The CBDT vide Notification No. 154/2025 dated October 24, 2025, notifies Agreement and Protocol between the Republic of India and the State of Qatar for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income
The agreement, signed in New Delhi on February 18, 2025, officially entered into force on September 10, 2025. Its provisions will take effect in India and Qatar for income arising on or after the first day of the fiscal year immediately following its entry into force. This new agreement supersedes the previous one signed on April 7, 1999.
Key Highlights of the Agreement:
- Scope: The agreement applies to residents of one or both contracting states and covers income taxes imposed by either country, including those on gains from property alienation and wages.
- Definitions: It provides clear definitions for “India,” “Qatar,” “person,” “company,” “enterprise,” “international traffic,” “competent authority,” “national,” “fiscal year,” and “tax.”
- Permanent Establishment (PE): Defines what constitutes a PE, including places of management, branches, offices, factories, workshops, mines, sales outlets, warehouses, and agricultural sites. Specific conditions are outlined for building sites, construction projects, and the furnishing of services to be considered a PE.
- Business Profits: Profits of an enterprise are generally taxable only in its resident state unless it carries on business through a PE in the other state. Deductions for expenses incurred for the PE’s business are allowed, with certain exceptions for internal payments.
- Shipping and Air Transport: Profits from the operation of ships or aircraft in international traffic are taxable only in the enterprise’s resident state. This also extends to profits from the use, maintenance, or rental of containers in international traffic.
- Associated Enterprises: Provisions are included to address situations where conditions between associated enterprises differ from those between independent enterprises, allowing for adjustments to taxable profits.
- Dividends: Dividends paid to a resident of the other contracting state may be taxed in that other state, with a maximum tax rate of 5% if the beneficial owner is a company holding at least 25% of the shares, and 10% in other cases.
- Interest: Interest arising in a contracting state and paid to a resident of the other state may be taxed in that other state, with a maximum tax rate of 10% on the gross amount. Interest beneficially owned by the other state itself, its political subdivision, or local authority will be taxable only in that other state.
- Royalties and Fees for Technical Services: These may be taxed in the state where they arise, with a maximum rate of 10% if the beneficial owner is a resident of the other contracting state.
- Capital Gains: Gains from the alienation of immovable property and certain shares deriving value from immovable property may be taxed in the state where the property is situated. Gains from ships or aircraft in international traffic are taxable only in the resident state.
- Personal Services: Rules are set for the taxation of income from independent personal services, dependent personal services (salaries, wages), directors’ fees, artistes and sportspersons, pensions, government service, and for students, apprentices, professors, teachers, and research scholars.
- Elimination of Double Taxation: Both India and Qatar will allow a deduction for the tax paid in the other state to eliminate double taxation.
- Non-Discrimination: Nationals and enterprises of one contracting state will not be subjected to more burdensome taxation in the other state than its own nationals or enterprises.
- Mutual Agreement Procedure: Provides a mechanism for competent authorities to resolve disputes concerning the interpretation or application of the agreement.
- Exchange of Information: The competent authorities will exchange relevant information to carry out the provisions of the agreement and prevent fraud or evasion.
- Assistance in Collection of Taxes: Both states undertake to assist each other in the collection of taxes, including interest, costs, and civil penalties.
- Entitlement to Benefits: Benefits will not be granted if obtaining that benefit was a principal purpose of any arrangement or transaction, unless it aligns with the agreement’s object and purpose.
- Diplomatic Missions: The agreement does not affect the fiscal privileges of diplomatic agents or consular officers.
- Termination: The agreement will remain in force indefinitely but can be terminated by either state with at least six months’ notice after five years from its entry into force.
This comprehensive agreement aims to foster economic cooperation between India and Qatar by providing clarity and mechanisms to prevent double taxation and fiscal evasion.
The Notification can be accessed at: https://a2ztaxcorp.net/wp-content/uploads/2025/10/CBDT-Notification-No.-154-2025.pdf
