��India-SG | Key regulations�Impacting Investments |ODI and FDI

An Overview

India-SG Trade & Investments | an overview

India and Singapore share close ties with a history rooted in strong commercial, cultural, and people-to-people links across a millennium.

• Singapore | the 2nd largest investor in India, with a cumulative FDI inflow of US$ 140,987 billion from April 2000 – September 2022 | 22% of total FDI into India,
• Singapore - amongst sources of External Commercial Borrowings for India and Foreign Portfolio Investment,
• The top sectors attracting FDI Equity inflows from Singapore to India : Services Sector, Computer Software & Hardware, Trading, Telecommunications, and Drugs & Pharmaceuticals,
• ODI : Singapore is the top investment destination for Indian companies accounting for US$ 1,138 million of the total overseas investments in FY 2022-23 (April-September 2022) | followed by the US and Mauritius,
• India was Singapore’s 12th largest trade partner, for the year 2021-22 with a share of 2.3% in Singapore’s overall trade. Singapore is India’s 6th largest trade partner with a share of 2.9% of India’s overall trade (2021-22),
• India’s imports from Singapore stood at US$ 19.17 billion in FY 2021-22. India’s export to Singapore stood at US$ 11.15 billion in FY 2021-22.

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Source : IBEF

�� India-Singapore DTAA �

India-SG DTAA | Key Features

• DTAA signed in 1994 | amended several times,
• Covers Tax residents of Singapore and India,
• A comprehensive treaty covering all income streams,
• Capital gains exemption in India provided under DTAA | amendment since 2017,
• MLI – Multilateral Instrument | ratified,
• Fees for Technical Services (FTS) | make available clause,
• Information exchange provided under Article 28,
• Avoidance of double taxation (Article 25) :

- India, vide deduction of taxes paid in Singapore

- Singapore, vide credit of taxes paid in India

Income-Tax Dept. cannot Ignore The Valid TRC Issued By The Govt.: Hon’ble Bombay High Court allows DTAA-Benefits To Alibaba Singapore

Certificates issued by Singapore Tax Authorities is sufficient evidence for accepting legal position | CIT Vs Citicorp Investment Bank (Hon’ble Bombay High Court)

CIT Vs Blackstone Capital Partners VI FDI Three Pte Ltd (Hon’ble Delhi High Court) | upholds sufficiency of the tax residency certificate for treaty eligibility

Is Tax Residency Certificate suffice to apply DTAA?

Key (recent) Tax Jurisprudence | India-SG�

• The Hyderabad Bench of ITAT, in case of PACC Container Line Pvt Ltd, held that as per limitation of relief under Article 24 of the India-SD Tax Treaty, the taxpayer was entitled to benefit in respect of the income from shipping and air transport to the extent of amount remitted to Singapore (under Article 8 of the Tax Treaty). In here, the taxpayer received a freight of USD 100 on cargo shipment. The local agent in India remitted net freight of USD 80, after deducting its commission of USD 20. The taxpayer claimed entire USD 100 as tax exempt in India and subject to tax in SG as per the Tax Treaty (Article 8). It was upheld that the benefit under the Tax treaty can be provided only for the amount remitted to Singapore (USD 80), and not the entire amount.

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• The Delhi Bench of ITAT, in case of Hitachi High Technologies Singapore Pte Ltd, held that the Liaison Office of the taxpayer, in view of the activities [ascertaining customer requirements, price negotiations, obtaining purchase orders, following up delivery of materials and payments] that it perform in India, constituted a Permanent Establishment (PE) under the India-SG Tax Treaty.

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• The Ahmedabad Bench of ITAT, in case of Elitcore Technologies Pvt Ltd held that the amount of tax paid in respect of income arising in a foreign country and subject to tax both in India and such foreign country (Singapore) shall be allowed a Foreign Tax Credit (FTC) against the tax payable in India in such a way that the credit should not exceed the Indian tax which is proportionate to the income arising in foreign country (Singapore).

