India has signed a double taxation avoidance agreement (DTAA) with Uruguay. This agreement provides for effective exchange of information including banking information besides assistance in collection of taxes between the tax authorities of two countries.

Under this DTAA, business profits will be taxable in the source State if the activities of an enterprise constitute a permanent establishment in that State. Dividends, interest and royalty income will be taxed both in the country of residence and in the country of source.

The maximum rate of tax to be charged in the country of source will not exceed 5 percent in the case of dividend and 10 percent in the case of interest and royalties. Capital gains from sale of shares will be taxable in the country of source and tax credit will be given in the country of residence.

The agreement was signed by Mr M.C.Joshi, Chairman of the Central Board of Direct Taxes (CBDT) on behalf of the Indian Government and Mr Cesar Ferrer, Ambassador of Uruguay to India on behalf of Uruguay here on Thursday.

Profits derived by an enterprise from the operation of ships or aircraft in international traffic will be taxable in the country of residence of the enterprise, according to the DTAA.

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