India, Kazakhstan sign protocol to amend 'Double Taxation Avoidance Convention'

The Central Board of Direct Taxation (CBDT) on Friday announced that India and Kazakhstan have signed a protocol to amend the existing Double Taxation Avoidance Convention (DTAC) between the two countries signed on December 9th, 1996 for the avoidance of double taxation and for the prevention of fiscal evasion with respect to taxes on income.

The protocol under the DTAC will provide internationally accepted standards for effective exchange of information on tax matters. Further, the information received from Kazakhstan for tax purposes can be shared with other law enforcement agencies with authorization of the competent authority of Kazakhstan and vice versa.

It inserts a limitation of benefits article to provide a main purpose test to prevent misuse of the DTAC and to allow application of domestic law and measures against tax avoidance or evasion.

The protocol inserts a specific provision to facilitate relieving of economic double taxation in transfer pricing cases. This is a taxpayer friendly measure and is in line with India's commitment under Base Erosion and Profit Shifting (BEPS) Action Plan to meet the minimum standard of providing Mutual Agreement Procedure (MAP) access in transfer pricing cases.

Adding to this it inserts service PE provisions with a threshold and also provides that the profits to be attributed to PE will be determined on the basis of apportionment of total profits of the enterprise.