India and Singapore to hold talks on tax treaty amendments

index.jpgSource: The Economic Times, Dec 29, 2016

NEW DELHI: India and Singapore will discuss changes to their bilateral tax treaty, paving way for New Delhi to tax Singapore-based equity investors on profits on their investments in India, on Thursday and Friday.

The two countries are expected to amend the bilateral Double Taxation Avoidance Agreement (DTAA) on the lines of India’s bilateral treaties with Cyprus and Mauritius, officials said. Finance minister Arun Jaitley will hold talks with Singapore’s deputy prime minister Tharman Shanmugaratnam to conclude the protocol to amend DTAA to modify capital gains tax exemption.

At present, Singapore-based companies could take advantage of this exemption to avoid capital gains tax on their investments made in India.

Shanmugaratnam will be in New Delhi on December 30 and 31. This will be his third visit to the country this year. In August he had delivered the inaugural NITI lecture series on Transforming India.

India-Singapore DTAA, which came into force in 1994, has been amended twice — in 2005 and 2011. India has now benchmarked the treaty to the one with Mauritius.This means the capital gains tax exemption provision will be phased out in a defined time frame. The transition regime with Mauritius ends on March 31, 2019 after which capital gains will be taxed same as that for domestic investors.The treaty renegotiations are in line with discussions between Prime Minister Narendra Modi and his Singapore counterpart Lee Hsien Loong in October. The deliberations are likely to extend beyond the tax treaty.

Singapore occupies a key place in India’s external economic engagement and the Act East Policy, and the two countries have a number of strategic partnerships.

Modi in his talks with Lee had suggested a working group chaired by senior ministers to explore ways to further strengthen bilateral economic ties and accelerate investment flows between India and Singapore.

Singapore is already the second largest source of FDI in India with cumulative FDI inflow amounting to $50.6 billion, or about `3.5 lakh crore, between April 2000 and September 2016.

Singapore was the largest source of FDI in 2015-16 with inflows of $13.7 billion.

Singapore is also among the top destinations for Indian investors who have invested more than $45 billion there.

Singapore is seeking deeper economic and strategic engagement with India at a time of economic slowdown in Singapore, China and elsewhere, reversals in global sentiments on trade and economic integration, and broader geopolitical uncertainties in the region and the world.



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