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23rd September
written by Tellus

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. In addition, companies that have a negligible business in Singapore, without business continuity, are not entitled to this benefit. Under the LOB clause, the agreement does not apply to shell companies. In August 2020, the Central Board of Direct Taxes (CBDT) issued Guidelines on Mutual Agreement Procedure (MAP), which contains the following four parts: the Double Taxation Convention (DBA) between Singapore and India entered into force in 1994. The provisions of this Agreement have been amended by a Protocol signed on 29 June 2005. The second protocol was signed on 24 June 2011 and entered into force on 1 September 2011. The DBA agreement eliminates double taxation of income between Singapore and India and reduces the overall tax burden on the people of both countries. Although the vast majority of Singapore`s tax treaties currently do not contain an arbitration clause on POPs, Singapore signed the MLI last June, which will amend certain provisions of the tax treaty and allow taxpayers to seek settlement of POPs cases through arbitration if the competent authorities are unable to reach an agreement within a specified period of time.

The amendments decided by Singapore and the Contractor will enter into force as soon as Singapore and the Tax Treaty Partner have ratified the MFI. The inclusion of a mandatory arbitration clause in tax treaties should make POPs more effective as a dispute settlement mechanism. IRAS shall inform the taxable person of the outcome of the MAGP within one month of the conclusion of the agreement with the competent foreign CAs. IRAS will regularly inform the taxpayer of the progress of the negotiations and will endeavour to resolve the matter within 24 months of receipt of the request. 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. The ARTICLE OF THE POPs in the Indian Income Tax Agreement is based on Article 25 of the OECD Model Agreement. A pop application may be submitted by a taxable person if it is constituted by the tax authorities of one or both of the contractors accordingly or not in accordance with the tax treaty concerned. This procedure allows the competent authorities of States Parties to resolve by mutual agreement differences or difficulties in the interpretation or application of tax treaties.

The Domestic Revenue Authority of Singapore (IRAS) has published an e-tax guide that provides taxpayers with guidelines for cartel proceedings (POPs) under Singapore`s tax treaties. The Guide contains a great deal of information on the interpretation and application of the common provisions of Singapore`s tax treaties and sets out the effects of the Multilateral Agreement on the implementation of tax treaty-related measures to prevent profit reduction and profit shifting (MLI). . . .

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