Government ratifies convention on tax treaty

Last Updated: Thu, Jun 13, 2019 16:32 hrs
Income Tax (PTI Photo)

New Delhi: The Union cabinet has approved the ratification of an international convention which enables the implementation of tax treaty related changes to achieve anti-abuse "Base Erosion and Profit Shifting (BEPS)".

BEPS are corporate tax planning strategies used by various multinational firms to shift their profits from a higher-tax jurisdiction to lower tax jurisdictions to erode tax-base.

Accordingly, the Union cabinet chaired by Prime Minister Narendra Modi approved the ratification of the "Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting".

"The Convention will modify India's treaties in order to curb revenue loss through treaty abuse and base erosion and profit shifting strategies by ensuring that profits are taxed where substantive economic activities generating the profits are carried out and where value is created," an official communique said.

The Convention enables countries to implement the tax treaty related changes to achieve anti-abuse BEPS outcomes through the multilateral route without the need to bilaterally re-negotiate each such agreement which is burdensome and time consuming.