India/Singapore DTAA Hits The Buffers

by Mary Swire, Tax-News.com, Hong Kong

03 May 2005

Talks between India and Singapore aimed at putting in place a revised Double Tax Avoidance Agreement and bolstering Singapore as a conduit country for Indian DTI have hit a roadblock over information exchange provisions.

Both countries are keen to reach a deal, allowing Singapore to compete against Mauritius, currently the favoured route for Indian investment; but Singapore won't accept an information-sharing clause similar to the one which Mauritius has just signed in an FTA with India which incorporates its DTAA.

Indian officials say that they are being liberal in allowing Singapore to clone the Mauritius DTAA, which has just about survived a series of attacks from the Indian taxation authorities due to worries over its residence provisions. India wants to include a ‘limitation-of-benefits' clause which could be used to deny benefits to third party investors who unfairly use the DTAA to evade Indian taxation (India has 'round-tripping' by Indians in mind).

For its part, Singapore is keen to finalize a bilateral comprehensive economic cooperation agreement (CECA) on trade and investment, but India is reluctant to include concessions in sectors like financial services and telecom.

It's not clear how closely the two sets of negotiations are linked; but after an exhaustive series of meetings the DTAA negotiations at any rate are on hold.

India recently signed a Comprehensive Economic Cooperation Partnership Agreement with Mauritius which liberalises trade in goods and services and facilitates joint ventures, but also encompasses the existing double taxation avoidance agreement between the two countries, seemingly fire-proofing it against further attacks from India's CBDT.

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