In the latest move to check tax evasion by multinational companies operating in both China and India, the two countries signed a protocol to amend the existing Double Taxation Avoidance Agreement (DTAA).
The protocol, among other things, updates the existing provisions for the exchange of information to the latest international standards.
It also incorporates changes required to implement treaty related minimum standards under the ‘action report’ of Base Erosion & Profit Shifting (BEPS) Project, which allows for greater transparency of multinational companies’ tax information on a country-by-country basis.
The new protocol between India and China brings in changes as per BEPS Action reports, as agreed upon by the two sides.
The Action report comprises 15 BEPS actions that give governments the tools they need to ensure all activity and value generating profits are taxed. It focuses on three fundamental pillars:
- Introducing coherence in domestic rules that affect cross-border activities;
- Reinforcing substance requirements in international standards to ensure alignment of taxation with the location of economic activity and value creation; and
- Improving transparency, as well as certainty for businesses and governments
The OECD BEPS Multilateral Instrument was introduced on November 24, 2016, and has since been signed by over 78 countries. It came into force in July 2018.
To see the original India-China DTAA, please click here.
