Double Taxation Avoidance Agreements Research Articles

International double taxation: Interpretation in the Indian context and general mitigation Measures

International Double Taxation poses a complex challenge with diverse interpretations, especially in the Indian context. This paper investigates the nuances of double taxation, focusing on legal principles, double taxation avoidance agreements (DTAAs), and their implications for residents and permanent establishments. It analyzes India's engagement in double taxation treaties, considering monistic and dualistic principles, legislative processes, and recent judicial developments. Case studies from French and Indian courts offer insights into treaty interpretation. The paper examines relief methods such as Exemption, Credit, Tax-sparing, and Expense Deduction, emphasizing their application within Indian tax treaties. Notably, Permanent Establishment (PE) significance in international taxation is explored through relevant case law. Conclusively, the paper underscores the importance of addressing international double taxation in the globalized era. It argues that while various relief methods exist, the Exemption method is most effective in mitigating double taxation, contrasting with the partial relief provided by the Credit method. The choice of relief method varies across nations based on financial considerations. This comprehensive exploration contributes to understanding international double taxation in the Indian context, highlighting legal interpretations, treaty dynamics, and mitigation measures. It advocates for harmonizing global approaches to achieve more effective and equitable solutions in international taxation.

Resolving Cross-Border Tax Disputes: An In-Depth Analysis of Double Taxation Avoidance Agreements With A Special Emphasis on The Vodafone Case

Resolving Cross-Border Tax Disputes: An In-Depth Analysis of Double Taxation Avoidance Agreements With A Special Emphasis on The Vodafone Case

Double Taxation Avoidance Agreement (Tax Treaty) Against International Transactions According to the Islamic Economic Perspective

Holding a Double Taxation Avoidance Agreement (P3B) or a Tax treaty is to avoid double taxation. The presence or absence of this tax treaty greatly affects investors’ profits in international trade transactions. International transactions are needed by every country because with international transactions a country will have the opportunity to increase its economic growth. Through this international trade, a country will have the ability to expand its consumption possibilities. In the agreement, the avoidance of double taxation must also meet the principles that apply in taxes and must also meet the principles of Islamic economics and the conditions of tax collection according to Islamic principles. The purpose of this research is the analysis of double taxation avoidance agreements in international transactions according to the perspective of Islamic economics. In this research, the researcher uses the type of library research. The data collection method is in the form of documentation. The documentation that the author does is looking for documents or data that the author considers important to be taken, in the form of newspaper/magazine articles, journals, libraries, brochures, the internet, and books. This study concluded that the taxation method as part of the method in increasing state revenue administratively must be viewed as a universal method that should not be diverted towards favoring a particular person or entity. Simply, double taxation has unfair treatment because there are still unilateral methods that do not provide justice for citizens who have dual citizenship. The principle of justice is an important pillar in Islamic economics.

FDI and Tax Policy: Evidence from Indonesia

Foreign Direct Investment (FDI) is an investment from one country into another country. The purpose of this research is to determine the factors that affect the FDI inward in Indonesia. The research object used is the condition of FDI in Indonesia within 50 years from 1970 until 2019 with quantitative research methods. Data analysis was performed using the multiple linear regression and using software statistic E-views. The results shows that Tax Treaty has positive significant effect on FDI. Tax Incentive have no effect on FDI. Corporate Income Tax Rate has negative significant effect on FDI. Furthermore, GDP per Capita and Inflation Rate have no effect on FDI. Trade Openness have no effect on FDI. This indicates that double taxation avoidance agreements are legalized and active between Indonesia and other countries, enlarging the number of foreign direct investment entering Indonesia. The lower the corporate income tax rate imposed in Indonesia, enlarging the Foreign Direct Investment inward in Indonesia.

Concentrix Service Netherlands S.V.: Most Favoured Nation Clause in India’s Double Taxation Avoidance Agreements

In this article, the author reviews the legal provisions and relevant court decisions relating to the most favoured nation clause in India’s double taxation avoidance agreements (DTAAs). He traces the origin and evolution of this clause in India’s DTAAs and discusses an important dispute that arose in the application of this clause and the position of the courts on the issue. He concludes that even though some courts have decided the issue relating to invocation of MFN clause in favour of the residents of other contracting states, the position is far from settled.

Abuse of double taxation avoidance agreement between India and Mauritius

Double taxation Avoidance agreements are entered between two countries so that the income earned by the residents of both the countries is not taxed twice by the countries. It provides relief to the residents in form of either deduction of tax already paid or by giving credit regarding the tax paid. The objective of this paper is to find the ways in which India-Mauritius Treaty was misused by individuals by doing treaty shopping. The DTAA between India and Mauritius gives specific tax exemptions for individuals who are residents of India and Mauritius. The treaty provides that if a resident of Mauritius invests in shares of an Indian company the capital gains of that resident will not be taxed by the Indian government and would be taxed by the Mauritius government. But because of this treaty it has been seen that individuals from all around the world try to route their investments from Mauritius to India. In this paper the researcher will look into how the treaty was abused and what steps have been taken by Indian authorities in their domestic laws to ensure that individuals who are non-residents of the contracting state cannot avail benefits arising out of the DTAA.

