A Guide To Singapore And India’s Double Tax Treaty

Ottavia has prepared this guide to provide entrepreneurs, investors and business owners with a broad overview of the nature, extent and content of the double taxation agreement (DTA) between Singapore and India. This guide is not intended to replace tailored, professional advice, and we encourage organisations considering doing business between these two countries to contact Ottavia for more personalised advice.

A DTA between Singapore and another country provides protection for residents of one country deriving income in another from double taxation. It also clarifies and boundaries of each countries tax jurisdiction on different kinds of income arising from economic activities taking place across borders. These agreements can also provide concessionary tax rates or tax exemptions on certain types of income.

Specifics of the Singapore-India DTA

In brief

TOPIC TREATY PROVISIONS
Scope of DTA The respective tax residents of India and Singapore.
Taxes Covered by the DTA Income tax.
Income from Immovable Property Taxed in the country in which the property is located.
Business Profits Taxed in the country in which the enterprise is present.
Airline/Shipping Profits Taxed in the operator’s country of residence.
Dividends
  • Singapore resident receiving dividends from an Indian company: 10% or 15% Indian tax on gross dividend income
  • Indian resident shareholders of a Singapore company are exempt from taxation on dividend income>
Interest Taxed at a rate of 10% or 15% in the country in which the interest income arises (i.e. source country). May be taxed in recipient country as well.
Royalties 10% or 15% at the source of the royalty (the country in which the income arises). In some cases, may be taxed in the country of the recipient too.
Fees for Technical Services Taxed at a rate of 10% or 15% in the country in which the income arises (i.e. source country). May be taxed in recipient country as well.
Directors’ fees Taxed in the jurisdiction in which the paying company is a tax resident.
Personal/Professional Services Income Taxed in the recipient’s country of residence. Per certain conditions, tax exemptions may be applicable (see below).
Employment Income Taxed in the country in which employment is exercised. Per certain conditions, tax exemptions may be applicable (see below).
Income of Artists and Sportsmen Taxed in the country in which the activities are performed. Per certain conditions, tax exemptions may be applicable (see below).
Non-government Pension & Annuity Taxed in the recipient’s country of residence.
Government Payments Any remuneration received by government officials is to be taxed by the paying government, unless the official is a citizen or permanent resident of the country in which they providing their services.
Payments made to Visiting Students or Trainees A tax exemption shall be provided on overseas payments relating to the education, training or maintenance of visiting business apprentices or students the country which they are studying/pursuing a trade.
Visiting Teachers or Researchers Any remuneration received by a visiting researcher or teacher for the provision of teaching services or research activities is to be considered exempt from taxation in the country which they are teaching or conducting research.

The provisions of this tax treaty apply to Indian and Singaporean tax residents. Please note that a shell company claiming to be a resident of either contracting country may not benefit from the DTA. A shell company is here used to refer to any legal entity that can be defined as a resident of a contracting country while having nil to negligible business operations carried out in the same country. A resident shall be considered to be a shell company in a contracting country when its total expenditure on operations in that country is lesser than Rs 5,000,000 or S$200,000, depending on jurisdiction, in a 24 month period immediately preceding the date the gains originally arose.

Taxes covered by the agreement

  • Singapore: Income tax
  • India: Income tax, including any surcharges.

Income derived from immovable property

Where income is derived from the direct use, letting or any other form of use of immovable property, the country in which property is located shall have the right to tax the income. This income shall include an enterprise’s real-estate income as well as income resulting from immovable property utilised for the carrying out of professional services. The definition of immovable property and what is taxable under this provision shall depend on the country in which the property is situated. Aircraft and ships are not to be considered as immovable property.

Business profits

Profits of an enterprise or business income are to be taxed by the country in which the enterprise resides. Where the enterprise is engaged in business in the other contracting country through a Permanent Establishment located in the same, then income or profits solely associated with that Permanent Establishment are eligible for taxation in the other contracting country.

