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India and Japan can now exchange banking related information for tax administration purposes.
This has been enabled through a new Protocol — that came into force on October 29 — amending the double taxation avoidance convention (DTAC), which was signed in March 1989.
Prior to this Protocol, signed on December 11, 2015, there was no explicit provision for exchange of banking related information under the DTAC.
Aseem Chawla, Managing Partner, ASC Legal, a law firm, said that the chief implication is to further facilitate exchange of information which would assist in enforcement and tax collection.
Rakesh Nangia, Managing Partner, Nangia & Co, a CA firm, said this (latest Protocol) will stimulate effective exchange of information including banking information between India and Japan.
Replacing the erstwhile Article 26 on exchange of information, the Protocol provides a strengthened exchange of information clause, which will act as a deterrent and help in reducing tax avoidance and evasion and will also enable assistance in collection of taxes between India and Japan, Nangia said.
Amit Singhania, Partner, Shardul Amarchand Mangaldas & Co, a law firm, said that the latest amendment to the Exchange of Information Article of the India-Japan tax treaty brings it at parity with international standards on exchange of information.
Chawla said that another highlight is the amendment of provisions dealing with interest payments and enlarging the definition of ‘central bank’ for such payment purposes.
This would enable both designated Indian and Japanese institutions — GIC, New India Assurance, Nippon Export & Investments Insurance take benefits of tax treaty on interest payments, he added.
Singhania noted that another significant aspect of the Protocol is that it provides for an Article detailing terms of reference in relation to mutual assistance in collection of revenue claims.
“The said Article not only covers income tax but also indirect taxes (VAT, excise duty, service tax, sales tax) in its ambit,” Singhania said.
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