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India – Canada Double Taxation Avoidance Agreement (DTAA)

The Double Taxation Avoidance Agreement (DTAA) between the governments of India and Canada is a significant agreement that applies to income tax in Canada and income tax, applicable surcharges, wealth tax, and other taxes in India. This DTAA came into force on May 6, 1997, and has been subsequently amended by an amending protocol. The contracting states have also issued a synthesized text to provide a comprehensive overview of the DTAA’s provisions.

Applicability

The India-Canada DTAA applies to taxes on income and capital imposed by each contracting state, regardless of the manner in which they are levied. It covers any person who, under the laws of either state, is liable to tax based on criteria such as domicile, residence, place of management, or any similar nature. Specifically, the DTAA encompasses the following taxes:

  • In Canada: Taxes imposed under the Income-tax Act of Canada.
  • In India: Income tax, including any surcharge, imposed under the Income-tax Act, and wealth tax imposed under the Wealth-tax Act.

Key Highlights

Here are key highlights of the India-Canada DTAA:

  1. Withholding Rates: The DTAA specifies withholding rates for various types of income:
  • Dividends: 15%, but reduced to 10% if the recipient company controls at least 10% of the voting powers in the paying company.
  • Interest: 15%, with exemptions for interest earned by government institutions.
  • Royalty: 10% to 20%.
  1. Income from Immovable Property: Income from immovable property, including agriculture or forestry income, may be taxed in the contracting state where the property is located.
  2. Taxation of Enterprise Profits: The profits of an enterprise of a contracting state are taxable only in that state unless the enterprise operates through a permanent establishment in the other contracting state.
  3. Tax Credits: Tax payable in one country on profits, income, or gains arising in that country is deductible from any tax payable in the other country concerning the same profits, income, or gains.
  4. Non-Discrimination: Nationals of one contracting state are not subjected in the other state to taxation or requirements that are more burdensome than those applied to their own nationals.
  5. Mutual Agreement Procedure: Disputes related to the DTAA’s provisions can be resolved through a mutual agreement procedure.

Inference

The India-Canada DTAA aims to eliminate double taxation issues between India and Canada. It defines crucial terms to provide clarity on the application of the agreement to individuals, taxes, and businesses. The DTAA also incorporates internationally accepted provisions related to non-discrimination, mutual agreement procedures, termination of the DTAA, and the exchange of information to avoid confusion.

Chandrawat & Partners specializes in international tax agreements and can offer expert legal guidance on the India-Canada Double Taxation Avoidance Agreement and related matters. For comprehensive legal assistance or advice concerning this agreement, please do not hesitate to contact us. We are committed to providing professional legal services and helping you navigate the complexities of international tax laws.

For further information or to seek our expertise on this agreement or other legal matters, please reach out to us. We are here to serve your legal needs with the utmost professionalism and diligence.

To know more about DTAA relations between India and Canada, please download our Guide.

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