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�Singapore HC | Comptroller of Income Tax v.  AZP  High Court of Singapore(originating summons no. 320 of 2012) Dated- May 23, 2012�

• Information under article 28 of DTAA cannot be disclosed on the basis of un-signed transfer requests of Indian national to a Swiss Bank to transfer money to overseas bank accounts of two foreign companies.
• The Indian tax authority seized documents from an Indian national which were believed to indicate the existence of undeclared income deposited in a company’s bank accounts in Singapore.
• Pursuant to Article 28 (1) of the India-Singapore DTAA, the Indian tax authority sent a request for information to its Singapore counterpart (the Comptroller of Income-tax). In support of the request, the Indian tax authority relied on unsigned transfer instructions allegedly issued by the Indian national as evidence that the Indian national remitted monies to the Singapore Company’s bank accounts. The Comptroller filed an application in the High Court u/s 105J of the Singapore Income-tax Act for an order requiring the bank to produce the company’s bank records.
• HELD dismissing the application: Article 28(1) of the Agreement as amended by the Second Protocol provides that “the Contracting States shall exchange such information as is forseeeably relevant for carrying out the provisions of [the Agreement] or to the administration or enforcement of the domestic laws concerning taxes… imposed on behalf of the Contracting States …” [emphasis added].
• Section 105J(1) of the Singapore ITA imposes two other conditions: The conditions referred to in [s 105J(2) of the ITA] are as follows: (a) the making of the order is justified in the circumstances of the case; and (b) it is not contrary to the public interest for a copy of the document to be produced or that access to the information be given. Those three conditions must be satisfied before the High Court will grant an order under s 105J(2) of the ITA for access to the information requested or for a copy of the document containing the information requested to be given.
• In the light of the fact that the requirement of foreseeable relevance was not met - need not deal with the other two requirements of whether granting the application was justified in the circumstances of the case and not contrary to the public interest.

��India-Singapore | Angel Tax

Angel Tax exemption

Investors from 21 Countries have been exempted from levy of angel tax for investment in unlisted Indian start-ups:

1. USA
2. UK
3. Australia
4. Germany
5. Spain
6. Austria
7. Canada
8. Czech Republic
9. Belgium
10. Denmark
11. Finland
12. Israel
13. Italy
14. Iceland
15. Japan
16. Korea

17. Russia

18. Norway

19. New Zealand

20. Sweden

21. Russia

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Countries not included:

• Singapore,
• Netherlands,
• Mauritius,
• Ireland

• The provisions of ‘angel tax’ introduced in 2012 to deter generation and use of unaccounted money through subscription of shares of a closely held company at a value higher than its fair market value,

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• Whenever an Indian unlisted company (such as a start-up) receive equity from a resident for issue of shares that exceed face value of its shares, it will be treated as ‘Income from other sources’ in hands of start-up,

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• Earlier the foreign investors were exempt from the above-mentioned mechanism, however, with the latest amendment, the foreign Investors are included in its ambit – when a start-up raise funding from a foreign investor at a value more than fair market value of its shares (in form of premium), it will be counted as its income and subject to tax,

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• Exemptions provided to certain category of start-ups,

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• Effective from 1^st April, 2023, Investors from 21 countries exempted from levy of angel tax for investment in Indian unlisted companies / start-ups.

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Other exempt entities :

• Government
• Government related Investors (Central Banks, sovereign wealth funds,
• Insurance Cos

��India-Singapore | FDI & ODI regime

India’s ODI regime

Amendment in August, 2022 | Key features

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1. Overseas Direct Investment is now defined as follows : Investment by way of acquisition of :

- Unlisted equity capital of a foreign entity; or

- Subscription as a part of the memorandum of association of a foreign entity; or

- In case of a listed foreign entity : Investment in ten per cent, or more of the paid-up equity capital of the listed foreign entity; or

- Investment with control where investment is less than ten per cent of the paid-up equity capital of the listed foreign entity.