Income resulting from the operation of shipping or air transport services

  • Where a tax resident of one contracting country derives profits from the operation of aircraft or ships in international traffic, those profits are liable for taxation in the country of residence of the operator.
  • Where a tax resident of one contracting country derives profits from the operation of aircraft or ships in international traffic, those profits are liable for taxation in the country of residence of the operator.
    1. Profits from the enterprise’s participation in a joint business, pool, or international operating agency that operates aircraft or ships
    2. Interest derived from funds connected to the operation of aircraft or ships in international traffic.
    3. Profits derived from the transportation of passengers, goods, livestock or mail as carried on by the owners, charterers or lessees of the aircraft and ships. This shall include profits from:
      • Ticket sales for transportation made on behalf of other companies;
      • Incidental leasing of aircraft and ships utilised in this transportation;
      • Maintenance, use or rental of trailers and other similar containers (including equipment utilised for transporting containers) used in connection with this transportation; and
      • Any other profitable activity directly connected to transportation.

Dividend income

  • Income arising from dividends paid to a resident of one contracting country by an enterprise resident in the other contracting country may be taxed in the first-mentioned contracting country (the country of residence of the recipient). Per the following conditions, dividends may be taxed at the source country:
    1. 15 per cent of the gross dividend amount. Should the recipient of the payment be a company owning a minimum of 25 per cent of the shares of the paying company, a reduced tax rate of 10 per cent of the gross dividend amount shall apply.
    2. As Singapore does not impose a dividend tax, Indian-resident shareholders deriving dividends from a company resident in Singapore – or a Malaysian-resident company with a Singapore-based source of profit – are exempt from taxation by Singapore on their dividend income
  • The above provisions concerning dividend income do not apply where the recipient of the dividend income a) has a Permanent Establishment in same contracting country as the company paying the dividend or b) uses a fixed base situated in the same contracting country as the company paying the dividends for the performance of independent personal services, and the Permanent Establishment or fixed base is effectively connected with the holding giving rise to payment of the dividends. In either case, the dividend income will be considered to be income of the Permanent Establishment or resulting from the performance of personal services and will be taxed according to the relevant regulations.
  • Dividend income is here used to refer to income derived from shares or other corporate rights that are subject to same taxation treatment as income from shares.

Interest income

  • Interest paid to a resident of a contracting country that arose in the other country may be eligible for taxation in the country in which the recipient is resident. Interest may also be taxed in the source country per the following conditions:
    • 10 per cent of the gross interest amount where such interest has been paid on a loan granted by a bank bearing a bona fide banking license, or by any similar financial institution including insurance companies;
    • 15 per cent of the gross interest amount in all other cases.
    • The above provisions of the treaty relating to the taxation of interest income are not to apply where the recipient of the interest income: a) has a Permanent Establishment in the same country from which the interest income arose; or b) uses a fixed base situated in the country from which the payments arise for the purposes of performing independent personal services, and the indebtedness from which the interest payments result is effectively connected with the aforementioned fixed base or permanent establishment. In these cases, the resulting interest income shall be treated as income derived by the permanent establishment or income derived from the performance of personal services and is to be taxed according to the relevant income tax regulations.
    • Should a special relationship exist between the lender and the borrower that results in the interest paid exceeding an amount which both parties would potentially have agreed upon should such a relationship not exist, the above tax rate is only to apply to this agreed upon amount, and not any amount in excess of it.
    • Interest income is here used to refer to income resulting from government securities, bonds or debentures (including prizes and premiums attached to any such bond, security or debenture) or any other debt-claims secured or unsecured by a mortgage.

