India and the United Kingdom (UK) have made amendments to the convention on avoidance of double taxation, by signing a protocol. The pact will streamline the provisions on partnerships and dividends, besides enhancing the information flow between tax authorities of the two countries. The pact was signed by Mr Jaimini Bhagwati, High Commissioner of India to the UK, and Mr David Gauke, Exchequer Secretary to the Treasury. The pact relates to the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains.
Firms partnering with UK would benefit from the amendment. Further, the withholding taxes on the dividends would be 10 per cent or 15 per cent and would be equally applicable in the UK and India. Post the amendment, the convention will provide tax stability to the residents of India and the UK and will facilitate economic cooperation between the two nations. It will also encourage the flow of investment, technology and services.
The pact incorporates the provisions for effective exchange of information between the tax authorities of the two countries in line with latest international standards, including exchange of banking information and supplying of information irrespective of domestic interest. It also provides for sharing of information to other agencies with the consent of the supplying state. The pact further includes the anti-abuse (limitation of benefits) provisions to ensure that the benefits of the convention are not misused.
Further, both the countries would enter into memorandums of understanding (MoUs) to expedite exchange of information and assistance in collection of taxes.
News Source: IBEF