The Union Cabinet chaired by Prime Minister Narendra Modi approved the signing of the Protocol amending the Convention between the Governments of India and Brazil for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.
The existing Double Taxation Avoidance Convention (DTAC) between India and Brazil was signed on 26 April, 1988, and was last amended on 15 October, 2013, in respect of exchange of information. Most aspects of the existing DTAC between the two countries are very old. It was required to be amended to bring it in line with international developments and also to implement the recommendations contained in the G20 OECD Base Erosion and Profit Shifting Project (BEPS).
Through updation of the DTAC’s provisions to international standards, the Amending Protocol between India and Brazil will facilitate the elimination of double taxation. Clear allocation of taxing rights between the contracting states through DTAC will provide tax certainty to investors & businesses of both countries. The Amending Protocol will augment the flow of investment through lowering of tax rates in source State on interest, royalties and fees for technical services.
The Amending Protocol also implements minimum standards and other recommendations of G20 OECD Base Erosion Profit Shifting (BEPS) Project. Inclusion of Preamble Text, a Principal Purpose Test, a general anti-abuse provision in the DTAC along with a Simplified Limitation of Benefits Clause as per BEPS Project will result in curbing of tax planning strategies which exploit gaps and mismatches in tax rules.
After Cabinet approval, necessary formalities for bringing the Protocol into force will be completed. Implementation would be watched and reported by the Ministry.