India and Myanmar have signed a Double Taxation Avoidance Agreement (DTAA), which provides that business profits will be taxable in the source state.
"The agreement will provide tax stability to the residents of India and Myanmar and facilitate mutual economic cooperation as well as stimulate the flow of investment, technology and services between India and Myanmar," the Central Board of Direct Taxes (CBDT) said in a press release.
The DTAA agreement was signed on Wednesday by P K Misra, Chairman of CBDT, on behalf of India and by Kyi Thein, Ambassador Extraordinary and Plenipotentiary of the Union of Myanmar to India.
In the case of India, the DTAA will cover income tax and surcharge and in the case of Myanmar, income tax and profit tax.
According to the DTAA, business profits will be taxable in the source state if the activities of an enterprise constitute a permanent establishment in the source state. Examples of permanent establishment include a branch, factory, place of management and sales outlet.
Profits of a construction, assembly or installation projects will be taxed in the state of source if the project continues in that state for 270 days or more.
Profits derived by an enterprise from the operation of ships or aircraft in international traffic shall be taxable in the country of residence of the enterprise. Dividends, interest and royalty income will be taxed both in the country of residence and in the country of source.
However, the maximum rate of tax to be charged in the country of source will not exceed 5 per cent in the case of dividends and 10 per cent in the case of interest and royalties.
Capital gains from the sale of shares will be taxable in the country of source.
The agreement also incorporates provisions for exchange of information between tax authorities of the two countries and incorporates anti-abuse provisions to ensure that the benefits of the agreement are availed of by the genuine residents of the two countries.
