India pushes for amendment to DTAA to stop double taxation of IT firms in Australia

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India has called for an early amendment to the Double Taxation Avoidance Agreement (DTAA) with Australia, as Indian information technology firms operating in that country continue to pay more than the requisite amount of tax, the government said on July 14.

Minister of State for Commerce and Industry Anupriya Patel told the visiting deputy premier of Western Australia province Roger Cook that the taxation on the offshore income of Indian firms providing technical support should be stopped, a release issued by the ministry said.

A DTAA is a treaty signed between two or more countries to help taxpayers avoid paying double taxes on the same income. A DTAA becomes applicable when an individual or a business entity is a resident of one country but earns income in another.

India signed the DTAA with Australia in 1992 and it was updated in 2013.

DTAA headache

For New Delhi, an amendment to DTAA is vital, which was been agreed upon in the recently concluded India-Australia Economic Cooperation and Trade Agreement (India-Aus ECTA).

As part of the DTAA, Australia taxes Indian IT companies for offshore work done in India under the so-called “royalty” head, though the same income is taxed in India as well. This had led to losses of almost $1 billion for the $220-billion IT industry over the last 10 years, industry body Nasscom has said.

According to Nasscom, the Indian IT sector’s total annual revenue from the Australian market is about $2-3 billion. About 50 percent of this business is estimated to be served through off-shoring to India. The tax impact on the offshore services income levied at 15 percent equals about $225 million annually.

Other issues

Australia has agreed to look into delays in visas for Indian students and find ways to facilitate early processing. It will do the same for tourist visas as well.

Both sides noted that there were significant opportunities to strengthen cooperation in sectors like critical mining, education, agriculture, technology, energy and tourism.

“Both the sides acknowledged the need to expedite the ratification processes for early Entry into Force of the Ind-Aus ECTA for mutual benefit of both the economies, in particular, the businesses,” a commerce and industry ministry release said.

The two sides also explored market access issues relating to commodities such as potato, okra, gherkins, pineapple, and onion in the Australian market, and also a possible technical collaboration for increasing the yield of agricultural products in India, it added.

The two countries agreed to work towards having extensive engagement in activities relating to mineral mining, extending technical cooperation and expertise sharing and working towards a smooth resilient supply chain.

Source: Money Control

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