Cabinet approves signing of pact with Chile to avoid double taxation

The government on Wednesday approved signing of a double taxation avoidance agreement (DTAA) with Chile for elimination of double taxation besides prevention of fiscal evasion and avoidance with respect to taxes on income.

The decision was taken at a meeting of the Union Cabinet chaired by Prime Minister Narendra Modi.

"Clear allocation of taxing rights between contracting states through the agreement will provide tax certainty to investors and businesses of both countries while augmenting the flow of investment through fixing of tax rates in source state on interest, royalties and fees for technical services," according to an official statement.

The agreement and protocol implement minimum standards and other recommendations of G-20 OECD Base Erosion Profit Shifting (BEPS) Project.

"Inclusion of preamble text, a principal purpose test, a general anti-abuse provision in the agreement along with a simplified limitation of benefits clause as per BEPS Project will result in curbing of tax planning strategies which exploit gaps and mismatches in tax rules," said the statement.

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