India-US Double Taxation Avoidance Agreement: Key Points & Benefits

09 Mar  0 Sin categoría

The Double Taxation Avoidance Agreement Between India and United States of America

This Double Taxation Avoidance Agreement (DTAA) is entered into between the Government of India and the Government of the United States of America with the aim of preventing international double taxation and providing a framework for cooperation between the two countries on tax matters.

Article 1 – Personal Scope This Agreement shall apply to persons who are residents of one or both of the Contracting States.
Article 2 – Taxes Covered The existing taxes to which this Agreement shall apply are in particular:
Article 3 – General Definitions For the purposes of this Agreement, unless the context otherwise requires:
Article 4 – Residence For the purposes of this Agreement, the term «resident of a Contracting State» means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, citizenship, place of management, place of incorporation, or any other criterion of a similar nature.
Article 5 – Permanent Establishment For the purposes of this Agreement, the term «permanent establishment» means a fixed place of business through which the business of an enterprise is wholly or partly carried on.
Article 6 – Income from Immovable Property Income derived by a resident of a Contracting State from immovable property (including income from agriculture or forestry) situated in the other Contracting State may be taxed in that other State.
Article 7 – Business Profits The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein.
Article 8 – Shipping and Air Transport Profits derived by an enterprise of a Contracting State from the operation of ships or aircraft in international traffic shall be taxable only in that State.
Article 9 – Associated Enterprises Where an enterprise of a Contracting State participates directly or indirectly in the management, control, or capital of an enterprise of the other Contracting State, the profits of the enterprise of the first-mentioned State may be taxed in the other State.
Article 10 – Dividends Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State.
Article 11 – Interest Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.
Article 12 – Royalties Royalties arising in a Contracting State and derived by a resident of the other Contracting State may be taxed in that other State.
Article 13 – Capital Gains Gains derived by a resident of a Contracting State from the alienation of immovable property referred to in Article 6 and situated in the other Contracting State may be taxed in that other State.
Article 14 – Independent Personal Services Income derived by an individual who is a resident of a Contracting State in respect of professional services or other independent activities may be taxed in the other Contracting State.
Article 15 – Dependent Personal Services Subject to the provisions of Articles 16, 18, and 19, salaries, wages, and other similar remuneration derived by a resident of a Contracting State in respect of an employment may be taxed in that other State.
Article 16 – Directors` Fees Directors` fees and other similar payments derived by a resident of a Contracting State in his capacity as a member of the board of directors of a company which is a resident of the other Contracting State may be taxed in that other State.
Article 17 – Artistes and Athletes Notwithstanding the provisions of Article 14, income derived by public entertainers, such as theatre, motion picture, radio, or television artistes, and musicians, and by athletes, from their personal activities as such may be taxed in the country in which these activities are exercised.
Article 18 – Pensions, Annuities, Alimony, and Child Support Pensions and other similar remuneration paid to a resident of a Contracting State may be taxed in that State.
Article 19 – Governmental Functions Remuneration, other than a pension, paid by a Contracting State or a political subdivision or a local authority thereof to an individual in respect of services rendered to that State or subdivision or authority may be taxed in that State.
Article 20 – Students and Trainees Payments which a student or business apprentice who is or was immediately before visiting a Contracting State a resident of the other Contracting State and who is present in the first-mentioned State solely for the purpose of his education or training receives for the purpose of his maintenance, education, or training shall not be taxed in that State.
Article 21 – Other Income Income not expressly dealt with in the foregoing Articles of this Agreement shall be taxable only in the Contracting State of which the recipient is a resident.
Article 22 – Limitation on Benefits A resident of a Contracting State who receives income from the other Contracting State shall be entitled under this Agreement to the benefits of Articles 10, 11, and 12 only if the beneficial owner of such income satisfies the conditions listed in this Article.
Article 23 – Elimination of Double Taxation In accordance with its laws for the avoidance of double taxation, the United States shall allow to a resident of the United States as a credit against the United States tax on income the appropriate amount of income tax paid to India.
Article 24 – Non-Discrimination Nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which nationals of that other State in the same circumstances are or may be subjected.
Article 25 – Mutual Agreement Procedure Where a resident of a Contracting State considers that the actions of one or both of the Contracting States result or will result for him in taxation not in accordance with the provisions of this Agreement, he may, irrespective of the remedies provided by the domestic law of those States, present his case to the competent authority of the Contracting State of which he is a resident.
Article 26 – Exchange of Information and Administrative Assistance The competent authorities of the Contracting States shall exchange such information as is necessary for carrying out the provisions of this Agreement or of the domestic laws concerning taxes of every kind imposed on behalf of the Contracting States insofar as the taxation thereunder is not contrary to the Agreement.
Article 27 – Diplomatic Agents and Consular Officers Nothing in this Agreement shall affect the fiscal privileges of members of diplomatic missions or consular posts under the general rules of international law or under the provisions of special agreements.
Article 28 – Entry into Force This Agreement shall enter into force on the thirtieth day after the date of receipt of the later of these notifications and its provisions shall have effect:
Article 29 – Termination This Agreement shall remain in force indefinitely but may be terminated by either Contracting State, and may be terminated at any time after five years from its entry into force.

