Introduction: Double Tax Agreements<
A double tax agreement (“DTA”) is a bilateral agreement between two countries in order to avoid the double tax and the prevention of fiscal evasion with respect to taxes on income or on elements of income.
Individuals with a “permanent residence” and with full and unlimited tax liability in either one of the contracting countries may be entitled to exemption/reduction from taxation of income and property according to provisions of the respective agreements, in absence
of which the income would be subject to double taxation.
Tax benefits under DTA for payments can take place in two (2) ways:
• Avoided double tax payments or a reduced tax rate on respective payments;
• Deducted withholding tax rate payments.
The existing taxes covered under DTA’s agreement may include the following, depending on the signatory countries:
• Taxes on income;
• Gains from the alienation of movable or immovable property;
• Taxes on wages or salary;
• Withholding tax on dividends, interest, royalties, technical service.
The main feature of DTAs is that the standard rate of withholding tax can be reduced for all payments to non-resident taxpayers
from 14% to a maximum of 10% of the gross amount in most cases, including withholding tax on dividends, interest, royalties and technical services.
In addition, income of a Contracting State that is a resident of other Contracting States may be taxed in other jurisdictions, but by
virtue of the effectiveness of DTAs, the tax paid is provided as a tax credit in the jurisdiction.