The OECD model, the UN model, the American model and the Andean model are just a few of these models. Of these, the first three are the most important and most commonly used models. However, a final agreement could be a combination of different models. The DBAA applies to U.S. federal income tax, that is, U.S. income tax. However, the agreement does not apply to the following taxes: 4) National Website of the Tax Department of the Income of India-www.incometaxindia.gov.in/ Mr. X, a resident residing in India, works in the United States. In return, Mr. X receives some compensation for the work done in the United States.
Today, the U.S. government imposes federal income tax on income collected in the United States. However, it is possible that the Indian government may also levy income tax on the same amount, i.e. the remuneration paid abroad, with Mr. X based in India. In order to protect innocent taxpayers like Mr. X from the harmful effects of double taxation, governments in two or more countries can enter into an agreement known as the Double Taxation Prevention Convention (DBAA). However, in order to avoid the misuse of this exemption, particularly by residents of third countries who set up holding companies in Singapore to benefit from the exemption from yields, a clause “Limitation of Benefits (LOB) ” was added in the contract. Under this clause, a Singapore company entitled to a shareholding in the company is not entitled to the exemption from social capital gains if the sole purpose of the company`s incorporation was to benefit from this benefit. In addition, companies with only a negligible business in Singapore and no continuity in their operations are not entitled to this benefit.
Under the LOB clause, the agreement does not apply to shell companies. 4. Provisions to eliminate double taxation: this is first and foremost section 23. Article 25 (mutual agreement) could also be classified in this category. 5. Provisions to avoid tax evasion: they include Articles 9 (associated companies) and 26 (exchange of information). Disclaimer: The content of this article is exclusively for information and does not constitute a board or conception of the law and is a personal opinion of the author. It is based on the relevant laws and/or facts available at that time and is established with the necessary precision and reliability. Readers are invited to review and refer the relevant provisions of the statute, the latest judicial statements, circulars, clarifications, etc.
before acting on the basis of the above letters. The possibility of other views on this subject cannot be ruled out. By using this information, you agree that the author/TaxGuru is not responsible for authenticity, accuracy, completeness, integrity, error or omission in this information for all actions taken in it. This is not a type of professional advertising or incentive to work. C orntries around the world enter into different tax treaties. These contracts are beneficial to residents (commercial and individual units) of the countries parties to the agreement.