India And Italy Cut Withholding Tax Rates In Updated Double Tax Agreement

by Lorys Charalambous, Tax-News.com, Cyprus

18 January 2006

The governments of India and Italy have signed a new protocol which amends the existing Double Taxation Avoidance Agreement between the two states by reducing withholding tax rates.

The protocol was signed by K M Chandrashekhar, Secretary of the Indian Department of Revenue, and Italian Ambassador to India, Antonio Armellini.

Under one of the key revisions to the treaty, the withholding tax rate has been brought down to 10% in the case of dividends, interest and fees for technical services. This is intended to bring about a uniform tax structure with all other European Union countries.

Previously, the withholding tax was levied at rates between 15% and 25%.

The protocol also sets out broader rules concerning Permanent Establishments for taxation of services and insurance cover and deals with the tax treatment of business profits, air transport and shipping.

In addition, the updated treaty has a new clause aimed at fostering greater cooperation between the two governments on the prevention of fiscal evasion, which is in line with the OECD Model Treaty.

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