New Delhi: India and Bhutan on Monday signed the double taxation avoidance agreement (DTAA), a move that will facilitate exchange of information on banking between the two nations and help check tax evasion.
This is the first ever DTAA for Bhutan with any country. The treaty was signed by Finance Minister P Chidambaram and his Bhutanese counterpart Lyonpo Wangdi Norbum, on behalf of the Royal Government of Bhutan.
"The Agreement (DTAA) will provide tax stability to the residents of India and Bhutan and facilitate mutual economic cooperation as well as stimulate the flow of investment, technology and services between India and Bhutan," Chidambaram said.
Under the pact, business profits will be taxable in the source state if the activities of an enterprise constitute a permanent establishment in there.
However, dividends, interest, royalty income and fees for technical or professional services will be taxed both in the country of residence and in the country of source of income.
The maximum rate of tax to be charged in the country of source will not exceed 10 percent on such dividends, interest, royalties and fees for technical services.
Capital gains from the sale of shares will be taxable in the country of source.
Profits derived by an enterprise from the operation of aircraft in international traffic shall be taxable in the country of effective management of the enterprise.