Agreement between India and Bermuda for the exchange of information with respect to taxes
Background
On 7th October 2010 India had signed its first Agreement for Exchange of Information with respect to taxes (Agreement) with Bermuda as authorized by the Government of the United Kingdom of Great Britain and Northern Ireland. The Ministry Of Finance (MOF) has now vide Notification No 5 of 2011 dated 24th January 2011 notified that the Central Government has directed that all the provisions of this Agreement would be given effect in the Union of India (UOI):
i) with respect to criminal tax matters immediately and;
ii) with respect of all other matters covered by Article 1 for taxable periods beginning on or after 3rd November, 2010 or where there is no taxable period, for all charges to tax arising on or after 3rd November, 2010.
Salient Features of the Agreement are given below
Definitions
a) “person” includes an individual, a company, a body of persons and any other entity which is treated as a taxable unit under taxation laws in force in the respective countries; and a company would mean a body corporate or any entity that is treated as a body corporate for tax purposes
b) “Information gathering measures” means laws and administrative or judicial procedures that enable a contracting party to obtain and provide the requested information.
c) “Information” means any fact, statement, document or record in whatever form.
d) Taxes in India would refer to all taxes and in Bermuda to direct taxes imposed by the Central Government or the Governments of political subdivisions or local authorities of the respective countries and would extend to identical or substantially similar taxes which may be imposed by the respective Contracting parties after the signature of the Agreement
Object & Scope of the Agreement
The competent authorities of the Contracting Parties shall provide assistance through exchange of information relevant to the administration and enforcement of the domestic laws of the parties concerning taxes covered by this agreement. It would include information relavnat for the determination, assessment and collection of taxes, the recovery and enforcement of tax claims or the investigation or prosecution of tax matters
Jurisdiction
The information exchange would apply in respect of persons, without regard to whether such person to whom the information relates is, or whether the information is held by, a resident of a Contracting Party. However, a Requested Party is not obliged to provide information which is neither held by its authorities nor is in the possession or control of persons who are within its territorial jurisdiction.
Exchange of information Upon Request
Each Contracting Party shall ensure that its Competent Authority has the authority to obtain and provide (despite administrative measures in variance to its laws and pracitices) upon request information which would not be treated as a secret or trade process
• held by banks, other financial institutions and any other person acting in a fiduciary capacity
• regarding the legal and beneficial ownership of companies, partnerships, collective investment funds or schemes, trusts, foundations and other persons including the ownership information of persons in the ownership chain.
However, the agreement does not create an obligation on the Contracting Parties to provide or obtain ownership information with respect to publicly traded companies or public collective investment funds or schemes.
Additionally, there would be no obligation to disclose any trade, business, industrial, commercial or professional secret or trade process or obtain/ provide information which would reveal confidential communication between client and attorney.
The requesting party would be required to demonstrate the relevance of the information desired by providing specified information to the requested party.
The requested party may decline to provide the information where the request is not in conformity to the agreement, contrary to its public policy or the party has not pursued all means available to it in its own territory.
Tax Examinations Abroad
This Article provides for tax examinations abroad which can be done at the request of the Competent Authority of the Requesting Party. The Requested Party may allow representatives of the Competent Authority of the Requesting Party to enter the territory of the Requested Party, to the extent permitted under its domestic laws, to interview individuals and examine records with the prior written consent of the individuals or other persons concerned.
Other provisions
The agreement also provides for possibility of declining a request for information, confidentiality of information, administrative costs and mutual agreement procedures.
Comments
The agreement between India and Bermuda has been entered to enhance co-operation and facilitate the exchange of information with respect to administration and enforcement of the domestic laws with respect to taxes. This may result in greater transparency and further increase the investment opportunities between India and Bermuda.
