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New Singapore treaty harsher than GAAR, may impact FPI flows into India

New Singapore treaty harsher than GAAR, may impact FPI flows into India

Singapore might lose some of its allure for various foreign portfolio investors as a preferred destination to route their investments into India. With the Multi-Lateral Agreement (MLI) between the two countries set to come into force from April 1, fund managers in Singapore, who invest in India, could face a stiffer task of convincing local tax authorities that they have not set up shop in the island nation to avail the tax benefits. Investors based out of Singapore continue to avail several tax benefits for putting money in India. These include exemption from capital gains tax on derivatives and lower capital gains tax rate for equities. But, these exemptions will be applicable only if the Indian taxman are convinced that they are not in Singapore to avoid taxes. While the government has already implemented the General Anti-Avoidance Rules (GAAR) to curb tax avoidance, MLI comes with much stricter provisions and is believed to override GAAR, say experts. GAAR, implemented in 2017, requires foreign investors to prove that they are in a jurisdiction not just to take advantage of the tax treaty

 

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