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India-Denmark Double Taxation Avoidance Agreement (DTAA)

The Double Taxation Avoidance Agreement (DTAA) between the government of India and the Kingdom of Denmark is aimed at preventing double taxation and countering fiscal evasion concerning income and capital taxes. This treaty came into effect on June 13, 1989, and was later amended through a protocol issued on May 22, 2015, aligning its provisions with international standards and practices.

Applicability

The India-Denmark DTAA encompasses the following taxes in the contracting states:

  • In India: Income tax, super-tax, including any surcharge.
  • In Denmark: Profits tax, salaries tax, and property tax.

Key Takeaways

Here are the major highlights of the India-Denmark DTAA:

  1. Dividend Taxation: The tax levied on dividends shall not exceed 15% of the gross amount of the dividends if the beneficial owner owns at least 25% of the shares. In all other cases, the tax on dividends shall not exceed 25% of the gross amount.
  2. Capital Gains Tax: Capital gains tax may be levied based on the location of immovable property. If the immovable property is in India, India may levy the capital gains tax. Conversely, if the property is in Denmark, Denmark may levy the tax in line with Danish legislation.
  3. Interest, Royalties, and Fees: In no case may the Indian tax on interest, royalties, and fees for technical services be recognized as having been paid at a rate less than 10% for banks, 15% in other situations, and 20% in the case of royalties and fees for technical services.
  4. Tax Deduction Method: If a resident of one contracting state derives income or owns capital that is taxable only in the other state according to the DTAA, the latter state shall provide a deduction for that amount of tax.
  5. Mutual Agreement Procedure: If a resident of a contracting state believes that the actions of one or both states have resulted in or will result in taxation not in accordance with the provisions of the DTAA, they can present their case to the competent authority within three years of receiving notice of the action that caused non-conventional taxation.
  6. Termination of DTAA: The DTAA shall remain in effect until either of the contracting states terminates it through diplomatic channels by providing written notice on or before the thirty-first day of June of any calendar year, five years after the year in which the DTAA was signed.

Inference

The India-Denmark DTAA plays a crucial role in preventing tax avoidance and investments made solely for tax benefits. India and Denmark, both being members of the Organisation for Economic Co-operation and Development (OECD), signed an amending protocol to implement the provisions of the multilateral convention.

The DTAA incorporates provisions for the exchange of information and assistance in tax collection. It also includes mechanisms like the mutual agreement procedure and the tax deduction system to prevent double taxation and foster economic cooperation between the two nations.

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

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