Singapore and India revise their Double Taxation Agreement

On December 30, Singapore and India signed a Protocol to amend their Double Taxation Agreement (DTA).

The countries' Finance Ministers also met to finalize the terms of the revised DTA as well as discuss steps to sustain and deepen bilateral economic ties between Singapore and India. Singapore was the largest foreign direct investor into India for the period April 2015 - March 2016 and one of the largest portfolio investors in Indian markets.

Singapore and India have reached agreement to phase out the capital gains tax exemption gradually, and have also committed to find new ways to promote bilateral investments.

The revised DTA preserves the existing tax exemption on capital gains for shares acquired before 1 April 2017, while providing a transitional arrangement for shares acquired on or after 1 April 2017. For shares acquired on or after 1 April 2017, there will be a two-year transition period, during which the capital gains from such shares will be taxed at 50% of India's domestic tax rate if the capital gains arise during 1 April 2017 to 31 March 2019.

The new Protocol will continue to be fortified by the rigorous substance requirements which are unique to the Singapore-India DTA, and which ensure that the Protocol can only be enjoyed by tax residents with substantive economic activities.