India Nepal DTAA Signed
Legal Corner Icon — the image was hosted by the publisher and was not captured.INDIA and Nepal have signed the revised Double Taxation Avoidance Agreement, yesterday. The revised DTAA will provide tax stability to the residents of India and Nepal and facilitate mutual economic cooperation as well as stimulate the flow of investment, technology and services between India and Nepal. In the revised DTAA the threshold withholding tax rates on dividends, interest, etc., are rationalised to reflect the present day situation and developments in the area of international taxation. Finance Minister Pranab Mukherjee said after signing the agreement, “India has 81 such DTAAs. In line with the best practices followed, we have incorporated in this DTAA also, the provisions for effective exchange of information, assistance in collection of taxes between tax authorities and the anti-abuse provisions to ensure that the benefits of the Agreement are availed of by the genuine residents and not misused by third country residents. In the area of exchange of information, the revised DTAA provides for internationally accepted standards including sharing of bank information and sharing of information without domestic tax interest. Further, the information received can be shared with other law enforcement agencies with the consent of the information supplying country.”
Nepal's Republica reported, “The Double Tax Avoidance Agreement with India signed on Sunday in Kathmandu is the outcome of almost three years of protracted negotiations. The formal process of negotiation started when Baburam Bhattarai was the finance minister and now has been formally signed when he is the prime minister. It is sheer coincidence! …….. the new agreement reduces the number aggregate of days in a year to 90 only (from earlier 183) for a consulting or service business set up to be termed as “resident” for the purpose of taxation. This certainly increases Nepal´s tax base as there are more Indian consulting companies working in Nepal than our companies working in India. The new agreement reduces the rate of tax dividends paid by the resident company of Nepal to the resident company of India to five percent if the Indian company is holding at least 10 percent of the shares of the Nepali resident company. ……… The most significant feature of the new agreement is that anyone living a cozy life in India by defaulting on Nepali taxes in the past can now be brought to book. Nepali tax authorities can obtain assistance of Indian authorities to collect any revenue claims, not just income tax, from a person living in India whose taxes are due in Nepal.”