Press Release, dated 1-11-2012

What this is

Press Release, dated 1-11-2012 was issued by the Central Board of Direct Taxes on 1 November 2012. Its subject is Protocol Amending the Convention Between INDIA, UK and the Northern Ireland Signed for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital Gains.

This one is about a tax treaty. India’s treaties enter Indian law by notification under section 90; where the instrument below is that notification, its date decides from when the treaty may be applied, and where it is a circular, it is the Board telling its officers how it reads the treaty — which is not the same thing.

What it does

Announces the signing in London on 30 October 2012 of a Protocol amending the India-United Kingdom Convention for the avoidance of double taxation on income and capital gains, which was signed in New Delhi on 25 January 1993. The Protocol streamlines the partnership and dividend provisions, so that the benefits of the Convention become available to partners of United Kingdom partnerships to the extent the partnership's income is taxed in their hands, and withholding tax on dividends is set at 10 per cent or 15 per cent applying equally in both countries. It brings in exchange of information provisions in line with current international standards, including banking information and information supplied irrespective of domestic interest, adds a new article on assistance in the collection of taxes with measures of conservancy, and inserts limitation of benefits provisions against misuse.

Why it was issued

The press release presents the Protocol as providing tax stability to residents of both countries, facilitating economic cooperation and stimulating the flow of investment, technology and services.

Who it reaches

• United Kingdom partnerships and their partners claiming treaty benefits in India
• Indian companies paying dividends to United Kingdom residents and the reverse
• Taxpayers whose banking information may be exchanged between the two revenues
• Persons against whom recovery is sought across the two jurisdictions

The instrument, as the Board published it

PROTOCOL AMENDING THE CONVENTION BETWEEN INDIA, UK AND THE NORTHERN IRELAND SIGNED FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND CAPITAL GAINS
PRESS release, dated 1-11-2012
India and UK signed a Protocol amending the Convention between the Government of the Republic of India and the Government of the United Kingdom of Great Britain and Northern Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect of Taxes on Income and Capital Gains (DTAC). This Protocol amends the earlier Convention that was assigned in New Delhi on 25th January, 1993. The Protocol was signed on 30th October 2012 in London by Dr Jaimini Bhagwati, High Commissioner of India to the UK on behalf of the Government of India and Mr David Gauke MP, Exchequer Secretary to the Treasury on behalf of the Government of UK.
The Protocol streamlines the provisions relating to partnership and taxation of dividends in both the countries. Now, benefits of the Convention would also be available to partners of the UK partnerships to the extent income of UK partnership are taxed in their hands. Further, the withholding taxes on the dividends would be 10% or 15% and would be equally applicable in UK and in India.
The Protocol incorporates in the Convention provisions for effective exchange of information between tax authorities of the two countries in line with latest international standards including exchange of banking information and supplying of information irrespective of domestic interest. It now also provides for sharing of information to other agencies with the consent of the supplying state.
There would now be a new article in the Convention on assistance in collection of taxes. This article also includes provision for taking measures of conservancy. The Protocol also incorporates into the Convention anti-abuse (limitation of benefits) provisions to ensure that the benefits of the Convention are not misused. Both the countries would further enter into MOUs to expedite exchange of information and assistance in collection of taxes.
The Convention, as amended by this Protocol, will provide tax stability to the residents of India and U.K. and will facilitate mutual economic cooperation between the two countries. It will also stimulate the flow of investment, technology and services between India and U.K.
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What to watch

• This is a press release announcing a signing, not Board authority; the operative text is the Protocol as notified, and the notified version governs.
• A signed Protocol does not take effect on signature; entry into force and the years from which it applies are not stated in this text.
• Both dividend rates are mentioned without the text saying which shareholding attracts which, so the Protocol itself must be read for that.
• The memoranda of understanding on exchange of information and assistance in collection were still to be entered into when this was issued.

Where you meet it

When testing a withholding rate on a dividend paid to a United Kingdom resident, or when a partner of a United Kingdom partnership claims treaty relief in an Indian assessment.

← Letter [F.NO. DIT(S)-III/CPC/2012-13 - 14161-78], dated 5-11-2012  ·  Press Release, dated 29-10-2012 →