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India-China Double Taxation Avoidance Agreement (DTAA)

The Double Taxation Avoidance Agreement (DTAA) signed between the governments of the Republic of India and the People’s Republic of China aims to prevent double taxation and fiscal evasion of income. It came into force on November 21, 1994, and was further amended by a protocol signed on November 26, 2018, and notified by India on July 17, 2019.

Applicability

The tax treaty is applicable to residents of either or both countries. It specifically covers the following taxes:

  • In China: Income tax
  • In India: Income tax, including any surcharge

Key Highlights

Here are key highlights of the India-China DTAA:

  1. Cross-Border Investment Support: The DTAA extends support to cross-border investors, providing them with the means to navigate tax implications effectively.
  2. Exchange of Tax Information: The agreement facilitates the exchange of all tax-related information between both countries. This sharing of information plays a crucial role in preventing tax evasion.
  3. Taxation of Dividends: Dividends paid by a company resident in one state to a resident of the other state may be taxed in the recipient state at a rate of 10%.
  4. Taxation of Interests: Interests earned in one state and paid to a resident of the other state may be taxed in the recipient state at a rate of 10%.
  5. Taxation of Royalties and Technical Service Fees: Royalties and fees for technical services arising in one state and paid to a resident of the other state may be taxed in the recipient state at a rate of 10%.
  6. Taxation of Teachers and Researchers: Teachers and researchers who are residents of one state and work in the other state are taxable only in their state of residence for a period of up to three years.

Inference

The India-China DTAA has played a significant role in fostering cooperation and improving relations between the two countries in the realm of taxation. It serves as an effective tool in preventing tax evasion by enabling the exchange of information related to various types of taxation between the contracting states.

The amending protocol has incorporated several crucial clauses, aligning the DTAA with the latest international standards. These changes are in line with the requirements of implementing treaty-related minimum standards as per the action reports of the Base Erosion & Profit Shifting (BEPS) Project.

For comprehensive legal guidance and advice on the India-China Double Taxation Avoidance Agreement or other related matters, please feel free to contact Chandrawat & Partners. We specialize in international tax agreements and are dedicated to providing expert legal assistance for all your needs.

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

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