Singapore Property Tax.

 Singapore proposes to tax gains derived from sale/ disposal of property (including shares) situated outside Singapore, in certain situations.

Over past several decades, we have been witnessing Singapore as one of the most favored jurisdictions for investing in South-Asia (especially countries like India), due to several reasons, one of them being favorable tax treatment under treaty and no capital gains tax in Singapore.

This phenomenon was jolted with amendments to India-Singapore tax treaty, whereby India was given taxing rights in respect of capital gains arising from transfer of shares of Indian companies (though investments upto 2017 were grandfathered).

Singapore has now proposed certain amendments to the Singapore Income tax Act (‘the Act’), which are now open for public consultation. One of the significant amendment, proposes to insert section 10L to the Act, which provides that gains derived by a ‘relevant entity’ from sale/ disposal of movable or immovable property situated outside Singapore (at the time of sale), but ‘received in’ Singapore, are treated as income chargeable to tax in Singapore. Such newly inserted provision targets transactions which would otherwise be either exempt or specifically not chargeable to tax in Singapore and is applicable in respect of sale/ disposal that occurs on or after January 1, 2024.

As per the explanatory statement issued, the section targets gains derived by entities that are member of a multinational group, but lack reasonable economic substance in Singapore (number/ experience/ qualification of employees; business expenditure; decision making, etc. in Singapore). Thus, the entities which have business operations only in Singapore are not affected. Section also provides certain exceptions, like financial institutions, entities under tax incentive schemes or gains received in Singapore by individuals.
The computation of gains is to be determined after deduction of expenses incurred for acquisition, improvement or disposal of such asset. Guidelines have also been provided on determination of situs of the property sold/ diposed, like shares of a company are considered to be situated in the place of incorporation of such company; equity interest in any entity other than company shall be considered to be situated where business of the entity is principally carried on.

While the proposed amendment aims to address international tax avoidance by anchoring economic substance in Singapore, it would be interesting to evaluate interplay of such section with amended provisions of India-Singapore tax treaty and taxation of indirect transfer of shares in India.

Malaysia - Changes in TP regulations

 There has been an update to the TP Rules and APA Rules which was issued by the Malaysia Inland Revenue Board on 29^th May 2023.

Government issues stringent verification process for GST Registrations

 Central Board of Indirect Taxes and Customs (‘CBIC’) has issued an Instruction No. 3/2023, dated June 14, 2023, providing guidelines to all GST officials to strengthen the verification process of GST registration applications.

 

Introduction to tax at UAE

 The UAE was a tax-free country until May 31, 2023. On June 1, 2023, the UAE implemented a new corporate tax law with a headline rate of 9%. The new law applies to all businesses that are resident in the UAE, regardless of whether they are in a free zone or not.

Updation of IEC on DGFT portal

 Directorate General of Foreign Trade (‘DGFT’) vide Notification no. 58/2015-2020 dated 12 February 2021 has amended the IEC related provisions under Chapter-1 and Chapter-2 of Foreign Trade Policy, 2023.

How LIC invest to generate returns?

 

Life Insurance Corporation of India (LIC) is one of the largest institutional investors in India, and its annual investments dwarf those of foreign portfolio investors (FPIs) and other investor categories. Hence it is interesting to know LIC is making investments to get the returns that it needs to service its millions of policies. The below table explains the investment pattern of LIC.

Taxation on capital gains with respect to sale of shares:

1) If you sold LISTED SHARES (on Indian stock exchange) and held those for a period less than 1 year, then the gain is categorized as short term capital gain.

If held for more than 1 year, then gain is treated as long term.

◽ Short term capital gain on sale of listed shares - Taxed at 15% u/s 111A

◽ Long term capital gains on sale of listed shares - Taxed at 10% u/s 112A in excess of ₹1 lac

No deduction chapter VIA
No rebate u/s 87A for LTCG u/s 112A
No basic exemption benefit for non residents

2) If you sold UNLISTED shares in India (or foreign shares listed outside India) and held such shares for a period less than 2 years, then the gain is categorized as short term capital gain.

If held for more than 2 years, then gain is treated as long term.

