In line with an April agreement, India has requested Australia to accelerate adjustments to laws relevant to the Double Taxation Avoidance Agreement (DTAA), since Indian information technology (IT) firms operating in that country continue to be forced to pay more taxes than they should.
Anupriya Patel, minister of state for trade and industry, informed visiting Western Australian deputy premier Roger Cook that the adjustment should be made as soon as possible to cease taxing the offshore revenue of Indian enterprises providing technical help there, the commerce ministry said on Thursday.
Both parties agreed on the need of ratifying the interim trade agreement, or the India-Australia Economic Co-operation and Trade Agreement (ECTA), which was signed in April. The decision by Canberra to change its domestic legislation to prohibit such taxes is part of the India-Australia ECTA.
Once adopted, the change will fix a costly quirk in the two nations’ 1991 DTAA and allow IT and ITeS (IT-enabled Services) businesses to significantly expand their activities in Australia. According to industry estimates, the anomaly has cost Indian IT businesses over $1.3 billion since 2012.
Using the rules of the India-Australia DTAA, Canberra has taxed money earned by offshore IT services delivered from India as royalty, even though the same income is taxed in India.