The Government of the Republic of India signed a Double Taxation Avoidance Agreement (DTAA) with the Government of Republic of Fiji for the avoidance of double taxation and for the prevention of fiscal evasion with respect to taxes on income. The Agreement was signed here today by Shri P. Chidambaram, Union Minister of Finance on behalf of the Government of India and by Mr. Aiyaz Sayed-Khaiyum, Attorney General and Minister of Justice, Anti-Corruption, Public Enterprises, Communications, Civil Aviation, Tourism, Industry and Trade, on behalf of the Government of Republic of Fiji.

Speaking on the occasion, the Finance Minister Shri P. Chidambaram said that the need for the DTAA between the two countries was felt and negotiations were completed in 2011. He said that the Agreement will provide tax stability to the residents of India and Fiji and facilitate mutual economic cooperation as well as stimulate the flow of investment, technology and services between India and Fiji. The Finance Minister further said that the Agreement incorporates provisions for an effective exchange of information and assistance in collection of taxes between tax authorities of the two countries including exchange of banking information.

The DTAA provides that business profits will be taxable in the source State if the activities of an enterprise constitute a permanent establishment in the source state. Profits derived by an enterprise from the operation of aircraft in international traffic shall be taxable in the country of place of effective management of the enterprise. Dividends, interest, royalty income and fees for technical or professional services will be taxed both in the country of residence and in the country of source. However, the maximum rate of tax to be charged in the country of source will not exceed the prescribed limit for such dividends, interest, royalties and fees for technical services. Capital gains from the sale of shares will be taxable in the country of source. The Agreement also incorporates anti-abuse provisions to ensure that the benefits of the Agreement are availed of only by the residents of the two countries and to prevent any abuse of treaty.

Double taxation avoidance: treaty limits source taxation and provides information exchange and anti-abuse safeguards for cross-border investment. A Double Taxation Avoidance Agreement between India and Fiji allocates taxing rights by taxing business profits in the source State only when a permanent establishment exists, taxes aircraft operation profits in the country of place of effective management, allows residence and source taxation of dividends, interest, royalties and technical service fees subject to treaty maximum source rates, treats capital gains on share transfers as taxable in the source State, and includes exchange of information, assistance in tax collection, and anti-abuse provisions to prevent treaty misuse.