INDIA- DENMARK DOUBLE TAXATION AVOIDANCE AGREEMENT

The governments of India and the government of the Kingdom of Denmark signed a Double Taxation Avoidance Agreement (“DTAA”), which came into effect from June 13, 1989, to avoid double taxation and combat fiscal evasion in relation to income and capital taxes. Thereafter, it was amended through a protocol issued on May 22, 2015, in order to bring the provisions of the DTAA in consonance with the international standards and practices.

Applicability

The DTAA applies to the following taxes in the contracting states:

(a)   In India- the income tax, a super-tax, including any surcharge thereon.

(b)   In Denmark –

• profits tax;
• salaries tax; and
• property tax.

Key takeaways

• If the recipient is the beneficial owner of the dividends, the tax levied shall not exceed 15% of the gross amount of the dividends, in case the beneficial owner owns at least 25% of the shares and 25% of the gross amount of the dividends in all other cases.
• If the immovable property is located in India, a capital gain tax is levied. However, if the immovable property is located in Denmark, the amount of capital gain may be levied by Denmark in line with Danish legislation.
• In no instance may Indian tax on interest, royalties, and fees for technical services be recognized as having been paid at a rate less than 10% in the case of banks, 15% in other situations, and 20% in the case of royalties and fees for technical services.
• When a Danish resident derives income or owns capital that, according to the provisions of this DTAA, is taxable only in India, Denmark shall provide that amount of tax as a deduction and vice versa.
• If a resident of a contracting state believes that the actions of one or both states have resulted in or will result in taxation that is not in accordance with the provisions contained in the DTAA, he may, notwithstanding the remedies provided by the domestic laws of those states, present his case to the competent authority of the contracting state in which he resides. This case must be brought within three years of the date of receipt of notice of the action giving rise to non-conventional taxes.
• The DTAA shall remain in effect until either of the contracting states terminate it through diplomatic channels by submitting written notice of termination 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 DTAA prevents the investments that have been made to save taxes and gain undue advantages of the treaty. India and Denmark, being members of the Organisation for Economic Co-operation and Development signed off an amending protocol in order to give effect to the provisions of the multilateral convention. As a result, the DTAA consists of provisions for exchange of information and assistance in the collection of taxes. The DTAA also consists of clauses like the mutual agreement procedure and the tax deduction system so as to prevent double taxation and to facilitate economic cooperation between the two nations.