NRIs must practise sound bookkeeping, advise experts

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NRIs must practise sound bookkeeping, advise experts
Delegates attend a workshop on international taxation organised for NRIs by the UAE chapter of the Institute of Chartered Accountants in Dubai on Saturday.

Dubai - India-UAE double taxation treaty can unlock benefits for UAE residents, experts say.

By Deepthi Nair

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Published: Sat 31 Oct 2015, 11:00 PM

Last updated: Sun 1 Nov 2015, 7:16 PM

The UAE has signed 67 bilateral double taxation avoidance agreements (DTAAs) with countries but is yet to enter into any tax information exchange treaties with other states, said industry specialists at a day-long workshop in Dubai on Saturday.
Organised by the UAE chapter of the Institute of Chartered Accountants of India, the event discussed international taxation, double taxation treaties, NRI taxation and Foreign Exchange Management Act (Fema) implications.
DTAAs are signed to mitigate taxation, avoid double taxation conflicts and define boundaries of taxing rights.
"Since the UAE is tax-free, the India-UAE DTAA has advantages for UAE residents but not vice-versa," said T.P. Ostwal, a partner in TP Ostwal & Associates, Mumbai.
"For instance, if a UAE resident invests in India or purchases debentures, s/he has to pay only 12.5 per cent tax. A resident Indian has to pay 30 per cent tax on interest generated. Or if a UAE investor undertaking business in India says he has no permanent establishment in that country, he does not need to pay tax. A UAE shipping company doing business via India will not pay tax owing to treaty provisions," he added.
Meanwhile, 94 countries have agreed to trade information on financial details under the exchange of tax information programme initiated by the OECD. All financial information will be collected in 2016, shared in 2017, government officers will scrutinise data in 2018 and first action is likely to be initiated in India in 2019.
"Book-keeping has become a must as a safe course of action. Keep proof of all your property purchases. Keep a minimum trail if you are looking to come back to India and disclose assets," Ostwal advised NRIs at the event.
"Any money a UAE-based NRI has invested in a foreign country is white money. If an NRI makes an investment in India, he should have evidence of all transactions. This will protect him," he added.
Failure by a tax payer to disclose foreign assets while filing tax returns could invite government action and even result in a jail term, as per provisions of the Black Money Act.
The Fema, a successor to the draconian Foreign Exchange Regulation Act of 1973, is often referred to the 'Gateway of India' as it is the governing law for all NRIs.
"Citizenship or the number of days you reside in India will not influence Fema," said Rajesh H. Dhruva, an NRI tax consultant based in Rajkot, India.
Experts at the event defined international taxation as a body of legal provisions of different countries that covers the tax aspects of cross-border transactions. It is necessitated by globalisation, a borderless global economy, movement of people and growing cross-broder M&As (mergers and acquisitions).
"Bilateral tax treaties limit the taxing powers of each state and involve a negotiated sharing of tax revenues by two states. Treaties do not impose tax, but relieve them," said Ostwal.
He added: "DTAAs help prevent fiscal evasion, allocate taxing rights, promote investments and mutual relations, promote ease in recovering tax dues and prevent tax discrimination."
In comparison with national tax legislations which undergo frequent amendments, DTAAs are changed often and are open to liberal interpretation.
­- deepthi@khaleejtimes.com


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