Double Taxation Agreement between India and Thailand: What You Need to Know
India and Thailand have signed a Double Taxation Avoidance Agreement (DTAA) to prevent double taxation of income earned in both countries. The agreement was signed in 1985 and updated in 2013 to reflect changes in tax laws.
What is Double Taxation?
Double taxation occurs when income is taxed in two different countries. For instance, if an Indian citizen works in Thailand and earns income there, it will be taxed by the Thai government. However, if the same income is brought back to India, it may be taxed again. This results in double taxation, which can be a significant burden on taxpayers.
How Does the DTAA Work?
The DTAA between India and Thailand aims to eliminate the double taxation of income earned in both countries. It does this by allocating the taxing rights of the income between the two countries. Under the agreement, the income earned by a taxpayer in one country is only taxed by that country. The other country exempts the income or provides a credit for the tax paid in the first country.
For instance, if an Indian citizen earns income in Thailand, the tax paid in Thailand is deducted from their income when calculating their tax liability in India. This ensures that the income is not taxed twice, and the taxpayer is not overburdened.
Who Does the Agreement Apply to?
The DTAA applies to individuals and businesses that earn income in both India and Thailand. This includes:
– Indian residents earning income in Thailand
– Thai residents earning income in India
– Businesses with a presence in both countries
The DTAA also applies to various income types, including:
– Income from employment
– Income from business and profession
– Income from dividends and interest
– Income from royalties and fees for technical services
Benefits of the DTAA
The DTAA between India and Thailand provides several benefits for taxpayers, including:
– Prevention of double taxation: The DTAA ensures that income earned in both countries is not subject to double taxation.
– Reduction of tax liability: The agreement allows for the reduction of tax liability by providing for tax exemptions or credits.
– Facilitation of business: The agreement promotes trade and investment between the two countries by reducing the tax burden on businesses with a presence in both countries.
Conclusion
The Double Taxation Avoidance Agreement between India and Thailand is a significant step towards promoting trade and investment between the two countries. By preventing double taxation and reducing tax liability, the agreement provides significant benefits for individuals and businesses earning income in both countries. It is essential to understand the provisions of the agreement, particularly for those who frequently travel or do business in both India and Thailand.