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New Tax Treaty between India and Thailand has Entered into Force

According to a recent notice published by the Indian government, the new income tax treaty with Thailand entered into force on 13 October 2015. The treaty, signed 9 June 2015, replaces the 1985 income tax treaty between the two countries.

Taxes Covered

The treaty covers Indian income tax, including any surcharges, and covers Thai income tax and petroleum income tax.

Permanent Establishment

The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services within a Contracting State through employees or other personnel for the same or connected project for a period or periods aggregating more than 183 days within any 12-month period.

A permanent establishment will also be deemed constituted when an insurance enterprise collects premiums in a Contracting State or insures risks situated in a Contracting State through a non-independent agent. An exemption applies for re-insurance.

Withholding Tax Rates

  • Dividends - 10%
  • Interest - 10%
  • Royalties - 10%

Capital Gains

The following capital gains derived by a resident of one Contracting State may be taxed by the other State:

  • Gains from the alienation of immovable property situated in the other State;
  • Gains from alienation of movable property forming part of the business property of a permanent establishment in the other State;
  • Gains from the alienation of shares of the capital stock of a company the property of which consists directly or indirectly principally of immovable property situated in the other State; and
  • Gains from the alienation of shares, other than the above, in a company resident in the other State

Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.

Double Taxation Relief

Both countries apply the credit method for the elimination of double taxation.

Limitation on Benefits

Article 27 (Limitation on Benefits) includes the provision that the treaty in no case prevents a Contracting State from applying the provisions of its domestic law or measures concerning tax avoidance or evasion.

Assistance in Collection of Taxes

The protocol to the treaty, signed the same date, includes the provision that if Thailand introduces a provision in its domestic law regarding assistance in collection of taxes or agrees to enter into such assistance with any other treaty partner, then the competent authorities of India and Thailand will open negotiations to amend the treaty to provide such assistance to each other.

Effective Date

The treaty applies in India from 1 April 2016 and in Thailand from 1 January 2016.

The 1985 income tax treaty between the two countries will cease to have effect once the provisions of the new treaty become effective.

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