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India amends treaty with Singapore to curb black money
Last updated on Dec 31, 2016, 03:26 pm
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India amended its tax treaty with Singapore to curb black money that will also affect Mauritius.
Under the new amendment the "capital gains tax will be implemented on investments in India's capital markets that come from Singapore."
From 2017 till 2 years, the tax will be fixed at "50% of the prevailing domestic rate, and the full rate will apply from April 2019."
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In this articleIndo-Mauritus tax treaty Mauritius becomes major investment source for India 1/3rd investments route through Mauritius India, Mauritius to amend tax treaty A check against shell companies Markets reacts tumultuously Investments from Singapore will also be affected India amends treaty with Singapore to curb black money Mauritius and Singapore best options to route money to India
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About
Indo-Mauritus tax treaty
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The Double Taxation Avoidance Agreement (DTAA) between India and Mauritius is a treaty that aims to prevent double taxation, both in India and Mauritius, of business entities.
DTAA was aimed at economic cooperation, bringing certainty in taxation regime, and facilitating a flow of investment, technology, and services between nations.
According to the tax treaty, capital gains in Mauritius will be taxed in Mauritius.
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Mauritius route
Mauritius becomes major investment source for India
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Capital gains tax refers to the tax on the profit arising out of the sale of capital assets at a price higher than its purchase price.
Mauritius' minimal 3% capital gains tax rate against India's 15-20% makes Mauritius the most attractive conduit for investments in India.
This route was being misused for tax avoidance by routing investments through shell companies established in Mauritius.
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Personal
1/3rd investments route through Mauritius
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Between 2000-2015, Mauritius was the largest source of total Foreign Direct Investments (FDI) in India accounting for $94 billion or 1/3rd of the total investments in India.
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11 May 2016
India, Mauritius to amend tax treaty
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India will levy a capital gains tax on the investments routed through Mauritius from 1st April 2017, bringing an end to the 3-decade old tax exemption on such investments.
The move will help improve transparency and check tax evasion and avoidance.
It will also help bring parity between the domestic investments and foreign investments. Domestic investors had complained of preferential treatment to foreign investors.
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Information
A check against shell companies
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As a check against shell companies, the amended tax treaty provides for a 'limitation of benefit' clause, under which, a company needs to spend a minimum of Rs.27 lakhs in Mauritius to enjoy the benefits of the Indo-Mauritius DTAA.
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Reactions
Markets reacts tumultuously
![Markets reacts tumultuously]( "Markets reacts tumultuously")
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The markets reacted in a knee-jerk manner by falling 1.4% or 360 points on opening; however, they later recovered due to the approach adopted by the government.
An 11-month buffer has been given to the investors as the said amendments will be applicable from 1st Apr'17.
Investments made before 1st Apr'17 would not be taxed and 50% tax rebate will be available till Apr'19.
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Personal
Investments from Singapore will also be affected
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The amendments in the Mauritius treaty will also impact the Singapore treaty as the latter is linked to the Mauritius treaty. In other words, India will also levy capital gains tax on investments from Singapore.
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31 Dec 2016
India amends treaty with Singapore to curb black money
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India amended its tax treaty with Singapore to curb black money that will also affect Mauritius.
Under the new amendment the "capital gains tax will be implemented on investments in India's capital markets that come from Singapore."
From 2017 till 2 years, the tax will be fixed at "50% of the prevailing domestic rate, and the full rate will apply from April 2019."
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Similar in countries
Mauritius and Singapore best options to route money to India
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Mauritius and Singapore are the favoured destinations for foreign investors routing money to India because of the tax benefits to these countries: "Of the total FDI inflows of USD 29.4 billion in April- December 2015-16, Mauritius and Singapore accounted for USD 17 billion."
