After successfully amending the India-Mauritius tax treaty, India will soon amend the Avoidance of Double Tax agreement with Singapore. The Indian officials are in the process of reaching out to the Singaporean authorities for the amendment. The changes to India-Mauritius Double Taxation Avoidance Convention last week has put the focus on a similar treaty inked between India and Singapore in 2005.
Once the amendment is done, Singapore will likely get the same two-year transition benefit of 50 per cent capital gains tax like in the case of Mauritius. Finance Minister Arun Jaitley has said that Singapore is a separate sovereign state and the Mauritius treaty does not automatically extend. The principles will have to be applied, but applied through a process of renegotiation.
Article 6 of the Protocol dated July 18, 2005 to the Singapore Tax Treaty provides that the benefits such as capital gains exemption under the Singapore Tax Treaty would remain in force only till the time Mauritius Tax Treaty provides for capital gains exemption on alienation of shares. Accordingly, the benefits accorded under the Singapore Tax Treaty in this regard would fall away, unless amended.
However, given that the Mauritius Tax Treaty benefits on alienation of shares would be available until March 31, 2017, even the Singapore Tax Treaty benefits for similar transfers should be available until March 31, 2017. Like the Mauritius amendments, which leave out instruments other than shares, even the Singapore treaty changes are likely to stick to shares.