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India And Tajikistan Sign Double Tax Agreement

by Lorys Charalambous, Tax-News.com, Cyprus

21 November 2008


A Double Taxation Avoidance Agreement between India and Tajikistan was signed on Thursday by Indian Central Board of Direct Taxes chairman Narendra Bahadur Singh and Tajikstan's Deputy Minister of Finance Norinov Nurmahmadovich.

In the case of both India and Tajikistan, double taxation will be eliminated through the credit method. In other words, tax paid by a resident of India in Tajikistan will be allowed as a credit if the same income is taxable in India and vice versa.

The salient features of the Agreement are as follows:

The agreement will cover in the case of India, income tax including any surcharge thereon and in the case of Tajikistan, the taxes on income of legal persons and taxes on income of individuals.

Withholding rates for taxation of dividends in the source state have been restricted to a maximum of 5% of the gross amount of dividends if the beneficial owner of the dividends is a company which holds directly at least 25% of the share capital of the company paying the dividends, and 10% of the dividends in all other cases. Withholding rates for taxation of interest and royalties in the source state have been restricted to a maximum of 10% of the gross amount of interest and royalties respectively.

Any enterprises with residence in the opposing state will be deemed as having a permanent establishment after one calendar year.

Profits derived by an enterprise from the operation of ships or aircraft in international traffic is taxable in the country of residence of the enterprise.

Visiting students have been provided tax concessions for such period of time as may be reasonable or customarily required to complete the education or training undertaken or for six consecutive years from the date of their arrival, whichever is less.

The agreement also provides for the exchange of information between the tax authorities of the two countries and contains an anti-abuse provision aimed at preventing misuse of the agreement.

According to the Indian government, the agreement aims to provide tax stability to the residents of India and Tajikistan and facilitate mutual economic co-operation as well as stimulate the flow of investment, technology and services between the two countries.


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