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India-Ireland Double Taxation Avoidance Agreement (DTAA)

The Double Taxation Avoidance Agreement (DTAA) between the government of the Republic of India and the government of Ireland, signed with the aim of preventing double taxation and fiscal evasion concerning income and capital gains, came into force on 26 December 2001. This DTAA facilitates economic cooperation between India and Ireland and provides a framework for the elimination of double taxation.

Applicability

The India-Ireland DTAA applies to individuals and entities who are residents of one or both of the contracting states. It covers the following taxes:

  • In India: The income tax, including any surcharge.
  • In Ireland: The income tax, corporation tax, and capital gains tax.

Key Highlights

Here are the key highlights of the India-Ireland DTAA:

  1. Withholding Tax Rates: The DTAA stipulates that dividends, interest, royalties, and fees for technical services are subject to a 10% withholding tax in the country of origin.
  2. Exemption for Certain Interest Payments: Interest paid to specific financial institutions and government institutions in India is exempt from the 10% withholding tax that is typically applied to interest payments.
  3. Tax Credits for Corporation Taxes: Ireland allows 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. Non-Discrimination Article: The treaty contains a fundamental non-discrimination article ensuring that nationals of one contracting state shall not be subjected to any taxation or requirements more burdensome than those imposed on the nationals of the other state.
  5. Mutual Agreement Procedure: In the event of disputes related to the DTAA, the mutual agreement procedure is applied to resolve them amicably.
  6. Exchange of Information: The competent authorities of the contracting states are obliged to exchange information and documents necessary for implementing the provisions of the DTAA or their domestic laws.

Inferences

The India-Ireland DTAA includes provisions to prevent double taxation and ensure that residents of both countries are not unduly burdened by tax obligations. Ireland provides an underlying tax credit for corporate taxes on profits of Indian corporations when distributing dividends to Irish residents. However, there is no reciprocal tax credit for underlying taxes in India.

Despite containing a non-discrimination clause, India retains the right to tax an Irish company that establishes a permanent presence in India at a rate higher than the tax levied on Indian company profits. This feature was developed following the signing of the protocol to the DTAA.

The India-Ireland DTAA is in accordance with international standards and has been amended to align with the provisions agreed upon in the Multilateral Convention to Implement Tax Treaty-Related Measures to Prevent Base Erosion and Profit Shifting (BEPS).

For comprehensive legal advice or further information on the India-Ireland Double Taxation Avoidance Agreement or any other legal matters, please do not hesitate to contact Chandrawat & Partners. Our legal experts specialize in international tax agreements and are dedicated to providing tailored legal assistance to meet your specific needs.

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

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