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Government notifies third Protocol amending India-Singapore DTAA

The Union Finance Ministry has notified hird Protocol amending India-Singapore Double Taxation Avoidance Agreement (DTAA). The agreement came into force in February 2017and was signed in December 2016.

The Third Protocol amends the DTAA between both countries to provide for source-based taxation of capital gains arising on sale of shares in a company.

Key Facts

  • The India-Singapore DTAA at present provides for residence-based taxation of capital gains of shares in a company.
  • The addition of provision of source-based taxation of capital gains in DTAA, will help to curb revenue loss, prevent double non-taxation and streamline the flow of investments.
  • It also provides certainty to investors, investments in shares made before April 1, 2017 subject to fulfilment of conditions in Limitation of Benefits clause as per 2005 Protocol.
  • Further, it also provides a two-year transition period from April 1, 2017 to March 31, 2019 during which capital gains on shares will be taxed in source country at half the normal tax rate.
  • It also facilitates relieving of economic double taxation in transfer pricing cases. It is a taxpayer-friendly measure and is in line with India’s commitments under Base Erosion and Profit Shifting (BEPS) Action Plan.
  • It also enables application of domestic law and measures concerning prevention of tax avoidance or tax evasion.

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India and Belgium sign Protocol amending Double Taxation Avoidance Agreement and Protocol

India and Belgium have signed a Protocol to amend the existing Double Taxation Avoidance Agreement (DTAA) between the two countries.

The Protocol was signed by Sushil Chandra, Chairman Central Board of Direct Taxes (CBDT) and Jan Luykx, Ambassador of Belgium to India. 

Key Facts
  • The amendment of DTAA will broaden the scope of the existing framework of exchange of tax related information between the two countries.
  • It will help curb tax evasion and tax avoidance between the two countries and also enable mutual assistance in collection of taxes.
  • It also revises the scope of existing treaty provisions on mutual assistance in collection of taxes and further help to curb tax evasion and tax avoidance. 
Background

The Union Government has set a key priority area for dighting the menace of Black Money stashed in offshore accounts. To further this goal, India has either signed or amended international agreements, declarations or conventions for the DTAA and Prevention of Fiscal Evasion with respect to Taxes on Income and for the Exchange of Information with Mauritius, Switzerland, Cyprus, Japan, South Korea, Singapore, Kazakhstan, and Austria during the financial year 2016-17.

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India and Cyprus ink Revised DTAA

India and Cyprus have inked a revised Agreement for Avoidance of Double Taxation and Prevention of Fiscal evasion (DTAA) with respect to taxes on income, along with its Protocol.

It will replace the existing DTAA that was signed by two countries in June 1994. The provisions of new DTAA will enter into force after completion of necessary internal procedures in both countries.

Key provisions of new DTAA

  • Provides source based taxation of capital gains arising from alienation of shares, instead of residence based taxation provided under the existing DTAA.
  • Provides for Assistance between the two countries for collection of taxes. Updates the provisions related to Exchange of Information to accepted international standards.
  • Enables exchange of banking information and allow the use of such information for purposes other than taxation with the prior approval of the Competent Authorities.
  • Expands the scope of ‘permanent establishment’ and reduces the tax rate on royalty in the country from which payments are made to 10% from the existing rate of 15%.
  • Updates the text of other provisions in accordance with the international standards and consistent policy of India in respect of tax treaties.

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