Central Government notifies India-Chile Double Taxation Avoidance Agreement (DTAA) [Read Notification]

The Central Government, on 3rd May, 2023 notified the Double Tax Avoidance Agreement (DTAA) and protocol for elimination of Double taxation and prevention of fiscal evasion and avoidance with respect to taxes on income between the Government of the Republic of India and the Government of the Republic of Chile shall be given effect to in the Union of India.

The agreement was signed by Ms. Anita Nayar Ambassador of India to Republic of Chile on behalf of the Indian government and Mr. Ignacio Briones Minister of Finance, Republic of Chile on behalf of the Chile government.

A DTAA is a pact between two nations meant to prevent the double taxation of the same income in both. The primary goal is to relieve taxpayers of the challenges of paying taxes on the same income in two distinct nations.

As per the Article 30(2)(a) of the agreement which states about the enforcement of the agreement, in India, in respect of income derived in any fiscal year beginning on or after the first day of April next following the date on which the Agreement enters into force. As per the records, the agreement was entered into force on 19th October 2022.

The agreement consists of 31 articles from Persons covered to Termination of the agreement. As per the Article 1, this Agreement shall apply to persons who are residents of one or both of the Contracting States i.e., India and Chile. The taxes covered under the agreement is the Income Tax including any surcharge thereon in India.

As per the Article 5(b) of the agreement which states about Permanent Establishment, it includes especially: 

1. a place of management;
2. a branch;
3. an office;
4. a factory;
5. a workshop;
6. a sales outlet;
7. a warehouse in relation to a person providing storage facilities for others;
8. a mine, an oil or gas well, a quarry or any other place of extraction of natural resources;
9. an installation or structure, or plant or equipment, used for the exploration for or exploitation of natural resources.

Also, the subsequent sub clauses to the article mentioned other categories of permanent establishment.

The Article 20 of the agreement stated that the payments which a student, apprentice or business trainee who is, or was immediately before visiting a Contracting State, a resident of the other Contracting State and who is present in the first-mentioned State solely for the purpose of his education or training receives for the purpose of his maintenance, education or training shall not be taxed in that State, provided that such payments arise from sources outside that State.

Either Contracting State may terminate the Agreement, through diplomatic channels, by giving notice of termination at least six months before the end of any calendar year beginning after the expiration of five years from the date of entry into force of the Agreement as per Article 31 of the Double Taxation Avoidance Agreement.

With the Double Taxation Avoidance Agreement (DTAA), an 8 clause protocol to the agreement was also signed by both the countries.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates