India-Singapore double tax treaty amended to curb round tripping
New Delhi, Dec 30 (IANS) In yet another measure to curb generation of black money, India on Friday amended its Double Taxation Avoidance Agreement (DTAA) with Singapore, the Indian government said.
“We have today (Friday) amended the DTAA with Singapore on the same terns as the agreement signed with Mauritius earlier this year,” Finance Minister Arun Jaitley told reporters here.
“The year 2016 has been historic for the three DTAAs concluded with the countries that provided the routes for tax evasion…these have been blocked,” he said, adding that the third DTAA amendment agreement signed earlier this year was with the Mediterranean island nation of Cyprus.
Pointing out that all the three DTAAs had been the focus of attention, and even cause for uproar in Parliament, because of widespread suspicion that they were being used to evade capital gains tax, facilitating, thereby, the round tripping of funds anf generation of black money.
“The apprehension was of round tripping by which the flight of domestic black money was being organised to these 3 countries, which do not have capital gains tax, and bringing back the money through these 3 routes – Mauritius, Cyprus and Singapore.
Between April 200 and September 2016, Mauritius and Singapore accounted for 49 per cent of all foreign direct investmentn(FDI) inflows into India.
“The Third Protocol amends the India-Singapore DTAA with effect from 1st April, 2017, to provide for source based taxation of capital gains arising on transfer of shares in a company,” an Indian Finance Ministry release here said.
“Like the Mauritius agreement, the Singapore DTAA envisages that investments in shares made before 1st April, 2017, will be grandfathered,” Jaitley said.
“Thereafter, a two-year transition period from 1st April, 2017, to 31st March, 2019, has been provided during which capital gains liability on shares will be shared half with the source country,” he said.
“After the end of the transition period in 2019, the entire capital gains will come to India,” he added.
Jaitley also said that in another move against black money stashed abroad, India’s Central Board of Direct Taxes (CBDT) has signed an agreement with Swiss authorities for implementing the “Automatic Exchange of Information” (AEOI) between India and Switzerland.
Under this agreement it will now be possible for India to receive, from September, 2019 onwards, all financial information of accounts held by Indian residents in Switzerland for 2018 and subsequent years, on an automatic basis,” the Finance Minister said.