The Cabinet on Wednesday accorded approval to the protocol amending the agreement between India and China for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, an official said here.

The protocol amending Double Taxation Avoidance Agreement (DTAA) aims to update the provisions on exchange of information of the DTAA to the latest international standards, said an official statement following the Union Cabinet meeting here.

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“Further, the Protocol will incorporate changes required to implement treaty related minimum standards under the Action reports of Base Erosion and Profit shifting (BEPS) Project, in which India had participated on an equal footing,” it added.

In 2016, India signed a multilateral convention to implement measures to prevent shifting of profits by companies to low-tax nations as a way to avoid paying taxes.

The convention is an outcome of the Organisation for Economic Cooperation and Development (OECD)/G20 Base Erosion and Profit Shifting (BEPS) project.

The convention will tackle base erosion and profit shifting through tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity, resulting in little or no overall corporate tax being paid, the statement said.

The Final BEPS Project identified 15 actions to address BEPS in a comprehensive manner. Implementation of the Final BEPS Package requires changes to more than 3,000 bilateral tax treaties which will be burdensome and time consuming.

In view of this, the convention was conceived as a multilateral instrument which would swiftly modify all covered bilateral tax treaties to implement BEPS measures.

The convention implements two minimum standards related to prevention of treaty abuse and dispute resolution through mutual agreement procedure.