The Double Tax Avoidance Agreement (DTAA) is a tax treaty signed between two or more countries to help taxpayers avoid paying double taxes on the same income. A DTAA becomes applicable in cases where an individual is a resident of one nation but earns income in another. India presently has DTAA with 80+ countries, with plans to sign such treaties with more countries in the years to come.

DEFINITION OF FTS (FEES FOR TECHNICAL SERVICES)

FTS CLAUSE AS PER DIFFERENT DTAA’s

FTS DEFINITION UNDER THE TREATIES

FTS AS PER INDIA-US TAX TREATY

Consideration for rendering of any technical or consultancy services, if such services:

•  Ancillary and subsidiary to the application enjoyment of the right, property or information,
•  Make available technical knowledge, experience, skill, know-how, or processes, or consist of the development and transfer of technical plan or technical design.

ABSENCE OF ARTICLE ON FTS IN DTAA

In DTAA’s which do not contain FTS Clause:

• • Whether income would be taxed as business income under Article 7?
• • Whether income would be taxed under the residuary Article ‘Other Income’? Or
• • Whether income would be taxed as per provisions of the Act?

ILLUSTRATIVE EXAMPLES OF INCOME

TAX TREATEMENT FOR FTS AS PER THE PROVISIONS OF DTAA

Disclaimer:“The information contained herein is only for informational purpose and should not be considered for any particular instance or individual or entity. We have obtained information from publicly available sources, there can be no guarantee that such information is accurate as of the date it is received or it will continue to be accurate in future. No one should act on such information without obtaining professional advice after thorough examination of particular situation.”