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India And Iceland Sign DTA

by Lorys Charalambous, for, Cyprus

28 November 2007

It emerged on Friday that India has signed a Double Taxation Avoidance Agreement (DTAA) with the Government of Iceland, for the avoidance of double taxation, and for the prevention of fiscal evasion with respect to taxes on income.

The Agreement also aims to promote economic cooperation between the two countries.

The Agreement was signed by P. Chidambaram, Finance Minister on behalf of the Government of India and Arni Mathiesen, the Minister of Finance of Iceland on behalf of the Government of Iceland.

According to the Indian government:

"The DTAA between India and Iceland which will come into force on a date to be notified in due course, covers in the case of India, income-tax including any surcharge thereon and in the case of Iceland, income-tax to the State and to the municipalities. The DTAA provides for taxation of dividend, interest, royalties and fees for technical services-both in the country of residence as well as the country of source."

"However, the rate of tax in the country of source shall not exceed ten percent of the gross amount of payment in case the beneficial owner of the payments is a resident of the Contracting State."

"The DTAA provides that capital gains from alienation of shares of a company shall be taxable in the country where the company is a resident. The incidence of double taxation shall be avoided by one country giving credit for taxes paid by its residents in the other country. There is a provision for exchange of information in cases, which are under investigation in either of the two countries. Both the countries shall assist each other in collection of revenue claims. There is also a provision for limitation of benefits under the DTAA to prevent misuse of the provisions of the DTAA."

"The Agreement will further stimulate the flow of capital, technology and personnel between the two countries. It will also contribute to the tax stability and facilitate mutual cooperation."

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