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International Taxation


In Today’s modern world of  globalization and liberalization , business is not only restricted to a single geographical territory .There has been a phenomenal increase in the number of cross border transactions and merger and acquisitions. This has resulted into a complex world of business along with complex world of Accounting & Taxation.

A country has a right to tax on the profits earned in its land by anyone (source based rule) and also to tax the global income of its residence ( residence rule). This leads to taxation of same income more than once in different countries.

Tax is a sovereign issue and every state has its right to tax its residents but when there is taxing of the same property or person by two different states then the conflicts arise.

There are two kinds of double taxation

1) Juridical double taxation
Juridical double (or multiple) taxation occurs where the tax authorities of two or more countries concurrently impose taxes having the same bases and incidence in such a way that a person incurs a heavier tax burden than if he were subject to one tax jurisdiction only.

2) Economic double taxation
Economic double taxation takes place when two different persons are taxable in respect of
the same income and capital.

To avoid this double taxation of same income, countries are entering into Double tax avoidance agreement (DTAA) with each other based on the OECD model or the UN Model.. There is generally bi-lateral agreement which is entered between two countries. However, there are also Multi –lateral agreements which are entered between more than two countries.

The DTAA entered into by India can be divided into two types :Comprehensive Agreements & Limited Agreements. The scope of Comprehensive Agreements  is to addressing all source of income whereas Limited Agreements  cover only  particular source like gifts , estates , Income from operation of Aircrafts and ship etc.

Currently there are 90 Comprehensive Agreements &  13 Limited Agreements entered into by India. All this DTAA are available in the website: http://incometaxindia.gov.in/

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