India & South Korea sign revised DTAA to avoid double taxation
Q. India and which other country signed a revised DTAA for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income?- Published on 28 Oct 16a. South Korea
b. North Korea
c. China
d. Japan
ANSWER: South Korea
India and South Korea on 26th Oct 2016 signed a revised Double Taxation Avoidance Agreement for the avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income.
- The provisions of the new DTAA will have an effect in India with respect to income derived in fiscal years beginning on or after April 1, 2017.
- Earlier DTAA Convention between India and Korea was inked on 19th July, 1985 and notified on Sept 26, 1986.
- It provides for source based taxation of capital gains arising from shares alienation comprising more than 5 percent of share capital.
- To promote cross border flow of investments and technology, the revised DTAA provided for reduction in withholding tax rates from 15 to 10 percent on fees for technical services and from 15 to 10 percent on interest income.
- It expands the scope of dependant agent Permanent Establishment provisions in concordance with Indian policy of source based taxation.
- It provides for exclusive residence based taxation of shipping income from global traffic under Article 8 of the revised DTAA.
- It provides recourse to taxpayers of both countries to apply for Mutual Agreement Procedure in transfer pricing disputes as well as apply for bilateral Advance Pricing Agreements.
- The Article on Exchange of Information is updated to the latest international standard to provide for the exchange of information to the maximum possible extent.
- As per the revised Article, the country from which information is requested cannot leave aside the information on grounds of domestic tax interest.
- It inserts the new Article for assistance inc collection of taxes between tax authorities.
- It inserts new Limitation of Benefits Article i.e. anti-abuse provisions to ensure the benefits are availed by genuine residents of the two nations only.
- It also seeks to avoid the burden of double taxation for taxpayers of two countries to promote and stimulate the flow of investment, technology and services between India and Korea.
