South Asian Tax Summit 200815-16 April, 08, Karachi

SAARC TAX TREATY

Sunil Goyal ,India

Past President, The Institute of Chartered Accountants India and South Asian Federation of

Accountants

South Asian Association for Regional Cooperation

MEMBER STATES:

1. Republic of Bangladesh.2. Kingdom of Bhutan3. Republic of India4. Republic of Maldives5. Kingdom of Nepal6. Islamic Republic of Pakistan7. Democratic Socialist Republic of Sri Lanka

SAARC

Multilateral Agreement on Avoidance of Double Taxation and Mutual Administrative assistance in

TAX matters.

Historical Agreements Signed in 13th

SAARC Summit at Dhaka on 13th Nov,2005.

To promote economic Cooperation amongst the SAARC Member States.

TAXES COVERED

(i) Apply to taxes on Incomes Imposed by or on behalf of the member States

(i) Shall apply also to any identical or substantially similar taxes that are imposed after the date of signature of the agreement in additional to, or in the place of, the existing taxes.

RESIDENT

A person is deemed to be resident of state where he is liable to tax therein by reason of his domicile, residence, place of management or any other criterion

RESIDENT

An individual who is a resident of more than one member State, his\her status shall be determined as

follows:-

a. He has a permanent homeb. He has closer personal and economic relationsc. He has habitual aboded. Of which he is national

Exchange of Information

The Competent Authorities of the member states shall exchange such information, including documents and public documents or certified copies thereof , as is necessary for carrying out the provisions of this agreement or of the domestic laws of the member States concerning Taxes covered by this agreement insofar as the Taxation there under is not contrary of the agreement.

Any information received by a member state shall be treated as secret in the same manner as information obtained under the domestic Laws.

Assistance in the Collection of Taxes

(i) The Member states shall lend assistance to each other in the collection of revenue claims.

(ii) The term “REVENUE CLAIMS” as used in this articles means an amount owed in respect of Taxes covered by the agreement together with interest , penalty and cost of collection or conservancy related to such amount.

(iii) Revenue claim shall be collected by that other member state in accordance with the provision of its Laws applicable to the enforcement & Collection of its own taxes as if the revenue claimed were a revenue claim of that other member state.

Service of Documents

At the request of the applicant member state the requested member state shall serve upon the addressee , documents and public documents including those relating to Judicial decisions, which emanate from the applicant member state and which relate to a tax covered by this agreement.

Professors, teachers and Research Scholars

The Professors , Teachers or Research scholar who is / was a resident of the member state immediately before visiting the other member state for the purpose of teaching or engaging in research or both shall be exempt from tax in that other member state on any remuneration for such teaching or research for a period not exceeding 2 years from the date of his/her arrival in that other member state.

Students

A Student is who is or was a resident of one of the Member states immediately before visiting the other member states and who is present in that other member for the purpose of education or training shall, besides payments received from sources outside that state for the purpose of Education or Maintenance, be exempt from tax in that other member state.

Exemption in respect of remunerations from employment shall not exceed an amount equals to US$3000/-per annum.

Training

The member State shall endeavor to hold and organize training programmes, seminars and workshops for the Tax administration with the objective of :

(1) Providing a common forum for senior tax administrators to meet and discuss problems of common concerns;

(2) Enhancing the technical and administrative knowledge and skills of Tax administrators;

(3) Evolving strategies to combat common Tax problems like Tax avoidance/ evasion in the SAARC region.

Sharing of Tax Policy

(I) Each Member State shall endeavor to bring out a yearly report on changes made in its Tax Laws.

(I) A member state may, on request , make available its pool of talented experts to other member states for the purposes of Drafting and organizing legislation, tax procedures, operational managements, on –the-job training programmes, information system and technology etc.

Implementation

The Member State shall hold periodic consultation, an appropriate, of Competent Authority, with a view to facilitating the effective implementation of this agreement.

Review

The Member states shall meet in order to review this agreement on request or at the end of 5 years from the date of its entry into force, unless they notify the staff secretariat in writing, that no such review is necessary.

Amendments

This agreement may be amended by consensus. Any such amendment will become effective upon the deposit of instrument’s of acceptance with the Secretary- General of SAARC by all member states and issuance of notification thereof by the SAARC secretariat.

Depository

This Agreement will be deposited with the Secretary- General of SAARC, who will furnish a certified copy thereof to each member state.

Entry into Force

1. This Agreement shall enter into force on the thirtieth day after the notification issued by the SAARC secretariat regarding completion of all formality, including ratification, wherever applicable, by all member States, which shall be done no later than 30th June 2006.

2. The provision of this Agreement shall have effect in all the seven members of SAARC.

Termination

This agreement shall remain in force indefinitely until terminated by a member state. A member state may terminate the agreement, to diplomatic channels, by giving notice of termination at least 6 months before the end of an calendar year, beginning after the expiration of 5 years from the date of entry into force of the agreement. The provision of this Agreement shall have effect in all the seven members of SAARC

In case of conflict with subsequent bilateral agreement the later agreement shall prevail.

Conflict with bilateral

• Non implementation

• Too little , too late

• Relations between the countries

Issues of Concern

• Proper support with SAFTA regime

• Tax free import

• MFN Status

Need of Hour

• Use of economic strength of one country by other

• Creating the whole of south Asia as a strong body like EU

• Proper publicity • Very little scope , no business, no industry

covered • No tax credit of one country in other

country

Need of Hour

THANK YOU