DTAA with Colombia

India, recently signed a Double Taxation Avoidance Agreement (DTAA) with the Republic of Colombia for the avoidance of double taxation and for the prevention of fiscal evasion relating to taxes on income. The DTAA states that business profits will be taxable in the source country if the business of an entity includes a permanent establishment in the source country. Branch, factory etc. are some examples of permanent establishment. Proceeds from a construction, assembly or installation ventures will be taxed in the country of source if the project continues in that state for more than six months. Profits resulting by an establishment from the operation of ships or aircraft in international traffic shall be taxable in the country of residence of the business. Dividends, interest and royalty income will be taxed, both, in the country of residence and in the country of source. Even so, the maximum rate of tax to be charged in the nation state of source will not exceed 5% in the case of dividends and 10% in the case of interest and royalties. Capital gains from the sale of shares will be taxable in the country of source. 

Additionally, the agreement includes covenants for effectual exchange of information and support in collection of taxes between tax authorities of the two countries in sync with globally accepted criterions including exchange of banking information and slots in anti-abuse stipulations to make sure that the payoffs of the Agreement are of use to legitimate residents of both nations. The Agreement will provide tax permanence to the residents of India and Colombia and ease reciprocal economic support plus encourage the surge of investment, technology and services between India and Colombia.

By Vidhi Agarwal, Partner