Question

Which of the following are advantages of DTAA?

• A. Provides clarity to investors
• B. Promotes bilateral investments
• C. Promotes information sharing
• D. All the above

Answer 1

The correct option is D All the above

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 taxpayer 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, inheritance, etc.

Advantages of DTAA:

1. DTAAs are intended to make a country an attractive investment destination by providing relief from dual taxation by promoting information sharing
2. DTAAs also provide for concessional rates of tax in some cases.
3. It promotes bilateral investments by providing clarity on taxation to investors