, where the same facts would create one under any of the others. Note also the drafting of the limb that does exist: authority to conclude contracts "on behalf of the enterprise", rather than the more usual "in the name of the enterprise". "On behalf of" is the wider formulation of the two and is capable of reaching an agent who contracts in its own name for the principal's account, which the "in the name of" wording is generally taken not to reach — so on this one point the Agreement is wider than its neighbours, and it has not been replaced by the MLI commissionnaire rule because no MLI applies. Art. 5(5) is the independent-agent exclusion with the single-limb anti-exclusivity rider: exclusivity alone defeats independence, without the cumulative non-arm's-length requirement found in the Kenya text. There is no insurance permanent establishment in this Agreement — no counterpart to Art. 5(5) of the Uganda Convention or Art. 5(6) of the Colombia, Georgia and Syria agreements — so a Mongolian insurer collecting premiums in India or insuring Indian risks through a dependent person is not deemed to have a PE on that ground alone. Art. 5(6) is the ordinary control rule.
Where this comes from	Article 5, paragraph 2(g), 3, 4 and 5

Article 5 is short — six paragraphs — and much of its character lies in what it leaves out. There is no separate paragraph for construction (it sits at Art. 5(2)(g)), no service PE, no insurance PE, no mineral-oils deeming rule of the kind in Art. 5(4) of the Kyrgyz Agreement, and no natural-resources installation limb of the kind in Art. 5(2)(j) of the Colombia Agreement. Art. 5(2) is correspondingly compact: place of management, branch, office, factory, workshop, "(f) a mine, an oil or gas well, quarry or any other place of extraction of natural resources", and the construction limb at (g). There is no sales outlet, no warehouse limb and no farm or plantation limb — all three of which appear in the Uganda, Kyrgyz and Georgia inclusive lists. Art. 5(3) is the specific-activity exclusion list and it is the taxpayer-favourable version on both limbs: sub-paragraph (a) excludes facilities used solely for "storage, display or delivery" of goods or merchandise, and sub-paragraph (b) a stock held solely for "storage, display or delivery". Delivery is expressly excluded in both places, unlike the Colombia, Georgia and Syria treaties where "delivery" is omitted from the exclusions and a delivery warehouse can be a PE — and unlike the Uganda Convention, where delivery is excluded on the facilities limb but not on the stock limb. A Mongolian enterprise's delivery warehouse in India is therefore outside the PE definition, and because there is no stock-maintenance agency limb in Art. 5(4) it is not caught there either. Sub-paragraphs (c) to (e) are standard — processing by another enterprise, purchasing or collecting information, and other preparatory or auxiliary activity — but note that Art. 5(3) has no combination sub-paragraph: there is no "(f) the maintenance of a fixed place of business solely for any combination of activities mentioned in sub-paragraphs (a) to (e)" clause, which every other treaty in this group carries. On the face of the text a fixed place used for a combination of otherwise excluded activities is not expressly protected, although each individual activity is. Because no MLI applies there is no anti-fragmentation overlay and no "closely related enterprise" concept. Taken together — a nine-month construction threshold, no service PE, a single-limb agency rule, no insurance PE, and delivery excluded on both limbs — this is the most difficult permanent establishment article in this group for the revenue to establish, and the Agreement compensates for it entirely through high gross rates in Articles 10, 11 and 12.