Double Taxation Avoidance Agreements and its Development

Double Taxation Avoidance Agreements and its Development

Country Note: Abolition Of Ddt In India: A Treat For Foreign Investors?

The Indian government eliminated the much maligned dividend distribution tax (DDT) through Finance Act 2020. The abolishing of the DDT marks a return to the shareholder regime of dividend taxation (hereinafter ‘shareholder regime’). Foreign enterprises (generally multinational corporations) aiming to do business in India through subsidiaries or enterprises that already have subsidiaries in India can benefit from this change. This article analyses the tax impact of this change when an Indian subsidiary distributes its profits to its parent or holding company. Thus, the paper presents a tabular representation of taxation in the DDT regime and the shareholder regime and compares them. To present the complete scenario, the paper also analyses different profit distributing mechanisms other than dividends that are used by companies – specifically, the buyback of shares and share capital reduction. Finally, limited liability partnership (LLP) firms offer another vehicle for companies to conduct business in India. Thus, the paper also analyses the taxation aspects of an LLP distributing profits to its partner company. The return to the shareholder regime will allow non-residents to avail beneficial tax rates provided for dividend taxation in double taxation avoidance agreements (DTAAs) signed by India with other countries. Thus, the final section of this article discusses the mechanisms that are in force to prevent treaty shopping. The principal purpose test (PPT) brought in by the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS) (Multilateral Instrument or MLI), the threshold of beneficial owners found in most DTAAs, and India’s domestic general anti-avoidance rule (GAAR) are analysed to determine the essential requirements of these mechanisms. CFC, Individuals, BEPS, Action 3, Brazil.

Case Study on INDO USA DTAA

In 2013-14 BHEL was dragged into an international arbitration case raised by a Russian collaborator on a contractual dispute. For this both side had to engage independent Technical witness since the case involved complex technical interpretations. BHEL engaged an expert technical witness based in USA and as per the agreement with him a very substantial fees was paid to him for the same. The issue, as detailed under this article, involved the question of TDS on remittance of fees and other reimbursements to this expert and fine interpretations of the various articles of the Double Taxation Avoidance Agreement (DTAA) with USA guided by the related case laws.

Is Dividend Distribution Tax a Tax on Income of Shareholder? The Debate Continues

An inquiry into the innate nature of a tax presupposes examination of an intricate web of variables, which on most occasions results into raging debates. For examples, whether a tax on service provider is a tax on service or a professional tax, whether a tax on capital value of assets is same as wealth tax, whether a tax on tobacco is luxury tax, nature of expenditure tax, etc. are some intriguing controversies into the true nature of various taxes which have received exposition of the Supreme Court. In such cases, the complexities often issues when the characteristics of the tax legislation depart from the ordinarily understood dimensions of a particular tax. The immediate case at hand is of ‘tax on distributed dividend’, or Dividend Distribution Tax (‘DDT’), as it is popularly called which is imposed under a separate Chapter of the Income Tax Act, 1961 (‘ITA’). This tax was introduced in 2000, omitted and reintroduced after a brief hiatus. DDT has since then been in vogue upto March 2020 when its levy was discontinued. Its contours have been examined twice by the Supreme Court, yet the debate on its true nature continues. The exact issue for consideration is whether DDT is a tax on income of the shareholder, which has resulted into extensive debates, particularly in the context of international tax. The inquiry arises from the challenges by taxpayers to the official view of the Government that DDT is not a tax on the income of the shareholder. According to the shareholders, particularly those who are Non-Residents and entitled to invoke Double Taxation Avoidance Agreements (DTAA), DDT is nothing but a tax on income of shareholder and therefore the levy of DDT should also observe the limitations under the DTAA on any tax on dividend in India. The debate is ongoing and has received mixed response. Currently, the issue awaits consideration of the Income Tax Appellate Tribunal. This article seeks to demystify the cause of controversy and the run-up to the present status.

The most favoured nation clause in tax matters from the perspective of the EU and the GATT

The most favoured nation clause has been one of the most complex elements of tax law. This results from the fact that it concerns the sensitive matter of the sovereignty of states related to fiscal matters and originates from various legal acts that have been established at international, European Union (EU) and national law levels. Additionally, it is related to the EU’s dual membership of the World Trade Organization (WTO). The added value of the article is the endeavour to define the mutual relationship between the most favoured nation clause expressed in Art. 1 (1) of the GATT, resulting from EU law and Art. 24 of the OECD MC that is the template for bilateral agreements of double tax avoidance. The aim of the research is a comparison of the above-mentioned regulations in order to establish what kind of relationship exists between those regulations. In conclusion, it should be considered that in the current legal state, Art. 1 (1) of the GATT does not constitute the basis for the interpretation of bilateral double taxation avoidance agreements, unless their provisions are consistent with each other. The following research methods have been applied in the article: legal comparison, descriptive and analytical.

