The Central Board of Direct Taxes has clarified that under the revised India-Korea Double Taxation Avoidance Agreement (DTAA), applications for bilateral Advance Pricing Agreement (APA) involving international transactions with Associated Enterprises in Korea for the APA period beginning Fiscal Year 2017-18 can be filed along with request for rollback provision in prescribed form.
Such requests for rollback provision shall be processed in accordance with the provisions of Income Tax Act, i.e, section 92CC(9A) of the Income Tax Act 1961, and the applicable Income Tax rules in this regard. Inclusion of rollback provision in such bilateral APAs would also be subject to the applicable regulations in Korea. The CBDT has issued the present clarification in response to the queries received from taxpayers regarding availability of rollback provision in respect of bilateral APA applications for APA period beginning financial year 2017-18.
The existing DTAA between India and Korea was signed on July 19, 1985 and was notified on September 26, 1986. A revised DTAA between India and Korea for the Avoidance of Double Taxation and the Prevention of Fiscal evasion with respect to taxes on income was signed on May 18, 2015 and entered into force on September 12, 2016.
A DTAA is a tax treaty signed between two or more countries. Its key objective is that tax-payers in these countries can avoid being taxed twice for the same income. A DTAA applies in cases where a tax-payer resides in one country and earns income in another.
DTAAs can either be comprehensive to cover all sources of income or be limited to certain areas such as taxing of income from shipping, air transport and inheritance. India has DTAAs with more than eighty countries, of which comprehensive agreements include those with Australia, Canada, Germany, Mauritius, Singapore, UAE, the UK and US.
DTAAs are intended to make a country an attractive investment destination by providing relief on dual taxation.