By IANS,
New Delhi : In an effort to rationalise bilateral taxation and stem the flow of illicit transactions the government Friday signed a double taxation avoidance agreement (DTAA) with the South American country of Colombia.
“India today (Friday) signed a DTAA with Colombia for the avoidance of double taxation and for the prevention of fiscal evasion with respect to taxes on income,” the finance ministry said in a statement.
The agreement will also provide impetus in the fight against illicit financial transactions like stashing of black money in exchange of financial information, including banking details, the statement added.
According to the ministry, the provisions under the agreement provide for rationalised taxation system in which business transactions between companies of both sides including subsidiaries would be taxed only once, thus providing an impetus to trade between both countries.
“Branch, factory, profits of a construction, assembly or installation projects will be taxed in the state of source if the project continues in that state for more than six months.”
Taxes on transportation of goods and passengers through aerial or maritime routes would be collected in the country where the company has been incorporated in.
The dividends, interest and royalty income of the company is liable to be taxed in both the countries.
“The maximum rate of tax to be charged in the country of source will not exceed five percent in the case of dividends and 10 percent in the case of interest and royalties,” according to the statement.