INDIA- IRELAND DOUBLE TAXATION AVOIDANCE AGREEMENT

The convention between the government of the Republic of India and the government of Ireland for the avoidance of double taxation and for the prevention of fiscal evasion with respect to taxes on income and capital gains led to the signing of a Double Taxation Avoidance Agreement (“DTAA”) which came into force from 26 December, 2001. 

Applicability

This DTAA applies to persons who are residents of one or both of the states and covers the following taxes:

1. In India: the income tax including any surcharge thereon; and
2. In Ireland:

• the income tax;
• the corporation tax; and
• the capital gains tax.

Key highlights

1. Dividends, interests, royalties, and fees for technical services revenue is subject to a 10% withholding tax in the nation of origin.
2. Interest paid to specific financial institutions and government institutions in India is exempt from the 10% withholding tax that is applied to interest payments.
3. Ireland permits a tax credit for the corporation taxes that are due on the income of Indian enterprises from which dividends are paid to residents of Ireland.
4. Fundamental non-discrimination article is present in the treaty which provides that the nationals of a contracting state shall not be subjected to any taxation or any connected requirement which is other or more burdensome than the taxation and connected requirements to which the nationals of that other state are subjected.
5. Mutual agreement procedure shall be applied to amicably resolve the disputes in relation to the DTAA.
6. The competent authorities of the contracting states shall exchange such information including documents, as is necessary for carrying out the provisions of this DTAA or of the domestic laws of the contracting states.

Inference

Through this DTAA, Ireland has consented to grant an underlying tax credit for the corporate taxes owed on the profits of the Indian corporations from which dividends are distributed to Irish citizens. But, for Irish taxes paid, there will be no equal credit for underlying taxes in India. Despite the fact that the treaty includes a standard non-discrimination clause, it has been agreed under the protocol that India reserves the right to tax an Irish company that establishes a permanent presence in India at a rate that is higher than the tax levied on the profits of an Indian company being a key feature developed following the signing of the protocol. The India- Ireland DTAA is in consonance with the international standards and has been amended in accordance with the provisions agreed upon in the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting.