Revision of India-Singapore Tax treaty; De-notification of Cyprus as a ‘notified jurisdictional area’

International Tax Review is part of Legal Benchmarking Limited, 4 Bouverie Street, London, EC4Y 8AX

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Revision of India-Singapore Tax treaty; De-notification of Cyprus as a ‘notified jurisdictional area’

Sponsored by

logo.png
singapore 320 x 215 free copyright

The changes brought about by the Protocol are largely similar to the revised India-Mauritius tax treaty.

dharawat.jpg
gangadharan.jpg

Rakesh Dharawat

Hari Gangadharan

Revision of India-Singapore Tax treaty

In a significant development, a third protocol (Protocol), amending the provisions of the India-Singapore tax treaty was signed in December 2016. The changes brought about by the Protocol are largely similar to the revised India-Mauritius tax treaty.

Under this Protocol, India will get the right to tax capital gains arising on alienation of shares acquired on or after April 1 2017. Shares acquired before March 31 2017 will be grandfathered and gains arising thereon will not taxable in India. For shares acquired and alienated between April 1 2017 and March 31 2019 the tax rate will be limited to 50% of the tax rate applicable in the source country.

To be eligible for the grandfathering or concessional tax rate during the transitory period, certain conditions specified by the limitations on benefit (LoB) clause have to be met by the company claiming the benefit. These include incurring an annual operating expenditure of at least S$200,000 ($140,000) or INR 5 million ($73,000) as the case maybe in the immediately preceding period of 12 months from the date on which the gains arise.

The benefit of reduced tax rates will not be available if the affairs are arranged with the primary purpose of benefiting from the grandfathering clause, or to take advantage of the provisions granting the reduced tax rate, or if the company claiming the benefit is a shell or a conduit company. A shell or a conduit company means any legal entity that is not listed, has negligible/nil business operations, or carries on no real and continuous business activities.

The Protocol provides that the tax treaty will not prevent a country from applying its domestic law and measures concerning the prevention of tax avoidance or tax evasion. It also seeks to provide for bilateral discussions for the elimination of double taxation arising from transfer pricing or the pricing of related party transactions.

De-notification of Cyprus as a 'notified jurisdictional area'

The notification issued in 2013 that classified Cyprus as a 'notified jurisdictional area' (NJA) under section 94A of India's Income-tax Act, 1961 was withdrawn in November 2016.

Thus, transactions with Cyprus will no longer attract transfer pricing, or a higher withholding of 30% as contemplated by section 94A.

It is also provided that this repeal has retrospective effect from the date of the 2013 Notification. However, transactions done, or omitted to be done, before the cancellation are expressly saved.

This repeal comes in the backdrop of the revision of the India-Cyprus tax treaty to provide for source-based taxation of capital gains in India (subject to a grandfathering of pre-2017 investments).

Rakesh Dharawat (rakesh.dharawat@dhruvaadvisors.com) and Hari Gangadharan (hariharan.gangadharan@dhruvaadvisors.com)

Dhruva Advisors

Tel: +91 22 6108 1000

Website: www.dhruvaadvisors.com

more across site & shared bottom lb ros

More from across our site

William Paul is being replaced as IRS chief counsel just two months after starting, it is understood
Wopke Hoekstra implored US officials to ‘truly look into the facts’; in other news, the EU Council has reached a political agreement on DAC9
The US president’s flippant approach to international trade will cause chaos for corporations, but there are opportunities for intrepid tax advisers
The ruling underscores that tax authorities must provide ‘detailed, well-supported, and logically sound justifications’ when determining reference prices in tax assessments, one expert told ITR
Tax teams and the IT experts they rely on should be wary of increased compliance, says Richard Sampson, chief revenue officer at Tax Systems
The law firm was representing a businessman in the commodities sector who had previously been convicted of tax fraud
One expert last month predicted the short-term impact of tariffs would be “devastating” for both Canada and the US, particularly if the former instituted retaliatory measures
Ahead of another busy year for the World Tax rankings and ITR Awards, we profile some of the UK’s major firms and explore key market trends
The Labor government has done more than any previous administration to crack down on multinational tax avoidance, Andrew Leigh also tells ITR
Companies that come to terms with digitised tax processes now will stand to gain from FASTER’s disruption, argues Carlos Silva of Xceptor
Gift this article