Impact of Double Taxation Avoidance Agreements on Foreign Direct Investment in Nepal

Developing countries like Nepal enter the Double Taxation Avoidance (DTA) Treaties agreements to increase inflow of Foreign Direct Investment. Since DTA avoid simultaneous tax payments by a taxpayer for same income or assets in multiple jurisdictions and be instrumental in promoting cross-border investments and capital transfer among DTA signing countries. However, empirical studies have shown mixed results. This study attempts to assess the impact of Double Taxation Avoidance (DTA) Treaties on inflow of Foreign Direct Investments (FDIs) in Nepal. This study uses a comprehensive panel database containing annual flow of FDI from 89 countries for the period of 1990-2016 as well as other factors that might affect FDI flow into the country. We used pooled OLS and fixed effect methods. The study finds that singing DTA agreement have had small but positive impact on the inflow of FDI. Specifically, Nepal receives, on average, between 91.90 to 216.54 million more FDI per country per year from countries with DTA agreement compared to countries without such agreement.

Правовой режим временного применения Протоколов к налоговым соглашениям России с Кипром и Мальтой

Theoretical and practical aspects of provisional application of double taxation avoidance agreements are analysed in the article. The author analyses the conditions of provisional application of protocols on amendment of Russia’s tax treaties with Malta and with Cyprus of 2020. The Russian Federation as a rule resort to provisional application of international treaties only in exceptional cases when the treaty is of exceptional interest and there is a need in its “start” before its entering into force. The author draws attention to the fact that the provisional application of the treaty can be regulated both with indication on this condition in the treaty itself or with separate treaty. The author also provides examples from the practice of international cooperation into the tax sphere.

International Double Taxation Relief Provisions in India : A Critical Analysis

International double taxation of income has been a subject of frequent debate in courts in India and abroad. Double taxation of income arises essentially when two or more countries impose taxes on the same income of a taxpayer who happens to be a resident in one country but has a certain source of income arising or accruing to him in another country (known as the source country). In view of the importance of providing double taxation relief to taxpayers, the present paper attempts to describe the historical perspective with regard to the development of Model Conventions that could be used by two different countries as the basis for formulating and entering into that double taxation avoidance agreements (DTAAs), also known as tax treaties. In this context, the Model Conventions developed by the League of Nations, the Organisation for Economic Cooperation and Development (OECD) and the United Nations (UN) have been discussed. The present paper also specifically discusses the Indian law on double taxation relief as provided under Sections 90, 90A and 91 of the Income-Tax Act 1961. Finally, it has been suggested that DTAAs should not be misused for such purposes as ‘double non-taxation'and ‘treaty shopping’.

Ways of Restricting the Rights of Taxpayers Under Agreements for the Avoidance of Double Taxation in National Legislation

The article analyzes the situations that might limit the rights of a taxpayer under double taxation avoidance agreements. Because of the analysis of the national legislation in the area of taxation, significant differences that lead to the emergence of controversial situations regarding double taxation are revealed. The general analysis of the basic concepts of legal regulation using Russian and foreign sources regarding restrictions on the exercise of taxpayer rights under double taxation avoidance agreements, principles and mechanisms in national legislation is carried out. Because of studying the terms of individual agreements on avoidance of double taxation to test the admissibility of applying national legislation, significant differences in the approaches of different countries and examples of law enforcement based on judicial practice are analyzed. The novelty of the article is the justification of the necessity of establishing the basic principles upon restricting taxpayer rights under double taxation avoidance agreements in national legislation. The practical significance of the work lies in identifying the role of mutual agreement procedures between the competent authorities of the contracting parties under double taxation avoidance agreements, as well as in stating recommendations on the practical application of the rules regarding the limitation of taxpayer rights under double taxation avoidance agreements. System analysis, expert analysis, event analysis, traditionally legal methods (formal and logical, comparative legal), structural analysis, and modeling research methods are used.

