On December 30, 2016 India and Singapore signed a Third Protocol Amending the Agreement Between the Government of the Republic of Singapore and the Government of the Republic of India for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income.
Although the Protocol has been signed, it has not entered into force yet. For the Protocol to enter into force, the respective ratification procedures have to have been finalized in both countries.
The Protocol a.o. amends Article 13 of the existing DTA (“CAPITAL GAINS”). The purpose of the amendments is to phase out the capital gains tax exemption for shares as it exists under the existing DTA. Therefore Article 2 of the Protocol arranges that Article 13 - Capital Gains of the Agreement shall be amended, with effect from 1 April 2017:
(i) by deleting paragraph 4; and
(ii) by inserting the following paragraphs:
“4A. Gains from the alienation of shares acquired before 1 April 2017 in a company which is a resident of a Contracting State shall be taxable only in the Contracting State in which the alienator is a resident.
4B. Gains from the alienation of shares acquired on or after 1 April 2017 in a company which is a resident of a Contracting State may be taxed in that State.
4C. However, the gains referred to in paragraph 4B of this Article which arise during the period beginning on 1 April 2017 and ending on 31 March 2019 may be taxed in the State of which the company whose shares are being alienated is a resident at a tax rate that shall not exceed 50% of the tax rate applicable on such gains in that State.
5. Gains from the alienation of any property other than that referred to in paragraphs 1, 2, 3, 4A and 4B of this Article shall be taxable only in the Contracting State of which the alienator is a resident.”
Furthermore the Protocol a.o. arranges that a new Article 24A is inserted into the DTA:
“ARTICLE 24A
1. A resident of a Contracting State shall not be entitled to the benefits of paragraph 4A or paragraph 4C of Article 13 of this Agreement if its affairs were arranged with the primary purpose to take advantage of the benefits in the said paragraph 4A or paragraph 4C of Article 13 of this Agreement, as the case may be.
2. A shell or conduit company that claims it is a resident of a Contracting State shall not be entitled to the benefits of paragraph 4A or paragraph 4C of Article 13 of this Agreement. A shell or conduit company is any legal entity falling within the definition of resident with negligible or nil business operations or with no real and continuous business activities carried out in that Contracting State.
3. A resident of a Contracting State is deemed to be a shell or conduit company if its annual expenditure on operations in that Contracting State is less than S$200,000 in Singapore or Indian Rs.5,000,000 in India, as the case may be:
(a) in the case of paragraph 4A of Article 13 of this Agreement, for each of the 12- month periods in the immediately preceding period of 24 months from the date on which the gains arise;
(b) in the case of paragraph 4C of Article 13 of this Agreement, for the immediately preceding period of 12 months from the date on which the gains arise.
4. A resident of a Contracting State is deemed not to be a shell or conduit company if:
(a) it is listed on a recognised stock exchange of the Contracting State; or
(b) its annual expenditure on operations in that Contracting State is equal to or more than S$200,000 in Singapore or Indian Rs.5,000,000 in India, as the case may be:
(i) in the case of paragraph 4A of Article 13 of this Agreement, for each of the 12-month periods in the immediately preceding period of 24 months from the date on which the gains arise;
(ii) in the case of paragraph 4C of Article 13 of this Agreement, for the immediately preceding period of 12 months from the date on which the gains arise
5. For the purpose of paragraph 4(a) of this Article, a recognised stock exchange means:
(a) in the case of Singapore, the securities market operated by the Singapore Exchange Limited, Singapore Exchange Securities Trading Limited and The Central Depository (Pte) Limited; and
(b) in the case of India, a stock exchange recognised by the Securities and Exchange Board of India.
Explanation: The cases of legal entities not having bona fide business activities shall be covered by paragraph 1 of this Article."
Click here to be forwarded to the text of the Third Protocol Amending the Agreement Between the Government of the Republic of Singapore and the Government of the Republic of India for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income as signed on December 30, 2016 by the Government of the Republic of Singapore and the Government of the Republic of India.
Click here to be forwarded to the text of the Agreement Between the Government of the Republic of Singapore and the Government of the Republic of India for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income as concluded on January 24, 1994.
Are you looking for other DTAs? Then check our section DTAs & TIEAs, a very efficient way to locate numerous DTAs.
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