Royalties

  • A contracting country has jurisdiction to impose taxes on any royalty income arising in the other contracting country and paid to a resident of the first-mentioned contracting country. A 10 per cent tax at the source country on the gross royalty amount may apply for the use of or right to use any copyright of a scientific, artistic or literary work, including tapes or films used in the broadcasting or radio or television; any patent; trade mark; plan; secret formula, model or design; or for information concerning the scientific, industrial or commercial experience of an individual or enterprise, including any gains derived from the alienation of any aforementioned right, property or information, as well as for the use of or right to use any commercial, industrial or scientific equipment. This provision does not include payments received for the sharing of technical knowledge, skill, experience, know-how or processes.
  • The above provisions concerning taxation of royalty payments do not apply where the recipient of the royalty income either: a) has a Permanent Establishment in the same country from which the royalty income arises or b) utilises a fixed base in the same country from which the royalty income arises for the performance of independent personal services, and that the right, property or contract which gives rise to the royalty payments is effectively connected with the aforementioned fixed base or permanent establishment. In this situation, the royalty income is to be considered as income of the permanent establishment or income derived from the performance of personal services and is to be taxed according to the relevant regulations.
  • Should a special relationship exist between the recipient and the payer of the royalties that causes the amount of royalties paid to exceed that which would have been agreed to by both parties in the absence of such a relationship, the above tax rate is only to apply to the amount that would have been agreed upon and not any in excess.

Fees for the performance of technical services

  • Where fees for a technical service arise in a contracting country and are paid to a resident of the other contracting country, those fees may be taxed by the tax authority of the country in which the recipient resides. The source country may also tax technical services fees at a rate of 10 per cent of the gross fee amount.
  • The aforementioned provisions relating to the taxation of technical services fees are not to apply where the recipient of the fees either: a) has a Permanent Establishment in the same country as that in which the fees arise or b) is engaged in the performance of independent personal services from a fixed base situated in the same country in which the fees arise, and the right, property or contract through which the fees arise is effectively connected with the aforementioned fixed base or permanent establishment. In this situation, the technical services fees are to be treated as either income of the permanent establishment or income derived through the performance of personal services and are to be taxed according to the respective regulations.
  • Should a special relationship exist between the recipient of the fees and the payer, it is possible that the amount of fees agreed to be paid exceeds an amount that both parties may have agreed to should the special relationship not have existed. Should the amount of fees paid exceed the amount that would have been agreed to in the absence of the relationship, the aforementioned tax rate is only to apply to the amount and not any excess.
  • Fees for the performance of technical services is defined as including payments made for the provision of services of a technical, consultancy or managerial nature.

Directors’ fees

Directors’ fees and other similar payments made to a person in recognition of their serving as the director of a company resident in either contracting country are to be taxed in the contracting country in which the paying company is resident.

Professional services income

  • Income resulting from a resident of one contracting country’s performance of personal or professional services is only eligible for taxation in the contracting country in which they are resident, except under the following conditions under which it may be also taxed in the other contracting country:
    • Where the person regularly performs their activities from a fixed base in the other contracting countries, in which case only the income directly attributable to actions carried out in relation to the fixed base are liable for taxation in the other contracting country.
    • Where the person stays in the other contracting country for a period of 90 days or more in any given financial year. Only income resulting from activities conducted in the other contracting country is eligible for taxation in that other country.
  • ‘Professional services’ is here used to refer to independent educational, teaching, literary, scientific or artistic activities. It also includes any independent activities conducted by lawyers, engineers, surgeons, physicians, dentists and accountants.

Employment income

  • Any salary, wage or similar remuneration paid in respect of employment is to be taxed exclusively in the country in which the recipient of the remuneration exercised the employment. Employment income may be subject to taxation in the recipient’s country of residence over the contracting country in which the recipient exercises their employment in the following circumstances:
    • The recipient of the remuneration has spent 183 days or fewer in a given fiscal year in the country in which they exercised their employment.
    • An employer who was not a resident of the country in which the employment was exercised paid the remuneration or charged another party to pay the remuneration on their behalf.
    • A permanent establishment or fixed base located in the contracting country in which the employer was exercised did not bear the remuneration.
    • The recipient derived the income in respect of employment exercised aboard an aircraft or ship in international traffic.

Artists and Sportspeople’s income

Income derived by a sportsperson; a motion picture, television, theatre, or radio artiste; or a musician is eligible for taxation in the contracting country in which the artiste, musician or sportsperson performed the relevant activities. Should the activities be either substantially or wholly supported through public funds provided by the other contracting country and not by the country where the artiste, musician or sportsperson performed the activities, the income is to be taxed in the other contracting country.