Substansi dan Formal Bentuk Usaha Tetap (BUT) Pada Strategi Pengurangan Pajak

With a self-assessment system in carrying out taxation obligations, the tax authority must conduct atax audit so that the tax reduction strategies conducted by taxpayers can be detected and tax revenues can be received optimally. Taxpayers have the aim of maximizing profits by reducing tax payments. The lack of tax regulations in determining permanent establishment (PE), associate enterprises (related party), and elaboration of double taxation avoidance agreements or tax treaty (P3B), can be used by taxpayers, especially taxpayers from abroad for reducing tax payments in Indonesia. By using a case study in the Tax Court Decision in Indonesia, it is easily seen that foreign taxpayers implement strategies for tax reduction. By disguising BUT as a business relationship with an independent party, branch profit tax can be avoided and expenses for head office can be a way of reducing taxes and transferring profits abroad. Lack of information possessed by tax authorities regarding taxpayers and incomplete tax regulations, making taxpayer businesses in tax reduction cannot be prevented or reduced optimally. Efforts should be made to complete regulations especially those relating to BUT if there are transactions that are substantially BUT but formally not BUT, and associate enterprises due to the use of technology, as well as the translation of a tax treaty, especially terms that have not been explained in P3Ba tax treaty, such as the term 'control'.

Taxing the Sale of Software: Revisiting the Definition of ‘Royalty’ Under the DTAAs

The characterization of payments, for taxation, in the hands of, non-resident payees arising out of a cross-border sale of software, has always remained controversial in India. While the Revenue, contends that such payments are ‘Royalties’ for Licensing of, Copyrights, the taxpayers argue that these payments are merely, Proceeds on the Sales of Copyrighted Articles. There have been, several conflicting decisions by different Income Tax Tribunals, and High Courts that have legitimized each of these characterizations., While the Courts and Tribunals led by the Delhi, HC held for the taxpayers by characterizing these payments as, Proceeds of Sales, the Courts and Tribunals led by the, Karnataka HC held for the Revenue. Therefore, albeit in, different jurisdictions within the country, a dichotomy persisted. In an attempt to resolve this dichotomy, the Government, of India introduced a clarificatory amendment to the Indian, Income Tax Act, 1961 in 2012. However, the conflict persisted, as the amendment did not clarify and could not have, clarified the status of these payments under the Double, Taxation Avoidance Agreements (DTAAs) As a result, the, dichotomy, now limited to Non-Resident Payees whose resident, jurisdiction has a DTAA with India, still prevailed. These, jurisdictions include several Commonwealth nations such as the, UK, Australia, Malaysia, Canada, etc. and Ireland, which is, the most preferred jurisdiction to operate from for almost all the, tech corporations in the world. Therefore, this dichotomy still, affects the tax liability of the residents of these jurisdictions and, their ease of doing business with India. In this article, the author will highlight that the dichotomy,, though existent, has no basis in law. The author will, highlight that the characterization of these payments as has been, contended by the Revenue is the only legitimate characterization., This characterization not only draws support from the, established Rules of Statutory Interpretation but also promotes, the ease of doing business in India. Agreement, Consideration, Copyright, Double-Tax, Income Tax, Licensing, Literary, Payment, Royalty, Resident

ПРОЦЕСС РЕГУЛИРОВАНИЯ РЕПАТРИАЦИИ ДОХОДОВ РОССИЙСКИМИ НЕФТЕГАЗОВЫМИ КОМПАНИЯМИ

This article discusses such legal regulation tools as: double taxation avoidance agreement (DTA), the concept of the actual right to income (ARI), which are used in the process of profit repatriation by Russian companies. The relevance of the study is expressed in the fact that in connection with the tightening of tax legislation and the deterioration of the external economic situation, Russian oil and gas companies need to look for ways to reduce the tax burden. The aim of the study is to consider the possibility of using the above tools on the example of a real project “Dunga PSA”. The objective of the study is to analyze the methods of legal regulation of the repatriation of income and methods of their application in practice.

Draft Rules Proposed by India on Profit Attribution to a Permanent Establishment – An Analysis

The Indian government has issued a draft circular inviting suggestions/comments from the public regarding its examination of the existing approach to profit attribution to a permanent establishment, under article 7 of India’s Double Taxation Avoidance Agreements , and regarding the recommended changes to Rule 10 of the Income Tax Rules 1962designed to bring clarity to domestic law regarding the attribution of profits. The draft rules emphasize a formulary approach to the attribution of profits to a permanent establishment. This article explains the rationale provided by the Indian government for this approach, issues arising from the proposed approach and the impact of the proposed approach on multinational enterprises with operations in India.

The Positioning of Mauritius as the Gateway to African Investments after the Review of the Mauritius- India Double Taxation Agreement

This paper investigates whether the re-negotiation of the Mauritius–India double taxation avoidance agreements will have an impact on the treaties between Mauritius and the African continent. The methodology explored the reasons for the re-negotiation and analysed impact of re-negotiation. The research findings showed that treaty shopping, loss of revenue, round tripping or abuse by Indians, controversy around the residency status or the meaning of permanent establishment, money laundering control in India, improved regulatory framework for attracting investments directly and too much Foreign Direct investment from Mauritius into the Indian economy were the main reasons for re-negotiation of the treaty.