BEPS Current Affairs - 2019
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India and China have signed protocol to amend Double Taxation Avoidance Agreement (DTAA) for the avoidance of double taxation and for prevention of fiscal evasion with respect to taxes on income by allowing exchange of information. Under Section 90 of Income-tax Act, 1961, India can enter into agreement with foreign country or specified territory for the avoidance of double taxation of income, for exchange of information for the prevention of evasion.
The Protocol to amend DTAA with China updates existing provisions for exchange of information to latest international standards. It incorporates changes required to implement treaty related minimum standards under the Action reports of Base Erosion & Profit Shifting (BEPS) Project. Besides minimum standards, it also brings in changes as per BEPS Action reports as agreed upon by the two sides. It will help prevent tax evasion by allowing the exchange of information.
Tags: Base erosion and profit shifting • BEPS • Corporate tax avoidance • Double taxation • Double Taxation Avoidance • DTAA • Economy • Foreign Direct Investment • India-China • International taxation • Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting • National • Tax • Tax avoidance • Tax Evasion • Taxation in the United States • World Economy
India and Hong Kong have signed agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.
Hong Kong is former British colony and is special administrative region of China which enjoys a high degree of autonomy under which it has an independent taxation system. It is an important financial and trading partner of India and the absence of a treaty was seen hindrance in many ways.
This agreement will stimulate flow of investment, technology and personnel from India to Hong Kong and vice versa, prevent double taxation and provide for exchange of information between two contracting parties. It will also improve transparency in tax matters and will help curb tax evasion and tax avoidance.
It will provide investors advantage of lower withholding tax of 10% on interest or royalties provided they fulfil main purpose test which broadly checks that transaction is not entered specifically to avoid taxes. It will also provide for capital gains taxation of indirect transfers. It provides that gains from sale of shares of company deriving more than 50% of its value from property situated in country will be taxed in that country.
This agreement will give protection against double taxation to over 1,500 Indian companies and businesses that have presence in Hong Kong as well as to Hong Kong-based companies providing services in India.