Govt. of India and Govt. of NZ signs Third Protocol to the Convention for avoidance of double taxation and the prevention of fiscal evasion

The Ministry of Finance (Department of Revenue) vide notification S.O. 3512(E) dated November 2, 2017 sets out the Third Protocol to the Convention between the Government of the Republic of India and the Government of New Zealand for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income (hereinafter referred to as the said “Protocol”).

The said Protocol was signed at New Delhi on October 26, 2016, but came into force on September 7, 2017 and now has been notified by the Ministry of Finance (Department of Revenue) in the Official Gazette of India.

The original convention between the Government of Republic of India and the Government of New Zealand for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income was done at Auckland on October 17, 1986 (hereinafter referred to as “the Convention”).

The highlights of the Protocol are as under:-

1. Article 26 of the Convention shall be deleted and replaced by a new amended Article 26 including few additions to the previous Article.

The various points as mentioned in the new amended article are as follow:-

1. The competent authorities of the Contracting States shall exchange such information as is foreseeably relevant for carrying out the provisions of the Convention or for the administration or enforcement of the domestic laws concerning taxes of every kind and description imposed on behalf of the Contracting States.
2. Any information received by a Contracting State shall be treated as confidential in the same manner as information obtained under the domestic laws of that State. This information shall be disclosed only to persons or authorities concerned with the assessment or collection; enforcement or prosecution; or the determination of appeals in relation to the taxes.
3. Contracting States may disclose the information in public court proceedings or in judicial decisions.
4. If any information is requested by a Contracting State in accordance with this Article, the other Contracting State shall use its information gathering measures to obtain the requested information, even though that other State may not need such information for its own tax purposes.
5. No Contracting State shall decline to supply information solely because it has no domestic interest in such information.
6. No Contracting State shall decline to supply information solely because the information is held by a bank, other financial institution, nominee or person acting in an agency or a fiduciary capacity or because it relates to ownership interests in a person.

2. Addition of Article 26A which hereby amends Article 26 further.

The new Article 26A states as follows:-

1. The Contracting States shall lend assistance to each other in the collection of revenue claims.
2. “Revenue Claim” means an amount owed in respect of taxes of every kind and description imposed on behalf of the Contracting States, or of their political subdivisions or local authorities, insofar as the taxation thereunder is not contrary to this Convention or any other instrument to which the Contracting States are parties, as well as interest, administrative penalties and costs of collection or conservancy related to such amount.
3. When a revenue claim of a Contracting State is enforceable under the laws of that State and is owed by a person who cannot prevent its collection, that revenue claim shall at the request of that State be accepted for purposes of collection by the other State. Revenue claim when collected by the other State has to be in accordance with the provisions of their laws applicable to the enforcement and collection of its own taxes, as if the revenue claim were a revenue claim of that other State.
4. Both the Contracting States have to take measures of conservancy while collecting their respective amount of revenue claims as per their own applicable laws, and that revenue claim shall be accepted at the request of the State for purposes of taking measures of conservancy by the other State.
5. Revenue claim accepted by a Contracting State for above mentioned purposes shall not be subject to the time limits or accorded any priority applicable to a revenue claim under the laws of that State by reason of its nature as such.
6. Proceedings with respect to the existence, validity or the amount of a revenue claim of a Contracting State shall only be brought before the courts or administrative bodies of that State. Nothing in this Article shall be construed as creating or providing any right to such proceedings before any court or administrative body of the other Contracting State.
7. Where a request has been made by a Contracting State under point (iii) and (iv) as mentioned above, before the other Contracting State which has collected and remitted the relevant revenue to the first mentioned State, the relevant claim ceases to be:-

• A revenue claim of the first mentioned State. (in case of point iii)
• A revenue claim of the first mentioned State if the first mentioned State either suspends or withdraws its request after notifying the other State. (in case of point iv)

viii. The provisions of this Article in no case shall be construed so as to impose on a Contracting State the following obligations:-

• to carry out administrative measures at variance with the laws and administrative practice of that or of the other Contracting State
• to provide assistance if the other Contracting State has not pursued all reasonable measures of collection or conservancy, as the case may be, available under its laws or administrative practice
• to provide assistance in those cases where the administrative burden for that State is clearly disproportionate to the benefit to be derived by the other Contracting State
• to carry out measures which would be contrary to public policy

The Protocol also mentions that it shall form an integral part of the Convention and shall remain in force as long as the Convention remains in force and shall apply as long as the Convention itself is applicable.