India, South Korea sign revised tax treaty


The Indian government on 26 October 2016 announced the signing of a revised agreement with South Korea for the avoidance of double taxation and fiscal evasion. Provisions of new agreement will have effect in India in respect of income derived in fiscal years beginning on or after 1 April 2017. Some key features of the revised agreement are as follows:

India, South Korea sign tax treaty• Source-based taxation of capital gains arising from alienation of shares comprising more than 5% of share capital.

• Reduction in withholding tax rates from 15% to 10% on royalties or fees for technical services, and from 15% to 10% on interest income.

• Expansion of the scope of dependent agent permanent establishment provisions.

• Introduction of article 9(2), which provides recourse to the taxpayers of both countries to apply for mutual agreement procedure (MAP) in transfer pricing disputes as well as applying for bilateral advance pricing agreements. MAP requests in transfer pricing cases will be considered if the request is presented by the taxpayer to its competent authority within three years of the date of receipt of notice of action giving rise to taxation not in accordance with the revised agreement.

• Updating of the provisions dealing with the exchange of information between India and Korea to match prevailing international standards, as well as providing for assistance between India and Korea in relation to the collection of taxes.

• Inserting a new limitation of benefits article, i.e. anti-abuse provision, to ensure that the benefits of the revised agreement are obtained only by the genuine residents of both the countries.

Business Law Digest is compiled with the assistance of BAKER MCKENZIE. Readers should not act on this information without seeking professional legal advice. You can contact Baker & McKenzie by e-mailing Danian Zhang at, or for general enquiries contact Anand Ramaswamy at

Additional copy regarding new treaties with India was compiled by Nishith Desai Associates (NDA), a research-based international law firm with offices in Mumbai, New Delhi, Bangalore, Singapore, Silicon Valley and Munich.