India has signed a double taxation avoidance agreement (DTAA) with Colombia. This agreement will provide tax stability to the residents of India and Colombia. It would also facilitate mutual economic cooperation as well as stimulate the flow of investments, technology and services between the two countries.
The DTAA was signed here today by Mr Sudhir Chandra, Chairman of the Central Board of Direct Taxes (CBDT), on behalf of the Indian Government, and Mr Juan Alfredo Pinto Saavedra, Ambassador of the Republic of Colombia to India, on behalf of Colombia.
It provides that business profits will be taxable in the source State if the activities of an enterprise constitute a permanent establishment in the source State. Profits of a construction, assembly or installation projects will be taxed in the State of source if the project continues in that State for more than six months.
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. Dividends, interest and royalty income will be taxed both in the country of residence and in the country of source.
However, the maximum rate of tax to be charged in the country of source will not exceed 5 per cent in the case of dividends and 10 per cent in the case of interest and royalties. Capital gains from the sale of shares will be taxable in the country of source, an official release said.
The DTAA also incorporates provisions for effective exchange of information and assistance in collection of taxes between tax authorities of the two countries in line with internationally accepted standards. This includes exchange of banking information. Anti-abuse provisions have also been incorporated to ensure that the benefits of the DTAA are availed by the genuine residents of the two countries.