Double Tax Agreement India Singapore: An Overview

India and Singapore signed a Double Taxation Avoidance Agreement (DTAA) in 1994 to avoid double taxation of income earned by residents of both countries. The agreement has since been revised in 2005 and 2016 to keep up with changing economic scenarios.

The DTAA provides a framework for taxation of income earned in one country by a resident of the other country. It eliminates the possibility of double taxation by allowing the taxpayer to claim tax credit in their home country for taxes paid in the other country.

Key provisions of the DTAA

The DTAA covers various types of income including business profits, dividends, interest, royalties, and capital gains. The provisions of the DTAA depend on the nature of income and the residency of the taxpayer.

Business profits

The DTAA allows the taxation of business profits only in the country of residence of the taxpayer. However, if the business has a permanent establishment (PE) in the other country, the profits attributable to the PE can be taxed in that country.

Dividends

The DTAA provides for a maximum tax rate of 15% on dividends paid by a company resident in one country to a resident of the other country. However, the rate can be higher in some cases if the dividends are paid to a company that owns less than 10% of the voting power of the company paying the dividends.

Interest

The DTAA provides for a maximum tax rate of 15% on interest paid by a resident of one country to a resident of the other country. However, the rate can be higher if the interest is paid to a related party or if the recipient is a bank or financial institution.

Royalties

The DTAA provides for a maximum tax rate of 10% on royalties paid by a resident of one country to a resident of the other country. However, the rate can be higher if the royalties are paid for the use of industrial, commercial or scientific equipment.

Capital gains

The DTAA provides for the taxation of capital gains only in the country of residence of the taxpayer. However, if the gains are from the sale of immovable property, the country where the property is located has the right to tax the gains.

Benefits of the DTAA

The DTAA provides several benefits to taxpayers such as:

– Avoidance of double taxation

– Reduction of withholding tax rates on payments made to residents of the other country

– Prevention of tax evasion by ensuring that income is taxed in the appropriate country

– Promotion of cross-border investments and trade

Conclusion

The Double Taxation Avoidance Agreement between India and Singapore has been a valuable tool for taxpayers in both countries. It provides a clear framework for taxation of income earned by residents of one country in the other country. The agreement has been revised over the years to keep up with changing economic scenarios, reflecting the commitment of both countries towards promoting cross-border investments and trade.