BEPS Current Affairs

Union Cabinet approves Protocol amending DTAA between India, China

The Union Cabinet has approved signing and ratification of protocol amending Double Taxation Avoidance Agreement (DTAA) between India and China. The DTAA aims for avoidance of double taxation  and prevention of fiscal evasion with respect to taxes on income and update the provisions on exchange of information of the DTAA to the latest international standards.

Key Facts

The amending protocol updates existing provisions of DTAA for exchange of information to the latest international standards. It also incorporates changes required to implement treaty related minimum standards under Action reports of Base Erosion & Profit shifting (BEPS) Project, in which India also had participated. It will also bring in changes as per BEPS Action reports as agreed upon by two countries.


In 2016, India had signed multilateral convention to implement measures to prevent shifting of profits by multinational companies (MNCs) to low-tax nations as way to avoid paying taxes. It was outcome of Organisation for Economic Cooperation and Development (OECD)/G20 BEPS project.

The convention aims to BEPS through tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax nations where there is little or no economic activity, resulting in little or no overall corporate tax being paid.

The Final BEPS Project had identified 15 actions to address BEPS in comprehensive manner. Its implementation requires changes to more than 3,000 bilateral tax treaties making it burdensome and time consuming process. In view of this, convention was conceived as multilateral instrument in order to swiftly modify all covered bilateral tax treaties to implement BEPS measures. The convention implements two minimum standards related to prevention of treaty abuse and dispute resolution through mutual agreement procedure.


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.