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DTAA Notes For Students

Regarding dtaa

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35 views2 pages

DTAA Notes For Students

Regarding dtaa

Uploaded by

cherry12345bhi
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Indian Economy for IAS by Pratik Gupta

DTAA

A Double Taxation Avoidance Agreement (DTAA) is a treaty established between two countries to
mitigate the possibility of taxpayers being taxed on the same income in both jurisdictions. DTAA
achieves this by delineating the taxing rights of each country on various types of income to prevent
double taxation. Typically, DTAA covers income categories such as business profits, dividends,
interest, royalties, and capital gains.
Under DTAA, taxpayers can claim relief or credit for taxes paid in one country against taxes due in the
other, ensuring that they are not unfairly burdened with excessive taxation. This helps promote
international trade, investment, and economic cooperation by eliminating barriers caused by double
taxation.
DTAA agreements vary in scope and provisions, depending on the negotiating countries' objectives
and interests. They often include mechanisms for resolving disputes between tax authorities of the
contracting states and preventing tax evasion and avoidance. Additionally, DTAA may include
provisions for exchange of information between the countries to enhance transparency and combat
tax evasion.
Overall, DTAA plays a crucial role in facilitating cross-border economic activities, fostering
international relations, and ensuring fairness in the taxation of individuals and businesses operating
in multiple jurisdictions.

Types of DTAA

1- Comprehensive DTAA- Like with South Africa, Australia, Bangladesh, Bhutan, USA, Japan,
Germany, Singapore, Mauritius, etc.
2- Inter-Governmental Agreement and MoU between the Indian Government and USA
Government in the name of Foreign Account Tax Compliance Act (FATCA) of USA.
3- Limited Agreements- Like as we have with Afghanistan, Ethiopia, Iran, Pakistan, etc. (around
8 Countries)
4- Specified Association Agreement- As India have with Taipei under Section 90-A of IT Act 1961.
(Double taxation only)
5- Tax Information Exchange Agreement (TIEA) like with Argentina, Bahamas, Cayman Island,
etc. (Around 19 in Total- mainly signed with Tax Heavens)

Double Taxation Avoidance Agreement Country List

India has comprehensive Double Taxation Avoidance AGREEMENTS (DTAA) WITH 88 (SIGNED 88
DTAAS out of which 85 have entered into force) countries. This means that there are agreed rates of
tax and jurisdiction on specified types of income arising in a country to a tax resident of another
country.

Under the Income Tax Act 1961 of India, there are two provisions, Section 90 and Section 91, which
provide specific relief to taxpayers to save them from double taxation.

1. Section 90 is for taxpayers who have paid the tax to a country with which India has signed
DTAA,
2. while Section 91 provides relief to tax payers who have paid tax to a country with which India
has NOT signed a DTAA.

Amended DTAA with Mauritius


Indian Economy for IAS by Pratik Gupta

1. Now, a Mauritian entity will have to pay capital gains tax here while selling shares in a
company in India from April 2017.
2. "Mauritius treaty additionally provides for 50 per cent capital gains tax exemption for two
years from April 1, 2017 to March 31, 2019 subject to fulfilment of limitation on benefits (LoB)
conditions

Amended DTAA with Singapore

India had amended the tax treaty with Singapore on December 30, 2016, under which for 2 years
beginning April 1, 2017, capital gains tax will be imposed at 50 per cent of the prevailing domestic
rate. Full rate will apply from April 1, 2019.
In order to provide certainty to investors, investments in shares made before April 1, 2017, have been
grandfathered subject to fulfillment of conditions in Limitation of Benefits clause as per 2005 Protocol.

This is a taxpayer-friendly measure and is in line with India's commitments under Base Erosion and
Profit Shifting (BEPS) action plan to meet the minimum standard of providing Mutual Agreement
Procedure (MAP) access in transfer pricing cases.

Base Erosion and profit shifting

Base Erosion and Profit Shifting (BEPS) refers to strategies used by multinational companies to exploit
gaps and mismatches in tax rules, artificially shifting profits from high-tax jurisdictions to low-tax or
tax-free locations to reduce their overall tax liabilities. Techniques include transfer pricing
manipulation, intra-group loans, and exploiting tax havens. BEPS undermines tax systems, erodes the
tax base of countries, and leads to revenue losses and unfair competition. To address BEPS,
international cooperation and coordinated efforts among countries are necessary, including the
implementation of comprehensive tax reforms and measures to enhance transparency and
enforcement of tax laws.

Mutual Agreement Procedure

Mutual Agreement Procedure (MAP) is a mechanism in tax treaties allowing competent authorities of
two countries to resolve disputes regarding double taxation or interpretation of treaty provisions.
Taxpayers can request MAP to resolve issues not settled through domestic procedures, promoting
fairness and consistency in international taxation.

FATF

The Financial Action Task Force (FATF) is an intergovernmental organization established to combat
money laundering, terrorist financing, and other threats to the integrity of the international financial
system. It sets global standards, conducts evaluations of countries' compliance, and promotes the
implementation of measures to combat financial crimes worldwide.

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