INDIA- MALDIVES DOUBLE TAXATION AVOIDANCE AGREEMENT

A limited agreement for the avoidance of double taxation of income derived from international air travel,  an agreement for the provision of mutual administrative assistance in tax matters between members of the South Asian Association for Regional Cooperation (SAARC), and a third agreement being a Tax Information Exchange Agreement (“TIEA”) have been signed between the governments of India and the Republic of Maldives with the main of avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains. These came into effect from August 01, 2016, 01 April, 2011, and 02 August, 2016 respectively.

Applicability

The following taxes are covered in these agreements: 

• In India: taxes of every kind and description imposed in India by the Central Government, governments of political subdivisions, or local authorities,
• In Maldives: taxes of every kind and description imposed in the Maldives by the Government in accordance with the law, regardless of collection.

Key highlights

• Resident means any person who, under the laws of that Member State, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature, and also includes that Member State and any political sub-division or local authority thereof.
• The competent authorities of the member states shall exchange such information, including documents and public documents or certified copies thereof, as is necessary for carrying out the provisions of these agreement.
• The laws that are in effect in either of the states shall continue to regulate the assessment and taxation of income in the contracting states.
• Efforts shall be made by both the contracting states to provide an annual report to other state on changes to its taxation laws in the current year.
• The member states shall lend assistance to each other in the collection of revenue claims.
• Each state shall treat the information it receives regarding the taxation upon enquiry, as secret and limit the disclosure of any information received under this agreement.
• The member states shall meet in order to review this agreement on request or at the end of five years from the date of its entry into force, unless they notify the SAARC Secretariat, in writing, that no such review is necessary.

Inference

These three agreements have strengthened the ties between the two contracting states and have ensured that there are less instances of tax avoidance. The agreements calls for reciprocal assistance in the exchange of data necessary for administering and upholding domestic tax regulations. By exempting money received by Indian firms from the operation of planes in international traffic from Maldivian tax and vice versa, the agreement has also extended protection to airline corporations of India and the Maldives from double taxation.The agreement also enables the sharing of tax-related information as well as support in revenue claim. The primary goal is to improve trade ties among SAARC member nations. The sharing of information that is pertinent to the calculation, assessment, and collection of such taxes, to the enforcement and recovery of tax claims, or to the investigation and prosecution of tax cases is also included in this.