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After Mauritius tax treaty, government looking to tweak Singapore DTAA

12 May 2016 Evaluate

After successfully amending the India-Mauritius tax treaty to prevent loss of revenue and round-tripping, India is now looking to start talks with Singapore to tweak the double taxation avoidance agreement (DTAA) with the nation to plug any similar leakages and will start negotiations with Singapore soon.

The capital gains tax benefit under bilateral tax treaty between India and Singapore is linked to the capital gains tax provision in the India-Mauritius tax treaty . However, this parity is not automatic and the India-Singapore treaty will have to be amended to clearly spell out the changes.

The revamped India-Mauritius treaty will essentially mean capital gains on investments made in India through Mauritius will get fully taxed here from April 1, 2019. The Singapore treaty also stands to lose the benefit it has enjoyed till now because of the changes. But since it's an international protocol and India is keen to provide stability and certainty to investors, the government is keen on renegotiating it and incorporating clear provisions upfront in the treaty with Singapore.

Revenue Secretary Hasmukh Adhia has said that the India-Singapore tax treaty already has a Limitation of Benefit (LoB) clause that makes investments of $100,000 mandatory. He added that LoB limits that are there in the India-Singapore treaty should not change but the remaining dispensation should apply to them (50% of domestic tax rate). 

Singapore is the second-biggest source for foreign direct investments (FDI) into India after Mauritius, accounting for over 16% of cumulative inflows so far. Singapore is an important financial centre for investments into the country.


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