INDIA-NEW ZEALAND DOUBLE TAXATION AVOIDANCE AGREEMENT
The government of India and the government of New Zealand had signed a Double Taxation Avoidance Agreement (“DTAA”) on 17 October, 1986 with the view to prevent fiscal evasion with respect to taxes on income; and it came into force from 03 December, 1986. The DTAA has since been modified thrice, with the signing of amending protocols on 29 August, 1996, 21 June, 1999 and 26 October, 2016 respectively.
Applicability
This DTAA is based on the Organization for Economic and Co-operative Development’s (OECD) Model Tax Convention on Income and on Capital. This convention applies to persons who are residents of one or both of the states. The DTAA therefore applies to the following taxes:
a. In New Zealand:
- the income-tax; and
- the excess retention tax.
b. In India:
- the income-tax including any surcharge thereon; and
- the surtax.
Key takeaways
a. Interest arising in a state and paid to a resident of the other state, may be taxed in the other state.
b. Royalties and fees for technical services shall be taxed in the state in which they arise as per the laws of that state.
c. The competent authorities of the contracting states shall exchange information related to taxation, necessary for carrying out the provisions of this DTAA.
d. Any dispute that may arise in relation to the provisions of this DTAA, should be resolved through mutual agreement procedure.
e. A withholding rate of 15% on dividends and 10% on interests, royalties and fees for technical services has been agreed upon. An exemption on interests earned by government institutions has been further provided.
f. Income derived by a resident of a contracting state in the other state, as an entertainer, such as a theatre, motion picture, radio or television artiste or a musician, or as an athlete, from his personal activities as such, may be taxed in that other state.
Inference
The DTAA has facilitated mutual cooperation leading to stability and exchange of information related to taxes in the contracting states. Further, the updated framework via the signing of the amending protocols has made it possible for exchanging tax-related information and has therefore lead to assistance to the competent authorities of the contracting states and reduce the tax evasion and tax avoidance between the two countries. The permanent establishment article in the DTAA allows the country of source to tax the profits attributable to a permanent establishment where the entity is a non-resident in the country of source.
