India signs protocol revising tax treaty with Singapore

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In a press note dated 30 December 2016, the Indian government announced the signing of the third protocol to amend the double taxation avoidance agreement (DTAA) between India and Singapore. The amendments introduced by the protocol are similar to changes made recently to the India-Mauritius DTAA.

The protocol amends the prevailing residence-based tax regime under the India-Singapore DTAA and gives India a source-based right to tax capital gains which arise from the alienation of shares of an Indian resident company owned by a Singapore tax resident. The protocol also provides for:

  • The grandfathering of investments made on or before 31 March 2017;
  • A transition period from 1 April 2017 to 31 March 2019 during which a reduced rate of tax should be applicable on capital gains arising on the alienation of shares acquired on or after 1 April 2017;
  • A revised limitation of benefits clause, the conditions of which need to be fulfilled in order to obtain the benefit of the grandfathering and reduced rate of tax during the transition period; and
  • Explicit language allowing treaty provisions to be overridden by domestic anti-avoidance measures such as the general anti-avoidance rules.

The business law digest is compiled by Nishith Desai Associates (NDA). NDA is a research-based international law firm with offices in Mumbai, New Delhi, Bengaluru, Singapore, Silicon Valley and Munich. It specializes in strategic legal, regulatory and tax advice coupled with industry expertise in an integrated manner.