News-3 Jan 2013: INDIAN INKS PROTOCOL WITH UNITED KINGDOM TO AMEND TAX PACT

INDIAN INKS PROTOCOL WITH UK TO AMEND TAX PACT

In its continuing drive to check tax evasion and proliferation of black money, India has signed a protocol with United Kingdom for amending the convention between the two countries for avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income and capital gains. The protocol—signed in London on October 30 by India's High Commissioner to the U.K., Jaimini Bhagwati, and U.K.'s Exchequer Secretary to the Treasury, David Gauke, on behalf of the two countries—amends the earlier Double Taxation Avoidance Convention (DTAC) that was inked on January 25, 1993.

According to an official  statement,the  protocol streamlines the provisions relating to partnership and taxation of dividends in both countries. "Now, benefits of the Convention would also be available to partners of the U.K. partnerships to the extent incomes of U.K. partnership are taxed in their hands. Further, the withholding taxes on the dividends would be 10 per cent or 15 per cent and would  be equally applicable in the U.K. and in India", it said.

More importantly, the protocol incorporates in the DTAC provisions for effective exchange of information between the tax authorities of India and the U.K. in line with the latest ,international standards, including exchange of banking information and supplying of information irrespective of domestic interest. "It now also provides for sharing of information to other agencies with the consent of the supplying state," the statement said.

Tax Collection

In the amended DTAC, there would now be a new article on assistance in collection of taxes. The article also includes provision for taking measures of conservancy. The protocol also incorporates into the convention antiabuse (limitation of benefits) provisions. Further, both countries are to enter into MoUs to expedite exchange of information and assistance in collection of taxes.

Following the amendment, the DTAC will provide tax stability to residents of India and the U.K.