The double taxation avoidance agreement (DTAA), signed by Finance Minister P. Chidambaram and Mexico’s Foreign Minister Patricia Espinosa Cantellano, is also aimed at promoting economic cooperation between the two countries.
The DTAA between India and Mexico, according to an official statement here, will cover income-tax, including any surcharge thereon, in the case of India and the federal income-tax in the case of Mexico.
It provides for taxation of dividend, interest, royalties and fees for technical services —both in the country of residence as well as the country of source.
However, the rate of tax in the country of source should not exceed 10 per cent of the gross amount of payment in case the beneficial owner of the payments is a resident of the other contracting State.
The agreement provides that capital gains from alienation of shares of a company should be taxable in the country where the company is a resident. The incidence of double taxation should be avoided by one country giving credit for taxes paid by its residents in the other country. There is a provision for exchange of information in cases which are under investigation in either of the two countries. Both countries should assist each other in collection of revenue claims.
There is also a provision for limitation of benefits under the DTAA to prevent misuse of the provisions of the agreement.
The pact will further stimulate the flow of capital, technology and personnel between the two countries as also contribute to the tax stability and reduce any obstacles in providing mutual cooperation, the statement said.
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