Cabinet approves revision of double taxation avoidance agreement

The union cabinet on Wednesday approved revision of the Double Taxation Avoidance Agreement (DTAA), which was signed in 1985 between India and South Korea to avoid double taxation and prevent fiscal evasion with respect to taxes on income.

"The revised Double Taxation Avoidance Agreement (DTAA) will provide tax stability to the residents of India and Korea and facilitate mutual economic cooperation as well as stimulate the flow of investment, technology and services between the two countries," an official statement issued here said.

The revised DTAA provides for source based taxation of capital gains, provisions for making adjustments to profits of associated enterprises on the basis of arm's length principle, provides for residence based taxation of shipping income, provisions for service of permanent establishment, rationalizes tax rates in the articles on dividend, interest and royalties and fees for technical services, it added.

The agreement further incorporates provisions for effective exchange of information and assistance in collection of taxes between tax authorities and also incorporates limitation of benefits provisions, to ensure that the benefits of the agreement are availed of by genuine residents of both countries.

The cabinet meeting was chaired by Prime Minister Narendra Modi.