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India-Kuwait Double Taxation Avoidance Agreement (DTAA)

On June 15, 2006, the governments of India and Kuwait signed a Double Taxation Avoidance Agreement (DTAA) aimed at preventing double taxation and fiscal evasion concerning taxes on income. To further amend the tax treaty, both countries signed a protocol on January 15, 2017. The DTAA also allows for the sharing of information obtained from Kuwait for tax purposes with other law enforcement agencies, subject to permission from Kuwait’s responsible authorities, and vice versa. 

Applicability

The India-Kuwait DTAA applies to specific taxes:

  • In India, it includes income tax, including any associated surcharges.
  • In Kuwait, it covers corporate income tax, income tax, and taxes imposed according to the Supporting of National Employees law.

Key Highlights

Here are some of the key provisions of the India-Kuwait DTAA:

  1. Taxation of Immovable Property: Income derived by a resident of one state from immovable property situated in the other state may be taxed in the state where the property is located.
  2. International Traffic Profits: Profits derived by an enterprise of one state from the operation of ships or aircraft in international traffic shall be taxed only in that state.
  3. Interest and Royalties: Interest arising in one state and paid to a resident of the other state who is the beneficial owner of such interest may be taxed in that other state. Similarly, royalties arising in one state and paid to a resident of the other state may be taxed in the other state.
  4. Withholding Tax: The DTAA provides for a withholding tax rate of 10% on dividends, interests, royalties, and fees for technical services.

Inference

The DTAA specifies that if a resident of Kuwait derives income that is taxable in both India and Kuwait, Kuwait shall allow a deduction from the tax on the income of that resident, equal to the income tax paid in India, and vice versa. The protocol amends the DTAA’s information exchange provisions to align with current international standards and practices. It brings these provisions in line with those set by the Organization for Economic Cooperation and Development and 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-Kuwait 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 Kuwait, please download our Guide.

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