Anti-abuse: limitation of benefits, and the MLI

LOB	There is no limitation-of-benefits article in this Agreement. A full reading of all thirty Articles returns nothing under the headings "limitation", "benefits", "bona fide" or "main purpose", and there is no protocol. The Agreement runs: 22 Other income, 23 Capital, 24 Avoidance of double taxation, 25 Non-discrimination, 26 Mutual agreement procedure, 27 Exchange of information, 28 Diplomatic and consular activities, 29 Entry into force, 30 Termination — the numbers at which an anti-abuse article would sit are all occupied by something else. There is no qualified-person test, no ownership or base-erosion test, no stock-exchange test, no active-trade-or-business clause, no competent-authority discretion, no bona-fide-business-activities test, no subject-to-tax clause, no remittance-basis limitation and no switch-over clause of the Namibian kind. There is not even an express saving of domestic anti-avoidance law of the kind in Art. 28(1) of the Colombia Agreement. The closest the Agreement comes is Art. 24(1), a general saving of domestic law sitting in the elimination-of-double-taxation article: "The laws in force in either of the Contracting States will continue to govern the taxation of income in the respective Contracting States except where provisions to the contrary are made in this Agreement." That preserves domestic law subject to the treaty; it is not an anti-abuse rule and does not on its own authorise the denial of a treaty benefit. The administrative machinery is thin by modern standards: Art. 27 (Exchange of Information) is in the older and narrower form, and there is no collection-assistance article at all — contrast the Uganda Convention and the Kyrgyz Agreement, both of which have one.
PPT	There is no principal purpose test and no main-purpose test in this Agreement, from any source. Bilaterally there is none, as set out above. Multilaterally there is none either, because no MLI synthesised text exists for Mongolia (see synthesised_text), so Article 7 of the MLI is not overlaid on this Agreement on the material used here. The practical position is therefore the same as under the Uganda Convention and the Kyrgyz Agreement, and it should be stated without hedging: a treaty-shopping or conduit challenge to a Mongolian structure cannot be run through this Agreement. It has to be run entirely on Indian domestic law — Chapter X-A GAAR, section 94A, or judicial substance doctrine — or on the beneficial-ownership condition inside Art. 10(2), Art. 11(2) and Art. 12(2). Note the limits of that condition here. It is confined to dividends, interest, royalties and technical fees. It does not reach capital gains under Art. 13, which is the article a treaty-shopped structure would most naturally be using and which has no filter of any kind. And it is drafted in the older form — "if the recipient is the beneficial owner" — which requires the beneficial owner to be the recipient but does not separately require the beneficial owner to be a resident of the other Contracting State, so it is a weaker instrument against a conduit than the modern formulation used in the Colombia, Georgia and Syria agreements. Set against that, the rates in this Agreement are high — 15 per cent on dividends, interest, royalties and technical fees alike — so the incentive to route income through Mongolia is correspondingly low, which may be why the parties saw no need for an anti-abuse article in 1994.
Where this comes from	Article None. There is no anti-abuse article; Article 24(1) is the only saving of domestic law and it sits in the elimination-of-double-taxation article.

The text notified under section 90 of the Income-tax Act and section 44A of the Wealth-tax Act is what this record carries. The Income Tax Department publishes MLI synthesised texts for those of its treaties the MLI has modified, and a search of that collection returns no Mongolia entry — Georgia has one, Mongolia does not. There is therefore only one text of this Agreement and nothing to reconcile. None of the MLI overlay is established as applying: no anti-treaty-shopping preamble, no MLI principal purposes test, no saving clause, no anti-fragmentation rule on Art. 5(3), no commissionnaire rule on Art. 5(4), no 365-day look-back on immovable-property share gains under Art. 13(4), and no splitting-up-of-contracts rule on the nine-month construction test in Art. 5(2)(g). The consequence is as stark here as under the Uganda Convention, and for the same reason: this Agreement contains no anti-abuse article of its own either (see anti_abuse). On the material used here there is no treaty-level anti-abuse rule in the India-Mongolia Agreement from any source, bilateral or multilateral — no limitation of benefits, no main-purpose test, no bona-fide-business test, and no MLI principal purposes test. Whether Mongolia has signed or ratified the MLI, and whether India has listed this Agreement as a Covered Tax Agreement, is not established from the sources used here; the conclusion rests on the absence of a synthesised text and on the notified text carrying no modification marker.

The protocols, in order

A treaty read without its protocols is a wrong answer.

