The signing took place at a meeting of Indian and Korean
delegations, headed by the revenue secretary and the
commissioner, hosted by Prime Minister Narendra Modi and President Park Geun-hye
in South Korea.
Sagar Wagh, senior consultant at EY in New Delhi, welcomed
the revised agreement.
"Entering into the MoU to revise the tax treaty
demonstrates the commitment from both countries to move towards
proactive dispute resolution, remove double taxation and
encourage cross-border investments," said Wagh.
"This will encourage more taxpayers to opt for the MAP
[mutual agreement procedure] route, as the MoU will provide
assured savings in immediate cash outflow, which is a major
concern of the taxpayers post-receiving the tax audit
order and demand from revenue authorities."
The MoU will reduce the likelihood of double taxation for
taxpayers in both countries by suspending the collection of
taxes if MAP proceedings are still pending.
A joint statement from the meeting said:
"The two sides hoped for increased exchange of India-Korea
parliamentary delegations. They shared the view that the
exchange of India-Korea parliamentary delegations will
contribute towards greater interaction and understanding
between the two parliaments."
Transfer pricing cases
Despite a press statement confirming both
countries have agreed that transfer pricing dispute cases will
be taken up for MAP under the revised treaty, Wagh believes
that there is still not a clear provision for the corresponding
adjustment of transfer pricing cases under "article 9(2) as per
"The Indian tax administration does not admit MAP
cases under the India-Korea tax treaty involving transfer
pricing disputes," said Wagh. "This position will remain the
same even after signing of this MoU."