India, Mexico ink taxation agreement

India today signed a Double Taxation Avoidance Agreement (DTAA) with Mexico.

Apart from double taxation avoidance, this treaty seeks to prevent tax evasion. This is India's 72nd DTAA and it provides for taxation of dividend, interest, royalties and fees for technical services, both in the country of residence as well as the country of source.

However, the rate of tax in the country of source cannot exceed 10 per cent of the gross amount of the payment in case the beneficial owner of the payments is a resident of the other contracting state.

The DTAA was signed by Finance Minister P Chidambaram and Mexican Foreign Minister Patricia Espinosa Cantellano here today.

"The Agreement will further stimulate the flow of capital, technology and personnel between the two countries. It will also contribute to the tax stability and reduce any obstacles in providing mutual co-operation," an official statement said.

The DTAA between India and Mexico will cover, in the case of India, income-tax including any surcharge thereon and in the case of Mexico, the federal income tax.

There is a provision for exchange of information in cases which are under investigation in either of the two countries. Trade between India and Mexico, currently at $1.8 billion, is targeted to double in the next three years.

Mexican President Felipe Calderon Hinojosa, who is visiting India at the moment, has said Mexico can offer Indian companies preferential access to one billion customers through the trade agreements that it has with 44 countries including the US.

Pro-Mexico, the investment promotion organisation of Mexico, will also be opening a special office in Mumbai by early next year to promote and protect bilateral trade between the two countries.