The government on Wednesday notified a new Double Taxation Avoidance Agreement (DTAA) between India and South Korea, which was signed by Prime Minister Narendra Modi during his visit to Seoul in May 2015.
The provisions of the new DTAA will have effect in India in respect of income derived in fiscal years beginning on or after April 1, 2017, the government said in a statement. — Special Correspondent
The earlier Double Taxation Avoidance Convention between India and South Korea was notified on September 26, 1986.
“The existing DTAA provided for residence based taxation of capital gains on shares,” the statement said. “In line with India’s policy of taxation of capital gains on shares, the revised DTAA provides for source based taxation of capital gains arising from alienation of shares comprising more than 5 per cent of share capital.”
The revised DTAA also provides for exclusive residence based taxation of shipping income from international traffic.
The revised DTAA allows both countries to apply for Mutual Agreement Procedure (MAP) in transfer pricing disputes as well as apply for bilateral Advance Pricing Agreements (APA).
The MoU provides for the suspension of collection of outstanding taxes during the pendency of MAP proceedings for a period of two years subject to providing on demand security or bank guarantee.
“The revised DTAA aims to avoid the burden of double taxation for taxpayers of two countries in order to promote and thereby stimulate flow of investment, technology and services between India and Korea,” the government statement added. “The revised DTAA provides tax certainty to the residents of India and Korea.”