DTAA Between India And Denmark: Tax Relief, Rules, Benefits & How to Claim

The DTAA between India and Denmark provides a legal framework to prevent double taxation on income earned across both nations. This treaty promotes smoother financial transactions, fair tax distribution, and investment transparency. By defining how different income types like dividends, royalties, or capital gains are taxed, the agreement strengthens bilateral trade relations, encourages business expansion, and ensures tax certainty for individuals and enterprises in both countries.

DTAA Between India and Denmark - Quick Info

Here is a quick overview of the essential details regarding the DTAA agreement between India and Denmark.

Objective of the DTAA Between India and Denmark

The DTAA India-Denmark treaty was established with several key objectives aimed at strengthening the economic relationship between the two nations.

• Preventing Double Taxation: The core purpose is to ensure that income earned by a resident of one country in the other is not taxed in both jurisdictions, thereby providing significant tax relief.
• Promoting Economic Cooperation: By creating a stable and predictable tax environment, the treaty encourages and facilitates cross-border trade, investment, and the exchange of services.
• Countering Fiscal Evasion: The agreement includes provisions for the exchange of tax-related information between the Indian and Danish tax authorities to prevent tax evasion and ensure compliance.
• Allocating Taxing Rights: The treaty provides clear and unambiguous rules that define which country has the primary right to tax different types of income, reducing the potential for disputes.
• Ensuring Non-Discrimination: It ensures that a resident of one country is not subjected to more burdensome taxation in the other country than a resident of that other country in the same circumstances.

Significance of DTAA for India and Denmark

The DTAA between India and Denmark is a highly significant income tax treaty for individuals and corporations involved in cross-border activities.

• For NRIs and Danish Residents: The treaty provides clarity on how their income earned in India (such as from property, investments, or bank deposits) will be taxed. This allows for better financial planning and ensures they can claim relief from double taxation.
• For Businesses and Investors: For Danish companies investing in India, the treaty provides certainty regarding the taxation of their profits, dividends, and royalties. This reduces risk and makes India a more attractive investment destination. Similarly, it benefits Indian businesses operating in Denmark.
• Impact on Trade and Technology Transfer: By providing clear rules and lower tax rates for royalties and fees for technical services, the treaty encourages the transfer of technology and expertise between the two countries, fostering innovation and industrial growth.

India-Denmark DTAA Tax Rates

The treaty specifies the maximum DTAA rate India and Denmark can charge at source on certain types of income. These rates are often lower than the standard domestic tax rates. [2]

Taxes Covered under DTAA Between India and Denmark

The agreement applies to various taxes on income levied by both countries, ensuring comprehensive coverage.

• Dividends: The DTAA between India and Denmark has a unique two-tiered tax rate for dividends, which provides a lower rate of 15% for significant corporate shareholders.
• Interest: The treaty provides a clear, capped tax rate on this income. This is especially relevant for NRIs when considering the Taxation rules for NRO accounts.
• Royalties: Payments made for the use of intellectual property like patents, trademarks, or copyrights.
• Salaries: The treaty provides rules to determine which country can tax this income based on the employee's duration of stay.
• Capital Gains: Profits from the sale of assets, such as real estate or shares. The DTAA specifies which country has the right to tax these gains.

Taxation on Capital Gains under the DTAA Between India and Denmark

The rules for taxing capital gains are a crucial part of the treaty, especially for those involved in real estate.

• Gains from Immovable Property: The treaty specifies that capital gains from the sale of immovable property (like a house, apartment, or land) may be taxed in the country where the property is located. This makes understanding the rules for TDS on sale of property by an NRI essential.
• Gains from Movable Property: In most other cases, gains from the sale of movable property (like shares) are taxed only in the country where the seller is a resident.
• Impact for Investors: This framework provides clarity for Danish NRIs investing in Indian real estate. They know that any capital gains from their Indian property will be subject to Indian tax laws, allowing for proper financial planning. For such transactions, performing Legal due diligence for NRIs investing in Indian real estate is highly advisable.

Taxation on Employment Income Under DTAA

The DTAA provides clear guidelines for individuals working in another country to avoid being taxed on their salary in both countries.

• The 183-Day Rule: Generally, an employee's salary is taxed in their country of residence. However, if they work in the other country for more than 183 days in a fiscal year, their salary can also be taxed there.
• Employer's Residence: The income can also be taxed in the other country if the salary is paid by an employer who is a resident of that country, or if it is paid by a "permanent establishment" (like a branch office) of the employer in that country.
• Practical Example: A Danish resident sent to work on a short-term project in India for four months (less than 183 days) would typically not pay Indian income tax on their salary, as long as their Danish employer pays their salary.

What are the Documents required to claim DTAA TDS?

To avail the benefits of the lower withholding tax (TDS) rates under the DTAA, a non-resident must provide the following key documents to the entity paying the income in India.

• Tax Residency Certificate (TRC) from the Danish tax authorities.
• A self-attested copy of the PAN Card.
• A self-declaration in Form 10F.
• A declaration of beneficial ownership of the income.
• A declaration stating they have no Permanent Establishment (PE) in India.

How to Claim DTAA Benefits?

The method for claiming tax relief depends on your country of residence and where the income is earned. It's crucial to understand the process and the general Income tax rules for NRIs.

• Indian residents earning in Denmark: Such citizens can claim a Foreign Tax Credit (FTC) when filing an income tax return in India. This requires filing Form 67 and providing proof of the Danish tax paid.
• Danish residents/NRIs earning in India: Such citizens can provide the required documents (TRC, Form 10F) to the Indian payer. The payer can then apply the lower TDS rate as specified in the treaty. For payments made from India, Understanding Form 15CA and 15CB for NRIs is also a critical step.
• Seeking Lower TDS: In some cases, it is also possible to apply for a Lower TDS certificate for NRIs from the Indian tax authorities to further streamline the process.

DTAA Impact on NRIs, Investors, and Businesses

The DTAA agreement has a significant and positive impact on various stakeholders involved in cross-border activities between India and Denmark.

• For NRIs: The treaty provides much-needed tax certainty for their Indian-sourced income, such as rent from property or interest from bank accounts. This is especially important for those who are renting out a home in India.
• For Investors: The clear tax rates and rules reduce ambiguity and risk, making it easier for Danish individuals and companies to consider How NRIs can buy property in India or invest in Indian businesses.
• For Businesses: The treaty fosters a more favourable environment for trade and the provision of services by providing clear guidelines on the taxation of business profits, royalties, and fees for technical services.

How NoBroker Can Help with NRI Services?

Managing property and taxation across borders becomes seamless with NoBroker’s expert NRI solutions. For those affected by the DTAA between India and Denmark, our services ensure complete assistance, from property management and tenant handling to legal and taxation guidance. NoBroker’s professionals simplify compliance with DTAA provisions, including TDS on property sales, income tax filings, and related documentation. With transparent processes and dedicated legal support, NRIs can confidently manage their Indian investments while staying compliant with bilateral tax regulations.

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