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Double Taxation Avoidance Agreement (DTAA)

The Double Taxation Avoidance Agreement (DTAA) allows NRIs functioning in overseas nations to opt out of paying dual taxation received in both their home country and their country of residency.

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double taxation avoidance agreement dtaa

The Double Taxation Avoidance Agreement (DTAA) allows NRIs functioning in overseas nations to opt out of paying dual taxation received in both their home country and their country of residency. Its main goal is to allow individuals in these countries to avoid paying taxes repeatedly on the same earnings. The DTAA’s main goal is to encourage and boost financial-economic cooperation between two countries by eliminating multiple payments.

What is the Double Taxation Avoidance Agreement-DTAA?

A Double Taxation Avoidance Agreement (DTAA) is an understanding between multiple countries to avoid taxing the same earnings twice. The DTAA protects people who live in one country but make money in another. This indicates that the nations concerned have negotiated on tax brackets and territories for money generated within their borders.

Benefits of Double Taxation Avoidance Agreement

Some of the benefits of Double Taxation Avoidance Agreement are:

  • Individuals benefit from lower tax liability since they can pay less TDS on their interest, royalties, or investment income.
  • Such assistance is offered by omitting revenue generated in a foreign nation from taxation in the domestic nation or by extending finance for payments made overseas.
  • Reductions in tax rates.
  • Between both of the member nations, eliminating the potential of tax evasion.
  • The goal of a Double Tax Avoidance Agreement is to make the region seem more appealing to investors by offering exemption from double payment.

DTAAs come in a variety of types

DTAA are of the following types:

Relief from a single source

If there is no common understanding between the nations, the home country gives the assistance.

Bilateral Agreements

When two nations reach a deal on a DTAA, alleviation is determined based on the consensual operation of the two nations. It can be further classified into two, are as follows:

  • Credit for taxes: In both nations, profits are taxed. The payer receives assistance in the nation where he or she resides.
  • Method of deduction: Profits are taxed in only one nation underneath this system.

Characteristics Of Double Taxation Avoidance Agreement

  • Restricted: Restricted DTAAs are ones that are only applicable to particular categories of earnings.
  • Expansive: Expansive DTAAs encompass practically all forms of earnings that are addressed by any type of agreement. The tax increase, estate taxes, flat tax, and other taxes are frequently covered by treaties.

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Double Taxation Avoidance Agreement Country List

Below you will find the DTAA country list along with their TDS rates, they are as follows:

Countries TDS Rates
Armenia 10%
Australia 15%
Austria 10%
Bangladesh 10%
Belarus 10%
Belgium 15%
Botswana 10%
Brazil 15%
Bulgaria 15%
Canada 15%
 China 15%
Cyprus 10%
Czech Republic 10%
Denmark 15%
Egypt 10%
Estonia 10%
Ethiopia 10%
Finland 10%
France 10%
Georgia 10%
Germany 10%
Greece As per agreement
Hashemite Kingdom of Jordan 10%
Hungary 10%
Iceland 10%
Indonesia 10%
Ireland 10%
Israel 10%
Italy 15%
Japan 10%
Kazakhstan 10%
Kenya 15%
South Korea 15%
Kuwait 10%
Kyrgyz Republic 10%
Libya As per agreement
Lithuania 10%
Luxembourg 10%
Malaysia 10%
Malta 10%
Mauritius 7.5-10%
Mongolia 15%
Montenegro 10%
Morocco 10%
Mozambique 10%
Myanmar 10%
Namibia 10%
Nepal 15%
Netherlands 10%
New Zealand 10%
Norway 15%
Oman 10%
Philippines 15%
Poland 15%
Portuguese Republic 10%
Qatar 10%
Romania 15%
Russia 10%
Saudi Arabia 10%
Serbia 10%
Singapore 15%
Slovenia 10%
South Africa 10%
Spain 15%
Sri Lanka 10%
Sudan 10%
Sweden 10%
Swiss Confederation 10%
Syrian Arab Republic 7.50%
Tajikistan 12.50%
Thailand 25%
Trinidad and Tobago 10%
Turkey 15%
Turkmenistan 10%
UAE 12.50%
UAR (Egypt) 10%
Uganda 10%
UK 15%
Ukraine 10%
United Mexican States 10%
USA 15%
Uzbekistan 15%
Vietnam 10%
Zambia 10%

Documents Required To Avail The Benefits Under DTAA

Documents required to avail of the benefits under DTAA

The documents required to avail of the benefits under Double Taxation Avoidance Agreement are as follows:

  • Passport copy (self-attested)
  • PAN card copy (self-attested)
  • Form for self-declaration and indemnification
  • TRC – Tax Residency Certificate
  • Proof copy of POI

The Finance Act, 2013 states “If a person does not give a Tax Residency Certificate to the deductor, he or she will not be able to claim any advantage of relief under the Double Taxation Avoidance Agreement. An application for a Tax Residency Certificate must be submitted to the income tax authorities in Form 10FA (Application for Certificate of Residence for the purposes of an Agreement Under Section 90 and 90A of the Income-tax Act, 1961). The certificate will be issued in Form 10FB once the application has been satisfactorily processed.” 

How Can NRIs Take Advantage Of The DTAA?

Non-resident Asians living in any of the DTAA nations can take advantage of the tax incentives available under the agreement by submitting the necessary documentation each accounting year by the appropriate dates.

  • The number of the PAN: To receive tax breaks, you must also provide your PAN (Permanent Account Number) including the aforesaid paperwork.
  • Tax Residency Certificate (TRC): To collect benefits under the DTAA, you must produce a TRC. You can receive a TRC by contacting the income officials in your actual home nation, who will issue you a TRC when you fill out Form 10F.
  • Form 10F contains the following information: To take advantage of DTAA benefits, you must fill out Form 10F.

Procedure To Apply For Double Taxation Avoidance Agreement

The procedure to apply Double Taxation Avoidance Agreement, are as follows:

  • Evaluate if the problem falls within the meeting’s boundaries.
  • Check to see if the tax in question is covered by the agreement.
  • Verify sure the treaty is in effect for the tax year in question.

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Conclusion

According to the DTAA’s terms, the amount invested to avoid taxes is not eligible for the deal’s advantages. As a result, if a firm invests in one country and subsequently invests heavily in another nation to save taxes, such transaction is not covered by the DTAA. The prevention of double tax treaties assures that genuine individuals do not have to pay tax in two nations. It can also be used to promote growth from specific countries and provide tax breaks or reduced taxes. It is an excellent technique to encourage cross-border partnerships that is free of ambiguities.

Read More: Singapore DTA

FAQ’s

People who live in one nation but receive significant earnings from another are protected by the Double Taxation Avoidance Agreement (DTAA).

DTAA can be utilized in two different methods:

  • Tax reduction – This strategy includes payment tax reduction in your own nation.
  • Exemption – This approach gives legal tax reduction in either of the two nations.

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