Double Taxation Avoidance Agreement — Singapore -India
In this era of globalization, a person, entity, etc can be resident of one country and have income from multiple countries. Each country have its own taxes on the income derived from the source country. So what should we do?
- Pay taxes in the country where it is earned and as well as in the country where we resides?
- Pay taxes in either of those countries?
Here is the solution :
Countries do understand the complexities and burden if the taxes are to be paid twice on the same income. So to make it more fairer deal, they have entered into mutual agreements in this respects which are commonly referred to as “Double Taxation Avoidance Agreement” (hereinafter DTAA).
India and Singapore do have one DTAA.
Effective date : 1994
Taxes Covered : Income Tax
Rationale : DTAA helps individual/corporations to avoid paying taxes on the same income multiple times in different countries.
Let’s run through some of these provisions broadly.
Article 6 Income From Immovable Property
1. Taxed in a country where the property is situated
Article 7 Business Profits
1. Taxed in the country where enterprise is located OR
2. If in case you have permanent establishment in another country then it will be taxable in that another country irrespective of country of incorporation
Article 8 Shipping and Air Transport
1. Taxed in the country where the recipient is resident
Article 9 Associated Enterprises
1. In case conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any income or profits which would, but for those conditions, have accrued to one of the enterprises, but by reason of those conditions, have not so accrued, may be included in the income or profits of that enterprise and taxed accordingly.
Article 10 Dividends
1. Dividend paid by Singapore company is tax exempt in Singapore
2. Dividend paid by Indian company is taxed at
— 10% if company owns > 25% of the shares of the company paying dividend — otherwise 15% in all other cases
Article 11 Interest
1. Taxed in the country where the recipient is resident
2. It is also taxed in a country where it arises — 10% — Loan granted by a bank/financial institution including insurance company 15% — In all other cases
Article 12 Royalties and Fees for Technical Services
1. Taxed in the country where the recipient is resident
2. It is also taxed in a country where it arises 10% or 15% depending on scenario
Article 13 Capital Gains
1. Immovable Property — where the property is situated
2. Gains from the alienation of movable property situated in other country having fixed base/permanent establishment is taxed in other country 3. Gains from the alienation of ships or aircraft operated in international traffic or movable property pertaining to the operation of such ships or aircraft shall be taxable only in the Contracting State of which the alienator is a resident 4. Any other gain is taxed in the country where the recipient is resident *Singapore has no capital gain taxes
Article 14 Independent Personal Services
1. Taxed in the country where the recipient is resident
2. If the resident recipient has permanent establishment in other country and services are performed in other country then it is taxed in that other country 3. If his stay in other country =>90 days in a fiscal year — Income related to the activity performed is taxed in that other country
Article 15 Dependent Personal Services
1. Taxed in the country where the recipient is resident
Article 16 Director’s Fees
1. Taxed in a country where the company is resident
Article 17 Artistes and Sportsperson
1. Taxed in a country where activities are carried out EXCEPT few cases as point no 2
2. Activities supported wholly or substantially from the public funds of the first-mentioned State, including any of its political subdivisions, local authorities or statutory bodies should be taxed in that first mentioned state though performed in other country
Article 18 Remuneration and Pensions in respect of government service 1. Taxed by the respective government unless the person is permanent resident or citizen of other country where services are performed
Article 19 Non-Government Pensions and Annuities
1. Taxed in the country where the recipient is resident
Article 20 Students and Trainees
1. Exempt from tax any remittances received for training, maintenance , etc in visiting country
Article 21 Teachers and Researchers
1. Taxed in the country of resident and not in visiting country for teaching — Period should not be exceeding 2 years
2. It doesn’t apply to research for private benefit
Items of income which are not expressly mentioned in the foregoing Articles of this Agreement may be taxed in accordance with the taxation laws of the respective Contracting States.
Relief How?
As we are still paying taxes here? Well true! But,
Relief is if you have paid taxes in any one of these countries you can claim the same as tax credit/deduction accordingly to laws of the another country where-in you are filing your income tax return.
Notes/References :
1. Link of DTAA — https://www.iras.gov.sg/irashome/uploadedFiles/IRASHome/Quick_Links/Protocol%20amending%20Singapore-India%20DTA%20(Ratified)(MLI)(1%20Oct%202019).pdf
2. All these interpretations are general understanding, for detailed coverage please refer to the tax treaty between Singapore and India, IRAS /Incometaxindia Website.
