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India Makes Tax Agreement With Mozambique

by Mary Swire, Tax-News.com, Hong Kong

17 June 2011


The government of India has notified the Double Taxation Avoidance Agreement with the government of Mozambique for the avoidance of double taxation and for the prevention of fiscal evasion with respect to taxes on income.

The DTAA will ensure that business profits will be taxable in the source state if the activities of an enterprise constitute a permanent establishment in the source state. Profits from a construction, assembly or installation project will be taxed in the state of source if the project continues in that state for more than 12 months.

According to India's Central Board of Direct Taxes (CBDT), profits derived by an enterprise from the operation of ships or aircraft in international traffic will be taxable in the country of residence of the enterprise. Dividends, interest and royalties income will be taxed both in the country of residence and in the country of source. However, the maximum rate of tax to be charged in the country of source will not exceed 7.5% in the case of dividends and 10% in the case of interest and royalties. Capital gains from the sale of shares will be taxable in the country of source.

The CBDT said that the agreement further incorporates provisions for effective exchange of information and assistance in the collection of taxes between the tax authorities of the two countries in line with internationally accepted standards plus the exchange of banking information. It also incorporates anti-abuse provisions to ensure that the benefits of the agreement are availed of by the genuine residents of the two countries.

It is hoped that the agreement will provide tax stability to the residents of both India and Mozambique and facilitate mutual economic cooperation as well as stimulate the flow of investment, technology and services between the two countries.

TAGS: tax | investment | business | India | interest | royalties | banking | Mozambique | tax rates | dividends | construction | standards

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