India today signed a Double Taxation Avoidance Agreement (DTAA) with Colombia to crack down on tax evaders, prevent money laundering and deal with other tax-related offences.
Besides facilitating economic cooperation between the two countries, the agreement will help in dealing with "fiscal evasion with respect to taxes on income," an official release said.
The agreement would also allow effective exchange of information, including banking data, and assistance in collection of taxes between tax authorities of the two countries.
It incorporates anti-abuse provisions to ensure that the benefits of the agreement are availed of by the genuine residents of India and Colombia.
The agreement was signed by the Central Board of Direct Taxes (CBDT) Chairman Sudhir Chandra and Juan Alfredo Pinto Saavedra, Colombian Ambassador to India.
The issue of black money and tax evasion has assumed greater significance in the last couple of years after instances of Indians having allegedly stashed away money in undisclosed locations abroad came to light.
Under the agreement, the profits derived by an enterprise from operating ships or aircraft in international traffic shall be taxable in the country of residence of the enterprise.
Moreover, dividends, interest and royalty income will be taxed both in the country of residence and in the country of source.
However, maximum tax rate to be charged in the source country cannot exceed 5% in the case of dividends and 10% in the case of interest and royalties, the release said.
Capital gains from the sale of shares will be taxable in the country of source, it added.
Besides, according to the agreement, profits earned by a business enterprise would be taxable if the concerned project continues to operate in either India or Colombia for over six months.