2. Overseas Portfolio Investment (‘OPI’) is now defined as: ‘Investment, other than ODI, in foreign securities, but not in any unlisted debt instruments or any security issued by a person resident in India who is not in an IFSC’
3. ‘Control’ has been defined to mean the right to appoint majority of the directors or control management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders’ agreements or voting agreements that entitle them to ten per cent or more of voting rights or in any other manner in the entity.
4. Person resident in India has now been permitted to invest in a foreign entity that has invested or invests into India [Round Tripping], directly or indirectly, up to 2 layers of subsidiaries, without RBI approval.
5. A resident individual has been permitted to gift foreign securities to his relative resident in India without RBI approval | A resident individual is permitted to receive

foreign securities by way of gift from a person resident outside India, subject to compliance with the provisions of Foreign Contribution (Regulation) Act, 2010 (‘FCRA’).

6. ‘Bonafide business activity’ has been defined to mean any business activity permissible under any law in force in India and the host country or host jurisdiction, as the

case may be.

g. Financial remittances towards loan to the foreign entity and/or in respect of the issuance of bank guarantee to/on behalf of the foreign entity permitted only after

ensuring that the Indian entity has made ODI and has control in the foreign entity. Interest rate should be at arm’s length.

h. Any person resident in India whose account is classified as non-performing assets, or as a wilful defaulter by any bank, or is under investigation by a financial service

regulator or investigative agency, will have to obtain a NOC from the lender bank or regulatory body or investigative agency, before making any such financial

commitment or undertaking disinvestment.

1. An Indian entity which is not engaged in financial services sector in India can now make ODI in a foreign entity engaged directly or indirectly in financial services

activities, except banking or insurance.

j. Indian resident person may acquire immoveable property on a lease of note more than 5 years. Can also acquire by inheritance or gift or purchase from an Indian resident,

k. New forms prescribed | Delay in reporting OI related compliances including Annual Performance Report shall now attract Late Submission Fees

• Financial Commitment of an Indian entity up to 400% of Net worth as on date of last audited Balance Sheet.
• Investment as OPI by an Indian entity cannot exceed 50% of its net worth as on the date of its last audited Balance Sheet.
• SEBI registered MFs, VCFs can invest overseas in securities as stipulated by SEBI | overall cap of USD 7 billion for MFs & USD 1.5 billion for VCF

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FDI regime in Singapore

Singapore has relatively minimal foreign direct investment (FDI) controls save in a few specific sectors.

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• Infrastructure assets accessible by the public or areas where national security concerns may lie. In general, the Singapore Government maintains a level of oversight and control over FDI in two ways:

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# legislative restrictions: FDI is restricted in certain sectors such as real estate or media; and

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# licensing regime: the government controls certain sectors through rigorous licensing regimes, applying both qualitative and

quantitative criteria depending on the sector involved. A licensing regime is in place for example in the banking and

telecommunications sectors, and both foreign and domestic investors are required to seek specific approvals from the

respective regulatory bodies.

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That said, even in these specific sectors, the Singapore Government generally promotes a consultative approach between foreign investors and the regulatory bodies, where each application is assessed on a case-by-case basis to ensure that it is assessed on its merits.

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On import of goods into SG, no custom duties except on Liquor and Tobaco products | GST of 8%.

The Singapore Government encourage FDI through various initiatives - incentives granted by the Economic Development Board of Singapore (EDB); and maintenance of an overall investor-friendly tax regime which support the business community, from start-ups to mature companies looking into expansion plans to multinationals moving their businesses or headquarters to Singapore.

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��Thanks��yogeshmit@gmail.com

Corporate Setup and Incorporation of a Company in Singapore

- By CA Preety Agarwal

Table of Contents

1. Registration Procedure in Singapore

Step 1 : Choosing a Business Structure

Types of Partnership in Singapore

Types of Companies in Singapore

Step 2 : Reserving a Business Name

Application filed in ACRA

Step 3 : Documents Required for Singapore Co. Registration

Step 4: Mandatory Requirements to form a Pvt Ltd. Co.

Step 5: Opening Corporate Bank Account in Singapore

Step 6 : Ongoing Compliances

2. Audit Requirements in Singapore

3. GST Requirements in Singapore

4. Work Passes in Singapore

5. CPF Contributions in Singapore

6. Trade Licenses in Singapore

This list is illustrative

7. Business Grants in Singapore

8. Closing Down a Company in Singapore

9. Re-domiciliation in Singapore

10. Transfer Pricing

Reporting

If Related Party transaction > SGD 15 Mln for the financial period, it needs to disclose in Corporate Income Tax Return (Form C) separately

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Thank You !

