India signs double taxation avoidance agreement with Mexico

New Delhi, Sep 10 (UNI) India today signed a double taxation avoidance agreement (DTAA) with Mexico for avoiding double taxation and for preventing evasion of taxes on income, here.

The agreement will become operative from a date yet to be notified, a Finance Ministry statement said.

Signed by the Union Finance Minister P Chidambaram and Mexico Foreign Minister Patricia Espinosa Cantellano, the agreement, in case of India, will cover income tax and surcharge on it. In case of Mexico, it will cover the federal income tax, the statement said.

The DTAA 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 shall 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 statement said.

The agreement provides that capital gains from alienation of shares of a company shall be taxable in the country where the company is a resident.

The incidence of double taxation shall 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 shall assist each other in collection of revenue claims.

The agreement also provides for limitation of benefits under the DTAA to prevent misuse of its provisions.

The agreement, the Finance Ministry said, will stimulate the flow of capital, technology and personnel between the two countries.

It will also contribute to the tax stability and reduce any obstacles in providing mutual co-operation, it added.

UNI