The India-Denmark Double Taxation Avoidance Agreement Explained
The India-Denmark Double Taxation Avoidance Agreement, also known as the DTAA, is a legal agreement between the Governments of India and Denmark. This agreement aims to prevent double taxation of income and gains that occur in either of the two countries.
Double taxation occurs when a person or company is taxed twice on the same income or gain by both the country of origin and the country of residence. The purpose of this agreement is to promote trade and investment between India and Denmark and to avoid double taxation, which can act as a significant impediment to trade and investment.
The DTAA between India and Denmark was signed on 26th October 1994 and came into force on 10th May 1995. It has been amended several times since then, with the most recent amendment being signed on 31st October 2019.
The agreement applies to individuals, companies, firms, and other entities that are residents of either India or Denmark. The tax covered under this agreement includes income tax, surtax, and any other similar taxes imposed by either country.
Under the DTAA, tax rates are fixed for specific categories of income and gains, and these rates cannot exceed the maximum rates specified in the agreement. For example, the maximum rate of withholding tax on dividends is 15% for both countries.
The agreement also provides for the exchange of information between the two countries‘ tax authorities to prevent tax evasion and money laundering. This exchange of information is done in strict confidence and is subject to the respective countries‘ laws and regulations.
In addition, the DTAA provides for the resolution of disputes regarding the agreement‘s interpretation and application through mutual consultations between the two countries‘ tax authorities.
The India-Denmark Double Taxation Avoidance Agreement has been vital in promoting trade and investment between the two countries and increasing the flow of capital and technology. It has provided clarity and certainty in the tax regime, reducing the compliance costs for taxpayers and promoting cross-border investment.
In conclusion, the India-Denmark Double Taxation Avoidance Agreement is an essential legal framework for companies and individuals investing or doing business in India and Denmark. It provides tax certainty, avoids double taxation and disputes, and helps promote economic growth and investment between the two countries.