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India-Singapore Double Taxation Avoidance Agreement (DTAA)

The India-Singapore Double Taxation Avoidance Agreement (DTAA) was initially signed on August 24, 1994, and it took effect from September 1, 1994. However, this agreement was amended on June 1, 2016, through a protocol, which became effective from December 27, 2016. The provisions of this amended DTAA have been applicable since the assessment year 2017-18 in India and the year of assessment 2017 in Singapore.

Applicability of the DTAA

The India-Singapore DTAA is applicable to individuals and companies that are residents of either India or Singapore and have income arising in the other country. This DTAA covers various types of income:

  1. Business Income: The DTAA applies to income earned from a business or profession in India or Singapore.
  2. Dividends: It covers income earned from dividends paid by a company that is a resident in India or Singapore.
  3. Interests: This DTAA applies to income earned from interest paid by a resident of India or Singapore.
  4. Royalties: It covers income earned from royalties paid by a resident of India or Singapore.
  5. Capital Gains: The DTAA applies to income earned from the sale of shares or other assets in India or Singapore.

To avail of the benefits of the DTAA, residents of India or Singapore must provide a tax residency certificate issued by the tax authorities of their home country. This certificate serves as proof of residency and helps avoid the double taxation of income.

Key Provisions

Here are some of the key provisions of the India-Singapore DTAA:

  1. Taxation of Business Profits: Business profits earned by a Singaporean resident in India are taxable in India only if the resident has a permanent establishment in India. Similarly, business profits earned by an Indian resident in Singapore are taxable in Singapore only if the resident has a permanent establishment in Singapore.
  2. Taxation of Dividends: Dividends paid by a company resident in India to a Singaporean resident are taxed at a maximum rate of 15% in India. Conversely, dividends paid by a company resident in Singapore to an Indian resident are taxed at a maximum rate of 10% in Singapore.
  3. Taxation of Interest and Royalties: Interest and royalties paid by an Indian resident to a Singaporean resident are subject to withholding tax at a maximum rate of 10%, while interest and royalties paid by a Singapore resident to an Indian resident are subject to withholding tax at a maximum rate of 15%.
  4. Capital Gains: Capital gains arising from the sale of shares of a company resident in India are taxable in India if more than 50% of the value of the shares is derived from immovable property located in India. However, if the shares are listed on a recognized stock exchange, the capital gains are taxable only in the country of residence of the seller. Capital gains arising from the sale of shares of a company resident in Singapore are taxable only in Singapore.
  5. Exchange of Tax Information: The tax authorities of both contracting countries exchange tax information as needed to prevent tax evasion and fraud.
  6. Grandfathered Investments: Shares acquired on or before April 1, 2017, that are not subject to the provisions of the protocol are subject to a revised limitation of benefits to avail of the capital gain tax benefits under the DTAA.
  7. Profits from International Traffic: Profits derived by an enterprise of a contracting state from the operation of ships or aircraft in international traffic are taxable only in that state.

Takeaway

The India-Singapore DTAA provides a favorable tax regime for businesses and investors operating in both countries, promoting trade and investment between the two nations. This DTAA aligns with international standards and practices and was amended to incorporate the provisions agreed upon in the ‘Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting.’ Broadly, the DTAA applies only to income tax imposed in both states, but it has become more comprehensive and progressive with the inclusion of clauses such as mutual agreement procedures, exchange of information, and limitations of benefits, among others.

For comprehensive legal support related to the India-Singapore Double Taxation Avoidance Agreement or any other international tax matters, please contact Chandrawat & Partners. Our legal experts specialize in international tax law and are dedicated to providing tailored legal solutions to meet your specific needs. We are committed to delivering high-quality legal services and ensuring your satisfaction. If you have any questions or require assistance with legal matters, please do not hesitate to reach out. We are here to provide professional and dedicated service.

To know more about DTAA relations between India and Singapore, please download our Guide.

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