Free trade agreements are treaties that facilitate trade and investment between two or more economies. The Comprehensive Economic Cooperation Agreement (CECAF) is a free trade agreement between Singapore and India. Through its creation, the ECSC covers the reduction or elimination of customs duties on 82% of Singapore`s exports to India. Read More If Singapore and India did not have a DBA in place, the company`s profits could be taxed in both Singapore and India. In this case, the profits generated by the institution would be twice as burdened. This underlines the importance of the DBA and how it avoids double taxation of corporate profits. To address this issue and reduce the overall burden on a taxpayer, Singapore and India have signed the DBA. In accordance with the signing of the agreement, all taxable income in both countries is taxable in only one country, in accordance with the provisions of the DBA. C ountries all over the world conclude various tax treaties. These contracts are beneficial for residents (companies and individuals) of countries that are parties to the agreement. They may provide for tax exemptions, tax credits and a general reduction in tax rates. Singapore has concluded DTAs with many countries.
These agreements contribute to the efficiency of Singapore`s tax system. This article highlights the important provisions of the India-Singapore DBA, the tax applicability, the tax rates, the scope of the agreement and the benefits of this DBA. The attached Agreement between the Government of the Republic of India and the Government of the Republic of Singapore for the Avoidance of Double Taxation and the Prevention of Tax Evasion on Income entered into force on 27 May 1994, in which the two States Parties notified each other of the completion of the procedures prescribed by their respective laws, in accordance with the provisions of the said Convention: Wishing to conclude a Convention for the avoidance of double taxation and the prevention of fiscal evasion in the context of tax on income. In the absence of a DBA, this income is doubly taxed, i.e. two countries apply their tax on the same income. This double taxation unfairly penalizes income flows between countries, thus discouraging trade and commerce between countries. The Double Taxation Avoidance Agreement (DBA) between India and Singapore is a tax treaty between two countries to avoid double taxation of income that may flow between the two countries. DTAS aims to alleviate the double taxation of income received in one jurisdiction by a resident in another jurisdiction. The double taxation treaty between Singapore and India provides an exemption from double taxation in the situation where income is taxable for both countries. However, in order to avoid the misuse of this derogation, in particular by third-country nationals who set up holding companies in Singapore to benefit from the capital gains exemption, the contract added a `limitation of benefits (LOB)` clause.
Under this clause, a company registered in Singapore is not entitled to the capital gains exemption if the sole purpose of setting up the company was to benefit from that benefit. . . .