No Protocol is annexed to this notification, and no amending notification or later protocol appears in the department's record of it. The annexed text runs from the preamble through Article 30 and the signature clause with nothing following, and the citation line names one notification and one date with no "as amended by", no corrigendum and no trailing footnote. The absence of a protocol matters more here than in most treaties of this period, because several provisions would ordinarily be glossed by one: Article 5(2)(g) says nothing about when the nine-month construction clock starts; Article 11(3)(b) makes an exemption turn on government approval without saying how approval is given; and Article 13(3) uses a composite registration-and-headquarters test that a protocol would normally explain. None of that is supplied.
No synthesised text exists for Mongolia, so no MLI change to this Agreement is established here. See synthesised_text.

The words themselves

Quoted from the treaty as notified.

a building site or a construction or an assembly project or supervisory activities in connection therewith; but only where such site, project or activity continues for a period of more than nine months

Article 5, paragraph 2(g) 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 term "fees for technical services" as used in this article 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.

Article 12, paragraph 4 of the treaty as notified.

Gains from the alienation of ships, aircraft or land vehicles operated in international traffic or movable property pertaining to the operation of such ships, aircraft or land vehicles shall be taxable only in the Contracting State in which the enterprise is registered and having the headquarters (i.e., effective management).

Article 13, paragraph 3 of the treaty as notified.

In India : in respect of income arising in any previous year beginning on or after the 1st April, 1994 and in respect of capital which is held at the expiry of any previous year beginning on or after 1st April, 1994.

Article 29, paragraph (a) of the treaty as notified.

What to watch

This Agreement does have a fees-for-technical-services provision, at 15 per cent, and the reason it is sometimes overlooked is structural: the definition sits in a paragraph of its own at Art. 12(4), not in a lettered sub-paragraph 3(b) as in the Uganda, Georgia, Colombia and Kyrgyz treaties. A citation to "Article 12(3)(b)" lifted from another Indian treaty lands on nothing here, and everything after the definition is renumbered — the PE carve-out is Art. 12(5), the source rule Art. 12(6), the excess-payment rule Art. 12(7).
The FTS definition in Art. 12(4) carves out only payments to the payer's own employee. There is no exclusion for payments falling within Articles 14 and 15, which every other treaty in this group carries. So a Mongolian individual's consultancy fee is within the literal words of Art. 12(4) even though the same income answers the description in Art. 14 (Independent Personal Services), and the Agreement gives no rule of priority between them. The individual/entity divide that settles this contest under the other treaties does not settle it here, and the argument that Art. 14 displaces Art. 12 has to be run on general principles rather than on the text.
Every rate in this Agreement is 15 per cent — dividends Art. 10(2), interest Art. 11(2), royalties and technical fees Art. 12(2) — with no reduced tier anywhere and no qualifying-holding rate for a parent company. That is high for India's network and it is the mirror image of the permanent establishment article, which is the most difficult in this group for the revenue to establish. The treaty trades a weak PE threshold for strong gross withholding, and a planner should read the two together rather than either alone. There is no MFN clause, so none of the 15 per cent figures can be reduced by reference to a later Indian treaty.
Article 11(3)(b) is a discretionary exemption with no counterpart in the other treaties in this group. Interest is exempt in the source State "to the extent approved by the Government of that State" where it is derived and beneficially owned by any resident of the other State — any person, not merely a listed institution — "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". It is transaction-specific rather than lender-specific, it is partial by design ("to the extent approved"), and the Agreement says nothing about which organ of government approves or by what procedure. So the 15 per cent in Art. 11(2) is a ceiling, not a floor, and the real question on any Indian-source loan is whether a government approval exists.
The agency limb is the narrowest in this group: Art. 5(4) has the conclude-contracts limb alone. There is no stock-maintenance limb and no order-securing limb, so a dependent agent in India who holds no contracting authority but maintains a stock and delivers from it, or who habitually secures orders, is not a permanent establishment of a Mongolian enterprise. Read that with Art. 5(3), which excludes delivery on both the facilities limb and the stock limb, and a delivery operation in India is outside the PE definition twice over. But note the one respect in which Art. 5(4) is wider than its neighbours: the authority is to conclude contracts "on behalf of the enterprise", not "in the name of the enterprise", which is capable of reaching an agent contracting in its own name for the principal's account.
There is no anti-abuse article of any kind — no limitation of benefits, no main-purpose or principal-purpose test, no bona-fide-business test — and no MLI principal purposes test, because no synthesised text exists for Mongolia. There is also no collection-assistance article and no express saving of domestic anti-avoidance law; Art. 24(1) merely preserves domestic law subject to the Agreement. Beneficial ownership is required only for dividends, interest, royalties and technical fees, and is drafted in the older "if the recipient is the beneficial owner" form, which does not separately require the beneficial owner to be resident in the other State. Capital gains under Art. 13 carry no filter at all.
Effect is fixed by hard calendar dates, not by reference to the year of entry into force. Article 29 gives the Agreement effect in India "in respect of income arising in any previous year beginning on or after the 1st April, 1994" and in Mongolia from 1 January 1994, although it entered into force on 29 March 1996 and was notified on 16 September 1996. Two previous years — those beginning 1 April 1994 and 1 April 1995 — had closed before entry into force, and the second had closed before notification. The Agreement reaches them on its own terms. Article 30's termination provision is drafted to match, requiring notice "on or before 30th June" in a calendar year rather than the more usual six months before the year end.
Two features reflect the geography of this treaty and appear in almost no other Indian agreement. Article 8 is headed "Shipping, air and land transport" and covers land transport in international traffic, and Article 13(3) carries land vehicles through to the capital-gains rule. Article 13(3)'s connecting factor is also unique in this group and is conjunctive: the State "in which the enterprise is registered and having the headquarters (i.e., effective management)". Registration and effective management must coincide; where they do not, Art. 13(3) allocates the gain to neither State on its own terms, and the Agreement does not resolve the gap. This is also an income-and-capital treaty — notified under section 44A of the Wealth-tax Act, 1957 as well as section 90 — with a separate capital article at Article 23.