Tax in Singapore

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• Corporate Tax
• Individual Tax
• Withholding Tax
• Goods and Services Tax

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Tax Regulatory Authority

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IRAS -Inland Revenue Authority of Singapore

Corporate tax

Who needs to pay Corporate tax in Singapore?

• Companies (resident and non-resident) that carry on a business in Singapore are taxed on their Singapore-sourced income when it arises and on foreign-sourced income when it is remitted or deemed remitted to Singapore.

What is Standard Rate of Corporate Tax ?

• 17%

What are the Tax Forms to be filed in Singapore ?

• Form C-s Lite, Form C-s and Form C

Corporate Tax Deadline in Singapore ?

• ECI ( Estimated Chargeable Income) – within 3 months of End of Financial year
• Form C/C-s/Form C – 30^th November

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Corporate tax

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How to determine Tax Residency of the Company?

• The tax residency status of a company is established based on the location where the company's business operations are controlled and managed.
• Foreign-Owned Investment Holding Companies with purely passive source of income or receiving only foreign sourced income and Non-Singapore Incorporated Companies, and Singapore Branches of Foreign Companies are classified as tax resident companies only if they fulfill specific conditions.

What are the benefits available to Tax Resident Companies?

• Exemption and Reduced Taxation under Double Taxation Avoidance Agreements (DTAA)
• Tax Exemption on Specified Foreign Income
• Foreign Tax Credit
• Tax Exemption for New Start-Up Companies

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Corporate tax

What is Taxable Income for a Company?

• Gains or profits from any trade or business
• Income from investment such as interest and rental
• Royalties, premiums and any other profits from property
• Other gains that are revenue in nature

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What is Non – Taxable Income ?

• Capital Gains
• Dividend Income
• Foreign-sourced dividends, branch profits and service income received by a resident company under Section 13(8)
• Gains derived by a company on the disposal of equity investments under Section 13W

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Singapore resident companies also enjoy deductions, grants and payouts.

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Individual Income Tax

What is the Due Date of Filing Income Tax ?

• 15^th April

Who Needs to File Individual Income Tax?

• Employees, Self-Employed Persons, Sole-Proprietors, Partnerships and other individuals who may be Singapore Citizens (SCs), Singapore Permanent Residents (SPRs) or Foreigners, and Employers.

What is Taxable Income ?

For Individual

• Salary , Bonus, Director Fee, Commission
• Income from Overseas
• Retirement Benefits
• Pension
• Retrenchment Benefit
• Gain from Stock options

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Individual Income Tax

What is the Due Date of Filing Income Tax ?

• 15^th April

Who Needs to File Individual Income Tax?

• Employees, Self-Employed Persons, Sole-Proprietors, Partnerships and other individuals who may be Singapore Citizens (SCs), Singapore Permanent Residents (SPRs) or Foreigners, and Employers.

What is Taxable Income ?

• Salary , Bonus, Director Fee, Commission
• Income from Overseas
• Retirement Benefits
• Pension
• Retrenchment Benefit
• Gain from Stock options
• Income from Self Employment
• Income from Partnerships

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Individual Income Tax

Who is a Tax resident in Singapore?

• You can be considered a tax resident in Singapore if you fall under one of the following categories:
• Singapore Citizen or Singapore Permanent Resident (SPR) who normally resides in Singapore, except for temporary absences.
• Foreigner who has stayed or worked in Singapore:

For at least 183 days in the previous calendar year; or

Continuously for 3 consecutive years.

• Foreigner who has worked in Singapore for a continuous period spanning 2 calendar years, and your total period of stay* is at least 183 days. This applies to foreign employees entering Singapore, excluding directors of a company, public entertainers, or professionals.

*including your physical presence immediately before and after your employment.

• Additionally, foreigners holding a work pass valid for at least 1 year will also be treated as tax residents. However, your tax residency status will be reviewed during tax clearance when your employment ends, based on the tax residency rules. If your stay in Singapore is less than 183 days, you will be classified as a non-resident.

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Individual Income Tax

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What is the Individual tax rates in Singapore ?

