Double Tax Avoidance Agreement Meaning

Similarly, another tax, which generates many inflows, could be examined and revised. The list of countries with which India has these DBA agreements could be visited from time to time. India has concluded a comprehensive double taxation treaty with 88 countries, 85 of which have entered into force. [15] This means that there are agreed tax rates and jurisdictions for certain types of income to be collected in one country for a tax established in another country. Under India`s Income Tax Act 1961, there are two provisions, Section 90 and Section 91, which provide taxpayers with a special facility to protect them from double taxation. Section 90 (bilateral relief) applies to taxpayers who have paid tax to a country with which India has signed double taxation treaties, while Section 91 (unilateral relief) grants benefits to taxpayers who have paid taxes to a country with which India has not signed an agreement. Thus, India relieves both types of taxpayers. Prices vary from country to country. The Treaty must be read carefully to understand its provisions in their proper perspective. The best way to understand the DBAA is to compare it to a partnership agreement between two people. The partnership uses the terms “the part of the first part” and the DBA, the terms used being “the other Contracting State”. The words “States Parties” could also be replaced by the names of the countries concerned and the DBAA could be re-read for a better understanding. In this case, the company was founded in Japan.

It formed a consortium with four others and entered into an agreement with an Indian company, Petronet LNG Ltd, for the construction of a liquefied natural gas receiving and degassing plant in Gujarat. Each member of the consortium should receive separate payments. The contract included offshore delivery, offshore services, onshore delivery, onshore services, construction and assembly. The price was payable for offshore deliveries and services in US dollars, while the price of onshore deliveries, services, construction and assembly was due in part in dollars and rupees. 7. Application of the provisions on the elimination of double taxation: each of the substantive articles must be considered together with Article 23, which defines the methods for eliminating double taxation. Although BABs are developed with the aim of facilitating tax matters and encouraging investment, there may be some side effects that these agreements can have. “double taxation” under tax treaties is generally legal double taxation (circumstances in which a taxpayer is taxed on the same income in more than one jurisdiction). There is another type of double taxation — economic double taxation. This is related to the taxation of two or more taxes on a tax basis.

Dear Sir, we had provided services to one of our clients in Zambia and increased our dollar bill. We have just learned that the client has stated that he will pay after deduction of tax. However, we are also required to pay income tax for the expected income from the aforementioned service. In this case, we have to double the tax on the same income. Can you advise us to avoid such double taxation? I would like to know how to deal for India`s DTAAs DTAs are sometimes used by unscrupulous companies to pay very less tax or no taxes by posing as companies or entities in one of the countries that are parties to the agreement. This results in a loss of turnover. To avoid this, countries usually include a benefit limitation clause (LoB) in their DBAA. This relief is made by the country of origin for the tax paid by the home company, even if there is no mutual agreement between the two countries. In order to reduce these abuses, countries include in their agreement a clause known as the limitation of benefits (LOB clause) that defines which investments are made only to preserve the benefit of the double taxation treaty (DBA) or what are the actual investments.

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