Thailand: New income tax treaty with India

Thailand: New income tax treaty with India

The income tax treaty between Thailand and India has been renegotiated, and a new treaty was agreed to on 1 December 2015. It is anticipated that the new income tax treaty would enter into force in Thailand in January 2017, but this is not official.

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Treaty provisions

The new Thailand-India income tax treaty includes various updates and clarifications to the permanent establishment (PE) article. Exceptions to the creation of PEs have now been restricted. Also, a PE would now arise when a combination of various activities (such as storage, display of goods, purchasing of goods) is not of a preparatory or auxiliary character in relation to the business as a whole. 

Another provision allows capital gains on the disposal of shares in a “property rich” company to be taxed in the country where the property is located.  The new treaty includes a comprehensive exchange of information article. A limitation of benefits article is also introduced that confirms each contracting state’s right to apply, without limitations, its domestic law and measures concerning tax avoidance or evasion. 

Concerning withholding taxes, the new treaty provides for the following:

  • Dividends—withholding tax rate reduced to 10% (from 15% / 20%)
  • Interest—withholding tax rate of 10%, but 0% when the interest is beneficially owned by the government, a political subdivision, local authority, or certain banks or institutions
  • Royalties—withholding tax rate reduced to 10% (from 15%)

 

Read a January 2016 report [PDF 106 KB] prepared by the KPMG member firm in Thailand: Double Taxation Treaty Between Thailand and India Renegotiated

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