Double Tax Avoidance Agreement (DTAA) between India and Singapore: All You Need to Know

The Double Tax Avoidance Agreement (DTAA) is a treaty signed between two countries with the aim of avoiding the double taxation of income of individuals and companies. It is an important agreement as it curbs the instances where people end up paying taxes in two countries on the same income. India has entered into DTAA with many countries, one of them being Singapore.

The DTAA agreement between India and Singapore was signed in 1994. The agreement was amended in 2005 and 2011. The agreement aims to promote mutual economic relationship and investment between the two countries. It also provides certainty for taxpayers in terms of tax treatment for cross-border transactions.

Here are some important provisions of the India-Singapore DTAA:

1. Taxation of business profits: Business profits earned by a Singaporean company in India are taxable only in Singapore, provided the company does not have a permanent establishment (PE) in India. Similarly, Indian companies earning business profits in Singapore are taxable only in India.

2. Taxation of dividends: Dividends paid by an Indian company to a Singaporean resident are taxable in Singapore at a maximum rate of 15%. Indian tax withheld on dividends may be credited against the Singapore tax payable on the same income.

3. Taxation of royalty and interest: Royalties and interest paid by an Indian resident to a Singaporean resident are taxable only in Singapore at the rates specified in the Singapore tax law.

4. Capital gains taxation: Capital gains arising from the sale of shares in an Indian company by a Singaporean resident are taxable only in Singapore. However, in case of a Singapore company holding an Indian PE, the sale of shares in the Indian company may be taxable in India.

5. Avoidance of double taxation: The DTAA between India and Singapore provides for a credit system that allows taxpayers to claim a credit for tax paid in one country against the tax liability in the other country.

The DTAA between India and Singapore has helped in the promotion of foreign investments and economic cooperation between the two countries. It has also provided certainty for taxpayers and reduced the instances of double taxation of income. With the ongoing efforts of both countries to improve the bilateral relationship, it is expected that the DTAA will continue to play a significant role in the promotion of mutual economic growth.