INDIA- GREECE DOUBLE TAXATION AVOIDANCE AGREEMENT

The government of India and the government of Greece, for the avoidance of double taxation with respect to taxes on income and capital, entered into a Double Taxation Avoidance Agreement (“DTAA”), which came into force from 17 March, 1967 after its ratification in 1965.

Applicability

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

a. In India-

• the income-tax;
• the super tax; and
• the surcharge imposed under the Income-tax Act, 1961

b. In Greece :

• the tax on physical persons;
• the income-tax on legal entities, and
• any special tax levied in Greece with reference to freight earned by shipping enterprises by the carriage of passengers, livestock or goods, imposed under the Royal Decrees No. 3323/1955 and 3843/1958 and the Law No. 1880/1951. 

Key highlights

a. Permanent establishment

No tax shall be levied in case of the commercial profits earned by a permanent establishment of the enterprise in the other territory.

b. Withholding tax rates

The DTAA as signed between the two countries provides that the withholding tax rate for interest, dividend and royalty shall be 20%, 20% and 10% respectively. Dividends paid by a company to the resident of another country can be levied only by the country which pays such dividends.

c. Tax on income from immovable property and capital gains

These should be imposed in the country where such immovable property is situated and capital gain has arrived. Remuneration other than pension and annuities, paid in Greece for services rendered therein out of public funds of India shall not be taxed in Greece, provided it is not paid to a citizen of Greece and vice-versa situation for the remuneration paid in India.

d. Taxation of pensions and annuities

Any pension or annuity derived by a resident of one of the territories, from sources in the other territory may be taxed only in that territory

e.  Information exchange

In line with international practices and standards, the DTAA also consists of provisions for exchange of information as per which the contracting states are required to share all relevant information related to taxation which has or can result in double taxation contradictions to be shared with the other state and such information shall be maintained and protected as secret information.

f. Double taxation relief

Both countries apply the credit method for the elimination of double taxation.

g. Mutual agreement procedure

The DTAA agreement also provides for clauses like mutual agreement procedure which comes into effect in case a dispute arises.

Takeaways

The DTAA agreement between the two countries specifically provides that the income shall be taxed in the country where they arise or the host nation in which the income arises. This is evident from the various articles enumerated under it. The credit system provided under the agreement permits taxes paid in one state to be utilized as a credit against a taxpayer’s obligation in another state. Lastly, the exchange of information further facilitates the curbing of tax evasion more expeditiously.