Unraveling the Double Taxation Avoidance Agreement Between India and the United States of America

Question Answer
1. What is the Double Taxation Avoidance Agreement (DTAA) between India and the United States of America? The DTAA is a bilateral agreement between India and the United States of America designed to prevent double taxation of income earned in both countries. This agreement aims to promote cross-border trade and investment by providing relief from double taxation through the allocation of taxing rights between the two countries.
2. How does the DTAA impact individuals and businesses conducting cross-border transactions between India and the United States? The DTAA impacts individuals and businesses by providing them with the opportunity to benefit from reduced tax rates, exemptions, and credits. This can lead to significant tax savings and increased certainty in tax treatment for cross-border transactions.
3. What types of income are covered under the DTAA between India and the United States? The DTAA covers various types of income, including but not limited to, dividends, interest, royalties, and capital gains. It also addresses the treatment of income from employment, pensions, and other sources.
4. How does the DTAA impact the determination of residency for tax purposes? The DTAA contains specific provisions for determining the residency of individuals and businesses for tax purposes. These provisions help in avoiding situations of dual residency and provide clarity on the allocation of taxing rights between the two countries.
5. What are the mechanisms for resolving disputes arising from the interpretation and application of the DTAA? The DTAA provides for the resolution of disputes through mutual agreement procedures and arbitration mechanisms. These mechanisms aim to ensure that taxpayers are not subjected to double taxation due to conflicting interpretations or applications of the agreement.
6. Can the benefits of the DTAA be denied to taxpayers who engage in abusive or fraudulent practices? Yes, the DTAA contains anti-abuse provisions that empower tax authorities to deny the benefits of the agreement to taxpayers engaged in abusive or fraudulent practices. These provisions help in safeguarding the integrity of the agreement and preventing its misuse.
7. How does the DTAA impact the reporting and disclosure requirements for taxpayers with cross-border transactions? The DTAA may impact the reporting and disclosure requirements for taxpayers by introducing additional compliance obligations, such as the need to provide information on foreign assets, income, and transactions. It is important for taxpayers to ensure compliance with these requirements to avoid potential penalties and sanctions.
8. What are the implications of the DTAA for foreign investors and multinational enterprises operating in India and the United States? The DTAA can have significant implications for foreign investors and multinational enterprises, including the ability to access reduced tax rates, exemptions, and credits. It also provides certainty in tax treatment and helps in avoiding double taxation, thereby enhancing the attractiveness of cross-border investment and business activities.
9. How does the DTAA impact the taxation of capital gains arising from the sale of shares and other investments? The DTAA contains specific provisions for the taxation of capital gains, including those arising from the sale of shares and other investments. These provisions help in determining the allocation of taxing rights between the two countries and provide relief from double taxation of such gains.
10. What are the key considerations for taxpayers and businesses seeking to leverage the benefits of the DTAA between India and the United States? Key considerations for taxpayers and businesses include understanding the provisions of the DTAA, ensuring compliance with reporting and disclosure requirements, and seeking professional advice to optimize tax benefits and mitigate potential risks. It is essential to stay informed about developments and changes in the agreement to proactively manage tax implications.

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