CBDT Notification 33/2024: Amendment in Existing Convention Between India & Spain Pertaining to Taxation of Royalties & Fees on Technical Services (FTS)
The Government of India (GOI), vide its Notification 33/2024 dated 19th March 2024, has introduced favorable adjustments in the Double Taxation Avoidance Agreement (DTAA) between India and Spain, specifically concerning royalties and fees for technical services (FTS).
The convention between the Government of India and the Kingdom of Spain, aiming to avoid double taxation and prevent fiscal evasion on income and capital, has been effective since January 12, 1995, following mutual notifications of completion of required procedures.
Under the authority of section 90 of the Income-tax Act, 1961 (43 of 1961), the Central Government had earlier directed the implementation of all provisions of the aforementioned Convention through a notification by the Ministry of Finance (Department of Revenue), dated April 21, 1995.
As per paragraph 7 of the Protocol dated February 8, 1993, any agreement between India and a third State (OECD member) after January 1, 1990, which reduces India’s source taxation on royalties or FTS, will also apply under this Convention.
A significant aspect is the Convention between India and Germany, effective since October 26, 1996. Germany, being an OECD member during this agreement, influenced India’s decision to limit taxation at source on royalties and FTS at a lower rate compared to the India-Spain Convention.
Now, exercising the powers under section 90 of the Income-tax Act, 1961 (43 of 1961), the Central Government directs the necessary modification for implementing the India-Spain Convention. This modification focuses on Article 13, concerning Royalties and Fees for Technical Services.
Here’s the updated paragraph for Article 13:
“2. However, such royalties and fees for technical services may also be taxed in the Contracting State in which they arise and according to the law of that State, but if the recipient is the beneficial owner of the royalties or fees for technical services, the tax so charged shall not exceed ten per cent of the gross amount of royalties or fees for technical services.”.
This amendment to paragraph 2 of Article 13, effective from the assessment year 2024-25, ensures a more favorable tax regime for royalties and fees for technical services in the India-Spain DTAA.
This update marks a beneficial step towards encouraging economic cooperation and trade relations between India and Spain, providing clarity and lower tax burdens for entities engaged in cross-border activities involving royalties and technical services.
For any further details or clarifications regarding this amendment, entities and individuals are encouraged to refer to the official CBDT Notification 33/2024.
Download the Notification 33/2024
To Access the CBDT Notification 34/2024 Dated 19 March 2024 CLICK HERE
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