What this page does not tell you. The text used is the Income Tax Department's own record of Notification SO 635(E) and the annexed Agreement; it is machine-readable and complete, and no page was illegible. The signature clause as printed does not name the place of signature, so this record does not state where the Agreement was signed, and the notification as printed carries no file number and no signatory's name. The Hindi and Mongolian texts were not used; only the English, which is expressly "the operative one" on divergence. Several questions are left open on the face of the instrument and there is no protocol to answer them. Art. 5(2)(g) names a building site, a construction project and an assembly project but not an installation project, so whether a pure installation contract is inside the nine-month rule is unresolved; it also says nothing about when the nine-month clock starts, so whether purely preparatory mobilisation time counts is open. Art. 5(3) has no combination sub-paragraph, so a fixed place used for a combination of otherwise excluded activities is not expressly protected. "Principally" in Art. 13(4) is undefined — no percentage, no valuation date, no averaging rule, no look-back. Art. 13(3) requires the enterprise to be registered in and headquartered in the same State and does not say what happens when it is not. Art. 11(3)(b) makes an exemption turn on approval by "the Government" of the source State without identifying the organ, the form or the procedure, and whether any such approvals have been granted is not established from the sources used here. Art. 12(4) carves out only payments to the payer's employee and gives no rule of priority against Article 14. Articles 15 to 22 and 25 to 28 are described only where they bear on the points covered above and are not set out in detail. Mongolia's MLI position is not established from the sources used here: the conclusion that no principal purposes test applies rests on the absence of a synthesised text in the department's collection and on the notified text carrying no modification marker, not on a check of the OECD Depositary listing, which would settle whether Mongolia has signed or ratified the MLI and whether India has listed this Agreement as a Covered Tax Agreement. The absence of an amending notification in the department's record is not proof that none exists. Domestic-law questions that decide many cases in practice — surcharge and cess on top of the treaty rate, section 206AA, and the certification requirements in Rule 21AB — are outside the notification and outside this record.

The India–Mongolia tax treaty