Remuneration and pensions for government service

  • Where a government of one contracting country pays a pension or remuneration to an individual in recognition of services rendered on behalf of that same government, that remuneration is exclusively eligible for taxation in that contracting country. The only exception to this is where the recipient is a resident and citizen of the other contracting country e.g. remuneration or pension payments made by the Government of India for services rendered to the same is exempt from tax except where the recipient is a citizen of Singapore and not India. The reverse applies for services rendered to the Government of Singapore.
  • The above provisions do not apply where income was derived from the rendering of services in connection with a Government-owned business enterprise (i.e. a business or trade carried out by the government of a contracting country for the purposes of generating property).

Non-government annuities and pensions

  • Non-government pensions and annuities not connected to services rendered by an individual in the discharge of governmental functions are to be taxed in the country in which the recipient resides.
  • Non-government pensions and annuities not connected to services rendered by an individual in the discharge of governmental functions are to be taxed in the country in which the recipient resides.
  • Annuity is used to refer to a stated sum made under an obligation to make the payments in return for full and adequate consideration in money or in money’s worth, received by the resident at stated times during their life or during a specified period of time.

Payments made to visiting trainees and students

  • Business and technical apprentices and students who are residents of one contracting country and visiting the other for the sole purpose of furthering education or training are no to be taxed by the tax authority of the other country for:
    • Payments made for the purpose of the maintenance, study, research, training or education of the apprentice/student from overseas.
    • Any amount received by the apprentice/student as an award, grant or allowance for the purposes of their study, research or training.
    • Remuneration not exceeding 500 USD per month or its local currency equivalent made in respect of services performed for the purposes of maintenance or in connection with training, study or research.

Payments made to researchers and teachers

Teachers and researchers who are resident in one contracting country and are visiting the other contracting country for a period not exceeding two years for the sole purpose of researching or teaching at an educational education will not be taxed by the tax authority of the other contracting country on any remuneration paid to them for teaching or research. This exemption is not to apply to income from research undertaken primarily for the personal benefit of a specific person.

Profits of associated enterprises

Enterprises are said to be associated where an enterprise from one contracting country participates indirectly or directly in the control, management or capital of an enterprise in the other country, and the two enterprises impose conditions that would differ from those that would exist were they independent enterprises. In the case of associated enterprises, any profits that would – were it not for these conditions – have been accrued by any one of these enterprises can be included in the profits of the enterprise and subjected to the appropriate taxation.

Capital gains

  • Where a resident of one contracting country derives gains through the alienation of immovable property located in the other contracting country, the contracting country in which the property is located may impose tax.
  • A resident or enterprise of one contracting country deriving gains from the alienation of any movable property connected to a permanent establishment or fixed base in the other contracting country is eligible for tax on those gains in the other contracting country.
  • Where a ship or aircraft that was operated in international traffic or movable property relating to the operation of the same is alienated, the recipient is eligible for taxation on those gains in their country of residence.
  • All other gains are to be taxed in the country of residence of the recipient.

Please note that Singapore does not impose a capital gains tax.

Relief for double taxation

  • India provides double taxation relief through deduction – i.e. domestic tax is applied on the affected income after the deduction of any suffered Singapore tax.
  • Singapore provides tax credits for double taxation relief. Indian tax paid in respect of income sourced from within India’s tax jurisdiction may be permitted as a credit against Singapore tax payable in respect of the same income.

Inter-jurisdictional exchange of information

  • The respective tax authorities of the contracting countries will exchange tax information when and as necessary.
  • This information shall remain confidential and is only to be disclosed to persons (including courts and administrative bodies) who are directly concerned with the collection, assessment, enforcement, or prosecution in respect of the taxes within the scope of the DTA.
  • No disclosure of any business, professional, trade or industrial secret or trade process will be made.

Please refer to the IRAS website for details on the specific provisions covered by the Singapore-India Double Tax Treaty.

For general information on Singapore’s DTAs, please refer to Ottavia’s guide.

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