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THE AIM
In the present times when the industry, trade and commerce
have transgressed all territorial barriers there is bound to
be double taxation when two states exercise their right to
tax the same person on the same income. A Double Taxation
Avoidance Agreement between two countries, therefore, aims
at eliminating or mitigating the extent of double taxation.
Provisions are also enacted for avoiding double taxation by
unilateral action in respect of the countries with which
there are no double taxation avoidance agreements
THE OBJECTIVES
The double taxation avoidance agreements have the effect of
law in a member country and they over-ride any other
enactment. The object of the double taxation of certain
income where a resident of one country derives an income in
any other country. The agreement s achieve the objects by:
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clarifying when a country of source may tax a
non-resident in respect of certain types of income;
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limiting the rate of tax a country or source may apply
to certain types of income;
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providing foreign tax credits in the country of
residence against taxes paid in that country on income
arising in that country; and
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preventing
avoidance of tax by exchange of information between the
two countries.
SCOPE
The scope of the agreements varies from
country to country and its economic policies, its economic
and trade relations with other countries and the fact
whether the economy is advanced and developed or only a
developing economy. Sometimes limited agreements are entered
into for development of maritime and air traffic relations
to the best advantages of the two countries. Distinct from
such limited tax agreements, there are comprehensive tax
treaties dealing with various aspects having regard to the
state of trade, commerce, development of technology ad other
related factors
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