India Renegotiating Tax Treaties

Mary Swire, Tax-New.com, Hong Kong

22 November 2010

The Indian government is attempting to renegotiate its double tax treaties in order to establish how much money has been moved out of the country by its residents.

Finance Minister Pranab Mukherjee has written to 78 countries asking them to amend existing tax treaties, and he has insisted on their adding on Article 26 of the Model Tax Convention of the Organization for Economic Cooperation and Development, which provides a legal basis for the bilateral exchange of information for tax purposes. Currently India has comprehensive Double Taxation Avoidance Agreements (DTAAs) with these countries, setting out agreed rates of tax and jurisdiction on specified types of income arising in a country to a tax resident of another country.

In a speech to Indian business leaders Mr Mukherjee reported that the DTAAs are being renegotiated and that the government has also finalized tax information exchange agreements with eight countries. The hope is that once these changes have taken place his department will be able to estimate how much money is being held offshore.

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