Singapore follows a progressive tax rate system ranging from 0 to 22% depending upon the level of Income.

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How to submit tax in Singapore?

• Employment Income – AIS ( Annual Income Submission / Individual Tax Return)
• Sole Proprietor – Form B /B1
• Partnership – Individual Tax Return

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Do a Foreigner leaving Singapore need to file Form IR21?

• Yes, If you cease employment with your current employer, go on an overseas posting or leave Singapore for more than three months, your employer must notify IRAS at least one month in advance by filing the Form IR21, and withhold all monies due to you from the date they are aware of your impending cessation of employment

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What are the Tax Implication for a Non- Resident In Singapore ?

• Your employment income is taxed at 15% or progressive resident rates, whichever results in a higher tax amount.
• Director's fees and other income are taxed at the prevailing rate of 24%.
• You are not entitled to tax reliefs.

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Withholding Tax

Who needs to pay Withholding tax in Singapore?

• A person (known as the payer) who makes payments of a specified nature (e.g. royalty, interest, technical service fee, etc.) to a non-resident company or individual (known as the payee) must withhold a percentage of the payment and pay the amount withheld to IRAS as WHT.

What is the due date of filing Withholding tax?

• File and pay the WHT to IRAS by the 15th of the second month from the date of payment to the non-resident.

What are the Forms to be Filed for Withholding tax ?

• Form S-45

Is there any WHT certificate which is issued?

• There is no WHT certificate which is issued, the confirmation of payment serves as certificate for cleaning relief under DTAA
• For claiming any kind of Relief under DTAA, the filer needs to ensure that original COR is obtained from non-resident for each year DTR is claimed.

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Goods and Services Tax

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Who needs to pay GST in Singapore?

A business must register for GST if your taxable turnover is:

Under the retrospective view, more than $1 million at the end of the calendar year, or

Under the prospective view, expected to be more than $1 million in the next 12 months

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What is the due date of filing GST?

• GST is filed Monthly or Quarterly

Which tax form to be Filed for GST ?

• Form F-5

What is taxable turnover ?

• The total value of all taxable supplies made in Singapore (excluding GST) in the course or furtherance of business. This includes the value of all standard-rated (GST at 8%) and zero-rated (GST at 0%) supplies but it excludes exempt supplies, out-of-scope supplies and the sale of capital assets.

What is the rate of GST?

• It is 8 % now and would increase to 9 % from 2024

Who is exempted from GST in Singapore?

Supplies that are exempt from GST include:

The provision of financial services;

The supply of digital payment tokens (with effect from 1 Jan 2020);

The sale and lease of residential properties; and

The import and local supply of investment precious metals

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Goods and Services Tax

What is the GST Registration process In Singapore ?

• Determine the type of GST Regsitration
• Complete e learning course
• Submit your GST Application

Is there any exception from GST Registration ?

• When taxable turnover of a business is derived wholly or mainly from zero-rated supplies and the business applyies for exemption from registration.
• You are liable for GST registration under the retrospective view but not under the prospective view and the following conditions are met:

You are certain that your taxable turnover for the next 12 months will not exceed S$1 million

The taxable turnover is projected to be lower due to specific circumstances(e.g. large-scale downsizing of business)

You have supporting documentation to substantiate your projection

You must nonetheless continue to monitor your taxable turnover at the end of the next calendar year.

Goods and Services Tax

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How to calculate taxable Turnover for GST?

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Sole Proprietor – All Sole proprietorship business together inc that of rental of commercial property and rental of furniture and fitting). All Sole Proprietorships will be registered in the name of the sole proprietor.

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Partnership - Combine the turnover of all partnership businesses with the same composition of partners (including rental of commercial properties, and rental of furniture & fittings) Each partnership business that is required to register for GST will be separately registered under its own name.

Once your partnership is GST-registered, all businesses with the same composition of partners need to be GST-Registered. This includes businesses with the same composition of partners which you may set up in the future..

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Company – Taxable turnover of the company and if it owns Sole proprietorship business, combine the turnover for company and sole proprietorship.

GST registration will be in the name of your company.

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Thank you !��R Accounting Solutions�

QUESTION AND ANSWERS