Features of Treaties

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....nefit of tax treaty in case the person is resident of one or both of the contracting States, Country of residence may have full right to taxing the global income of its resident and would grant relief in respect of tax paid in the country of Source. Article 4 of the tax treaty governs the provision of residence. It is to be noted that Article 4 of the tax treaty deals with residential status of a....

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....ction with the taxpayer. The rights of the source state are sometimes limited (e.g. in case of royalties, interest) or are unconditional or are conditional (e.g. business profits only taxable if PE exists). In some cases, no rights are granted to the Source State and the entire income is taxable in the Residence State. The allocation or distribution of the taxing rights depends upon the negotiatio....

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....he treaties do not provide for the computation mechanism, the collection and the assessment of taxes and that is left to the discretion of the domestic tax laws of the respective countries. Tax treaties only distribute or assign taxing jurisdiction. It does not impose tax. Ex - If any income is not taxable under domestic tax laws, such income cannot be taxed even if taxing provision provided unde....

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....s paid in the Source State. Under the limited credit method, the credit granted in the Residence State is restricted to the lower of the tax paid in source state or the tax on that income in the residence state. In some cases, certain types of income are relieved from double taxation by using the credit method while some get relieved from double taxation by using the exemption method. Exchange o....