The Hindu Business Line : Pact with Syria to avoid double taxation

India and Syria on Wednesday signed a revised double taxation avoidance agreement (DTAA) to facilitate mutual economic cooperation and stimulate flow of investment, technology and services between the two countries.

The revised agreement was signed in the presence of the visiting Syrian President, Mr Bashar Al Assad, and the Prime Minister, Dr Manmohan Singh. It was signed by the External Affairs Minister, Mr Pranab Mukherjee, and Dr Amer Husni Lutfi, Minister of Economy and Trade, Syrian Arab Republic.

The latest agreement has revised an earlier DTAA notified on June 25, 1985. Besides including anti-abuse provisions, the revised DTAA provides for source-based taxation of capital gains from sale of shares. Simply put, capital gains from sale of shares may be taxed in the country of source.

The revised DTAA provides for exchange of information between tax authorities of the two countries.

The anti-abuse provisions have been incorporated to ensure that the benefits of the agreement are availed of by the genuine residents of the two countries.

Under the revised agreement, profits derived by an enterprise from the operation of ships or aircraft in international traffic would be taxable in the country of residence of enterprise. Profits from the furnishing of services including consultancy services could also be taxed in the state of source if activities of this nature continue within that state for more than a period of 183 days within any 12-month period.

The revised DTAA provides that business profits may be taxed in the source state if the activities of an enterprise constitute a permanent establishment in the source state. Under the agreement, the maximum rate of taxation in the source state has been pegged at 10 per cent in the case of interest and royalties.

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