Does Australia Have a Double Tax Agreement with India

November 3, 2022

If you`re planning to do business in both Australia and India, you might be wondering whether there is a double tax agreement in place between the two countries. The good news is that there is indeed a double tax agreement between Australia and India, and understanding its provisions could help you avoid paying taxes twice on the same income.

What is a double tax agreement?

A double tax agreement, also known as a tax treaty, is an agreement between two countries that aims to prevent double taxation on the same income. Double taxation can occur when a taxpayer earns income in one country and is also taxed on that income in another country.

Double tax agreements typically address the following types of income: business profits, income from employment, dividends, interest, royalties, and capital gains. They also usually cover the following taxes: income tax, capital gains tax, and withholding tax.

What are the provisions of the Australia-India double tax agreement?

The Australia-India double tax agreement was signed in 1991 and applies to residents of both countries. Here are some of its key provisions:

– Business profits: Under the agreement, business profits can only be taxed in the country where the business is located, except in certain circumstances. For example, if an Australian business has a permanent establishment in India, the profits attributable to that establishment can be taxed in India.

– Income from employment: If you are resident in one country and work in the other country, you will generally only be taxed in the country where you are resident, unless you spend more than 183 days in the other country in a year or your employer is based in the other country.

– Dividends: Dividends paid by a company in one country to a resident of the other country are generally taxed at a reduced rate of 15%.

– Interest and royalties: Interest and royalties paid by a resident of one country to a resident of the other country may be subject to withholding tax, which is generally capped at 10%.

– Capital gains: Capital gains from the sale of immovable property (such as real estate) are generally taxed in the country where the property is located. For other capital gains, the country of residence of the taxpayer may have the right to tax the gains.

How can the Australia-India double tax agreement benefit you?

If you are doing business in both Australia and India, the double tax agreement can provide you with several benefits. For example:

– You can avoid being taxed twice on the same income.

– You can benefit from reduced rates of tax on dividends, interest, and royalties.

– You can benefit from more certainty about how your income will be taxed in each country.

Overall, the Australia-India double tax agreement is an important tool for businesses and individuals who are conducting business in both countries. By understanding its provisions, you can ensure that you are not paying more tax than you need to and can enjoy the benefits of doing business in both Australia and India.

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