Thursday, February 17 2005 22:23 Hrs (IST) - World Time -

New Delhi: India and Slovenia today (Feb 17, 2005) signed a double taxation avoidance treaty, which is expected to increase trade between the two countries.

The treaty will be applicable in India from April 2006 and in Slovenia from January next year.

The agreement, signed by Central Board of Direct Taxes chairman Shobha Majumdar and Slovenia's charge d'affaires Miklav Borstnik, will provide certainty and stability with respect to taxation of various categories of income, which could otherwise have been subjected to double taxation.

The treaty provides for a lower 10 per cent tax rate in India in respect of interest and royalties, an official release said.

Dividends will be taxed by the country of residence of the recipient. However, the source country will have a secondary right to tax dividends at a lower rate.

Such rate is 5 per cent in case beneficial owner is a company holding 10 per cet of the capital of the company paying dividends and 15 per cent in other cases.

In regard to capital gains tax from alienation of shares of a company, the same will be taxable in the country where the company is resident.

The incidence of double taxation will be avoided by the country giving credit for taxes paid in the source country.