India signed a Double Taxation Avoidance Agreement (DTAA) with Mexico for the avoidance of double taxation and for the prevention of fiscal evasion with respect to Taxes on Income, here today. This Agreement shall enter into force on a date to be notified in due course. The Agreement also aims at promoting economic co-operation between the two countries. The Agreement was signed by Shri P. Chidambaram, Union Minister of Finance on behalf of the Government of India and Ms.Patricia Espinosa Cantellano, Foreign Minister of Mexico on behalf of the Government of the United Mexican States.

The DTAA between India and Mexico will cover in the case of India, income-tax including any surcharge thereon and in the case of Mexico, the federal income-tax.

The DTAA provides for taxation of dividend, interest, royalties and fees for technical services-both in the country of residence as well as the country of source.

However, the rate of tax in the country of source shall not exceed ten percent of the gross amount of payment in case the beneficial owner of the payments is a resident of the other Contracting State.

The DTAA provides that capital gains from alienation of shares of a company shall be taxable in the country where the company is a resident.

The incidence of double taxation shall be avoided by one country giving credit for taxes paid by its residents in the other country.

There is a provision for exchange of information in cases which are under investigation in either of the two countries.

Both countries shall assist each other in collection of revenue claims.

There is also a provision for limitation of benefits under the DTAA to prevent misuse of the provisions of the DTAA.

The Agreement will further stimulate the flow of capital, technology and personnel between the two countries. It will also contribute to the tax stability and reduce any obstacles in providing mutual co-operation.

Withholding tax limits on dividends, interest and royalties permit source taxation subject to capped rates and tax credit relief. Double Taxation Avoidance Agreement between India and Mexico allocates taxing rights for income including dividends, interest, royalties and fees for technical services, permits source and residence taxation with a capped source withholding where the beneficial owner resides in the other Contracting State, assigns capital gains on company shares to the company's residence, and provides relief by crediting taxes paid abroad.