What is Double Tax Avoidance Agreement (DTAA)?
It aims to avoid double taxation incidents involving an income through bilateral agreements between two countries.
- Provides tax relief either in co-jurisdictions or both.
- Based on the source of income, taxation incurs.
- Can set low-rate taxes on income derived from cross border.
- It provides a mechanism for the resolution of disputes arising out of the tax-related requirements.
The DTAA between India and Switzerland was signed in 1994 and amended in 2010 to prevent double taxation of income.
- India and Switzerland entered an Agreement for the Avoidance of Double Taxation for the purpose of income earners from both countries.
- Provides for tax residency:
- decides the individual or entity belongs to which country.
- Provides tax exemption or credit for taxes paid in the other country to avoid double taxation.
- Requires reduction of tax rates on certain income:
- Specifies reduction in dividends, interest, and royalty payments.
- Income from business profits is not taxed:
- Taxed only in the resident’s country of residence unless a PE in the other country.
- Thinks about capital gains taxation:
- Thinks a little about taxation methods mostly about long-term capital gains.
- Taxation through of capital gains transfers by shares and securities.
- Provides for exchange of information:
- Thwarts evasion and fairness in treatment of taxpayers.
