Income From Air and Shipping Transport, Taxed under a DTA

Income, derived from the operation of Air transport in international traffic by an enterprise of one contracting state, will not normally be taxed in the other contracting state. An air transport company will be liable to tax only in the treaty country in which it is incorporated. However, this does not apply to aircraft companies, engaged in domestic traffic. In respect of an enterprise of one contracting state, income earned in the other contracting state from the operation of ships in international traffic, will be taxed in that contracting state, wherein the place of effective management of enterprise is situated. However, some DTA agreements contains provisions to tax the income in the other contracting state also, although, at a reduced rate. These provisions do not apply to coastal traffic.