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Semelhante a Double taxation avoidance agreement (DTAA)
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Double taxation avoidance agreement (DTAA)
- 1. Double Taxation Avoidance Agreement PREPARED BY: VINAY KUMAR SINGH
- 2. Double Taxation Taxpayer pays double taxes on their income earned from the source country as well as the residence country. And also for partners charged taxes separately on single income. imbalance in tax collection on global income of individuals Demotivating for the taxpayer Against free flow of trade Against the development of the nation Taxes are charged by nation on the basis of Resident Status Non Resident - Source of Income Doctrinal research methodology of study has been used for studies. Why different model convention are followed while DTAA How DTAA is important for the development of the nation Special study on India and China .
- 3. Residential Status and Income Residential Status Resident Resident and ordinary resident (days 182+ or 60+ days in previous year 365 days in last 4 years ) Resident but not ordinary Resident(9 out 0f 10 years or 729 days in last 7 years) Non Resident Income Income from house properties Salaries Profit and gains from business and profession Capital gains Income from other sources
- 4. Double Taxation Avoidance Agreement - DTAA Bilateral treaty or Multilateral treaty on matter concerning Taxation Model Convention used to draft and follow the treaty OECD and UN MC are the popular one Reciprocal Agreement Fiscal Jurisdiction Domestic Law of States Vs Internal Treaty DTAA Free flow of trade Protection against double taxation Non discrimination Mutual Exchange of Information Legal and Fiscal Certainty Encourage Technology transfer and investment
- 5. Objective of DTAA Proper arrangement and allocation of Tax Define different types of Tax Tax transaction between Resident and non resident Protect interest of tax payer Avoids Confusion Tax Avoidance • Not Illegal • Before tax calculation • Vodafone Case • GAAR Tax Evasion • Illegal in nature • Fraud in nature • Unfair Practice • Punishable
- 6. Vodafone case Vodafone AG Vodafone International Holdings Netherlands CGP Investment Holdings (67%) (Claman Island) Hutchison Essar Hutchison Telecommunication Ltd India Lost - Capital gain Tax (CGT) Tax deduction at source (TDS) 12000 Cr loss 55000 Cr Deal 2008 Bombay HC decision in favour of Indian Govt. 2012 SC decision in Favour of Vodafone D E A L
- 7. Kinds of DTAA Comprehensive Agreement (All Big Economies USA UK ) Limited Agreement (Lebanon Pakistan, Afghanistan ) Tax Info Exchange Agreement (British Virgin Island, Bahamas , Bermuda) Limited Multilateral Agreement (Bangladesh , Nepal)
- 8. Relief Provided by DTAA Bilateral Relief • Section 90 of IT Act 1961(DTAA) • Section 90A of IT Act 1961 • Sec 90B of IT ACT Unilateral Relief • Section 91of IT Act 1961 • When There is no DTAA • When Tax paid in Source country where income arose. (Deduction/Credit relief)
- 9. Composition of DTAA Treaties • Permanent establishment • Source • Resident • Business Profit • Shipping inland waterways and Air Transport • Associated enterprise • Dividend • Interest and Royalties • Independent or Personal services • Dependent Personal services • Income by sports persons or performers • Salary and pension in respect to the government services • Pension and social securities payments • Directors Fees and remuneration for top level managerial official • Exchange of information • Mutual agreement • Non Discrimination • Payment received by students • Method of eliminations • Diplomats and consular officers • Terminations
- 10. Model Conventions Article 23 Eliminates double Taxation Art. 23A – Exemptions Method Art. 23B Credit Methods Adopted by Resident States • 1955 - 1st Resolution • Bilateral agreement of parties on multilateral trade network • Defined multiple aspect of trade • Specially for developed nations • Brought uniformity • 1963 – Agreement approved by European States • 1977 – New technologies and settellite communication • Sharing tax and cross boarder transaction provisions. Article 23 Eliminates double Taxation Art. 23A – Exemptions Method Art. 23B Credit Methods Adopted by Resident States • 1963-64 - affirmed by general assembly and ECOSOC • Interest of Developing nations considered- UN Secretary General formed an Ad-hoc committee on Tax treaties between developing and developed countries • 1980 – Model conventions published • OECD updated - 2001
- 11. Bilateral Relief Methods Methods Credit Full Credit Ordinary Credit Tax Sparing Exemption Full Exemption With Progression Resident Country Exempts the income Arising in source country Tax Paid only in Source country Preferred between Developing and developed country as developed country exports technologies and capital Resident Country Exempts Taxes Paid in source country Lost of revenue is less Not refunded in case if more tax paid in the source country.
- 12. Interpretation of DTAA Vienna Conventions of Law and Treaties Interpretation of Convention and International Laws Anti Abuse Provision under International Laws • International Law Treaty – 1969 • Referred as Treaty on treaties • 116 - Parties States • Drafted by International Law Commission • Defines Treaty as : an international agreement concluded between states in written form and governed by international law 1. Union of India VS Aazadi Bachao Andolan 2. CIT VS Vishakhapatnam port Trust
- 13. DTAA Between India and China 88 countries - India has signed DTAA Biggest Trade Partner - China Comprehensive Agreement to avoid Double Taxation - Complete structure of the tax avoidance. Bilateral System of Relief OECD Model convention is followed by India
- 14. Conclusion Impact of DTAA – DTAA makes a positive changes in the trade and economic environment. Gives confidence to the international trade and FDI. Direct Tax Code Single code for direct taxes Use of simple languages Reducing scope of litigation Elimination of regulatory functions Stability in Market and Economy Effective and efficient use of DTAA improves international interaction , reduces the disputes between states and supports the concept of globalization with free flow of trade and movement of people across globe. Suggestion : - • Uniformity in Model Conventions. • Strong Municipal Laws for the implementation • Judicial interpretation in favour of DTAA • Strong International organization required • An arbitration body for resolution of Tax Disputes.
- 15. Thank you !