Singapore and India have signed a protocol to amend their bilateral Avoidance of Double Taxation Agreement (DTA) in New Delhi. The protocol was signed between H.E. Mr Lim Thuan Kuan, Singapore’s High Commissioner to India and Shri Sushil Chandra, Chairman of the Central Board of Direct Taxes, India.
Following a meeting between Prime Minister Lee Hsien Loong and Prime Minister Narendra Modi in October 2016, Deputy Prime Minister and Coordinating Minister for Economic and Social Policies of Singapore Tharman Shanmugaratnam and Minister of Finance and Corporate Affairs of India H.E. Shri Arun Jaitley met to finalise the terms of the revised DTA as well as discuss steps to sustain and deepen bilateral economic ties between Singapore and India, including facilitating investment flows.
Singapore was the largest foreign direct investor into India for the period April 2015 – March 2016 and one of the largest portfolio investors in India markets.
With the revision to the India-Mauritius DTA to phase out capital gains tax exemption, the capital gains tax exemption for shares in the Singapore-India DTA, which had been pegged to the India-Mauritius DTA, has had to be similarly amended. Singapore and India have reached agreement to phase out the capital gains tax exemption gradually, and have also committed to find new ways to promote bilateral investments.
The updated DTA preserves the existing tax exemption on capital gains for shares acquired before 1 April 2017, while providing a transitional arrangement for shares acquired on or after 1 April 2017.
For shares acquired on or after 1 April 2017, there will be a two-year transition period, during which the capital gains from such shares will be taxed at 50% of India’s domestic tax rate if the capital gains arise during 1 April 2017 to 31 March 2019.
The new protocol will continue to be underpinned by the stringent substance requirements which are unique to the Singapore-India DTA, and which ensure that the Protocol can only be enjoyed by tax residents with substantive economic activities. Details can be found in the Annex.
DPM Tharman and Minister Jaitley also agreed on steps towards a set of new initiatives for joint promotion of bilateral investments with a view to concluding an agreement in the second half of 2017.