India and Fiji signed Double Taxation Avoidance Agreement

Jan 31, 2014 10:10 IST

Government of India and the government of Fiji on 30 January 2014 signed a Double Taxation Avoidance Agreement (DTAA) for avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income.

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On behalf of India the agreement was signed by P. Chidambaram, Union Minister of Finance and on behalf of Fiji it was signed by Aiyaz Sayed-Khaiyum, Attorney General and Minister of Justice, Anti-Corruption, Public Enterprises, Communications, Civil Aviation, Tourism, Industry and Trade.

The negotiation on the DTAA was reached in 2011 and this agreement will provide tax stability to the residents of India and Fiji. It will also facilitate in mutual economic cooperation as well as stimulate the flow of investment, technology and services between the two countries. It also incorporates provisions for an effective exchange of information and assistance in collection of taxes between tax authorities of the two countries including exchange of banking information.

The maximum rate of tax that should be charged in the country of source will not exceed the prescribed limit for such dividends, royalties, interest and fees for technical services. The capital gains that are earned by the sale of shares will be taxable in the country of source. The anti-abuse provisions have been incorporated in the agreement to ensure that the benefits of Agreement are availed of only by the residents of the two countries and to prevent any abuse of treaty.

The agreement will also help the two countries in

• As per the DTAA the business profit will be taxable in the source state if the activities of an enterprise constitute a permanent establishment in the source country
• Profits derived by an enterprise from the operation of aircraft in international traffic shall be taxable in the country of place of effective management of the enterprise
• Dividends, interest, royalty income and fees for technical or professional services will be taxed both in the country of residence and in the country of source

About Double Taxation Avoidance Agreement (DTAA)
Double Taxation Avoidance Agreements (DTAA) means as an essential bilateral agreements that has been reached between the countries like this case the agreement on DTAA between India and Fiji. This is basically signed with an objective to avoid taxation of income in both the countries and to promote economic trade and investment between the two countries.

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The Double Tax Avoidance Agreements (DTAA) is essentially bilateral agreements entered into between two countries, in our case, between India and another foreign state. The basic objective is to avoid, taxation of income in both the countries (i.e. Double taxation of same income) and to promote and foster economic trade and investment between the two countries.

Important advantages of DTAA are    
• Lower Withholding Taxes (Tax Deduction at Source)
• Complete Exemption of Income from Taxes
• Underlying Tax Credits
• Tax Sparing Credits

The provisions mentioned under DTAA provide the facility of overriding the general provisions mentioned under the taxes of a particular country. In case of India Section 90(2) has been inserted in the Indian Income Tax Act helps the countries under DTAA to override the domestic tax norms. Insertion of this code in the Act provides the assessee a chance to choose among the provisions of Income Tax Act or of DTAA, whichever seems as more beneficial.

International Taxation (DTAA Comprehensive agreements – With respect to taxes on income) India has signed with 86 nations. The nations are
Armenia, Australia, Austria, Bangladesh, Belarus, Belgium, Botswana, Brazil, Bulgaria, Canada, China, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Ethiopia, Finland, France, Fiji, Georgia, Germany, Greece, Hashemite Kingdom of Jordan, Hungary, Iceland, Indonesia, Ireland, Israel, Italy, Japan, Kazakhstan, Kenya, Korea, Kuwait, Kyrgyz Republic, Libya, Lithuania, Luxembourg, Malaysia, Malta, Mauritius, Mongolia, Montenegro, Morocco, Mozambique, Myanmar, Namibia, Nepal, Netherlands, New Zealand, Norway, Oman, Philippines, Poland, Portuguese, Republic Qatar, Romania, Russia, Saudi Arabia, Serbia, Singapore, Slovenia, South Africa, Spain, Sri Lanka, Sudan, Sweden, Swiss Confederation, Syrian Arab Republic, Tajikistan, Tanzania, Thailand, Trinidad and Tobago, Turkey, Turkmenistan, UAE, UAR (Egypt), UGANDA, UK, Ukraine, United Mexican States, USA, Uzbekistan, Vietnam and Zambia.

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