India and Uruguay on Sep 8, 2011 signed a Double Taxation Avoidance Agreement that would help boost the flow of trade, investment and technology between the two countries. The agreement will provide tax stability to the residents of India and Uruguay and facilitate mutual economic cooperation as well as stimulate the flow of investment, technology and services between the two countries, an official statement said.
The deal is aimed to ensure avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income and capital.
According to the terms of the agreement, business profits will be taxable in the source country if the activities of an enterprise constitute a permanent establishment in that country. Profits of construction, assembly or installation projects will be taxed in the country of source if the project continues in that country for more than six months, while the profits derived by an enterprise from the operation of ships or aircraft in international traffic will be taxable in the country of residence of the enterprise. Capital gains from the sale of shares will be taxable in the country of source and tax credit will be given in the country of residence.