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Singapore wants Mauritius-like tax agreement with India

Business Standard

Singapore wants Mauritius-like tax agreement with India

Monica Gupta / New Delhi March 15, 2006

Singapore is likely to ask India to re-visit the provisions of the bilateral Double Taxation Avoidance Agreement to bring it on a par with a similar agreement between India and Mauritius.

The issue is expected to be raised by Singapore during the first review of the Comprehensive Economic Cooperation Agreement on March 31.

“We have received representations from several financial service companies who have said that the definition of a shell company as laid out in the DTAA is proving to be restrictive. Many of these companies have special purpose vehicles (SPVs) which are not covered by the twin conditions for getting capital gains tax exemption in the DTAA,” a Singapore official told Business Standard.

The India-Singapore DTAA lays down two eligibility conditions for capital gains tax exemption. These are listing on a recognised stock exchange and a total annual expenditure on operations in the residence state equal to or more than $ 2,00,000 or Rs 50,00,000 in the 24-month period from the date of the gains. “We want to make the DTAA more ambitious,” the official said.

Indian officials maintained that the two conditions had been inserted in the DTAA in order to check instances of round tripping seen in case of the DTAA with Mauritius.

Singapore officials said the review meeting would also discuss measures to make Singapore an “investment hub” for India.

“We want to be the hub for India not just in the financial services sector but also for both foreign direct investment and foreign institutional investment,” officials said.

Singapore is also expected to seek a clarification from the Indian government regarding operationalisation of the provision in the CECA to recognise its two investment arms, Temasek and GIC, as distinct entities and allow them to pick up to 10 per cent stake each in a listed Indian company.

“The Monetary Authority of Singapore and the Reserve Bank of India have been meeting at regular intervals but we will be seeking some clarifications following objections raised by the monetary authorities in India,” an official said.

The CECA was operationalised on July 1, 2005, and is the first such economic cooperation entered into by India.

 source: Business Standard