◽ Short term capital gain on sale of unlisted shares - Taxed at slab rates

◽ Long term capital gain on sale of unlisted shares - Taxed at 20% u/s 112 (indexation benefit available to residents)

As indexation benefit is not available to non residents, tax rate of 10% is allowed

CBIC prescribes procedure for payment of IGST and cess on non-fulfilment of pre-import condition and manner of claiming ITC pursuant to SC order

 This Tax Alert summarizes a recent Circular  issued by Central Board of Indirect Taxes and Customs (CBIC) pursuant to the Supreme Court (SC) judgement ², upholding the validity of pre-import condition under Advance Authorization (AA) scheme during the period 13 October 2017 till 9 January 2019.

Bombay HC passes final order upholding constitutional validity of PoS provisions for intermediary services under GST

 This Tax Alert summarizes the final judgment¹ of the Division Bench of the Bombay High Court (HC) on the issue of constitutional validity of Section 13(8)(b) and Section 8(2) of the Integrated Goods and Services Tax Act, 2017 (IGST Act).

Highlights of Monetary Policy Statement, 2023-24 – Resolution of the MPC, June 6 to 8, 2023

 Monetary Policy Committee (MPC) decided unanimously to keep the policy repo rate unchanged at 6.50 per cent.

• Consequently, the standing deposit facility (SDF) rate remains unchanged at 6.25 per cent and the marginal standing facility (MSF) rate and the Bank Rate at 6.75 per cent.
• MPC also decided to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth.
• CPI inflation is projected at 5.1 per cent for 2023-24, with Q1 at 4.6 per cent, Q2 at 5.2 per cent, Q3 at 5.4 per cent and Q4 at 5.2 per cent. The risks are evenly balanced.
• Real GDP growth for 2023-24 is projected at 6.5 per cent with Q1 at 8.0 per cent, Q2 at 6.5 per cent, Q3 at 6.0 per cent, and Q4 at 5.7 per cent, with risks evenly balanced.
• Reserve Bank will continue to remain nimble in its liquidity management, while ensuring that adequate resources are available for the productive requirements of the economy. The Reserve Bank will also ensure the orderly completion of the government’s market borrowing programme.
• With a view to providing greater flexibility for managing the money market borrowings, RBI decided that Scheduled Commercial Banks (excluding Small Finance Banks) can set their own limits for borrowing in Call and Notice Money Markets within the prudential limits for inter-bank liabilities prescribed by the Reserve Bank of India.
• In respect of NPA under the Prudential Framework, which is currently applicable to SCBs and select NBFCs. RBI has proposed to issue comprehensive guidelines on compromise settlements and technical write-offs which will now be applicable to all regulated entities including co-operative banks. Further, it is also proposed to rationalise the extant prudential norms on restructuring of borrower accounts affected by natural calamities.
• RBI has decided to put in place a regulatory framework for permitting Default Loss Guarantee arrangements in Digital Lending. Detailed guidelines on the matter will be issued separately
• RBI has decided to extend the timelines of primary urban cooperative banks (UCBs) for achieving priority sector lending targets by two more years up to March 2026. Further, UCBs which have met the targets as on March 31, 2023 shall be suitably incentivized.
• RBI has been decided to rationalise and simplify the licensing framework for Authorised Persons (APs) issued under FEMA. This is expected to improve the efficiency in the delivery of foreign exchange facilities to various segments of users including common persons, tourists and businesses.
• RBI has proposed to expand the scope and reach of e-RUPI vouchers by (a) permitting non-bank Prepaid Payment Instrument (PPI) issuers to issue e-RUPI vouchers and (b) enabling issuance of e-RUPI vouchers on behalf of individuals. Other aspects like reloading of vouchers, authentication process, issuance limits, etc., will also be modified to facilitate use of e-RUPI vouchers
• Given the gaining acceptance of RuPay Debit and Credit cards abroad (issued by banks in India), RBI has decided to permit issuance of RuPay Prepaid Forex cards by banks. This will expand the payment options for Indians travelling abroad. Further, RuPay cards will be enabled for issuance in foreign jurisdictions. These measures will expand the reach and acceptance of RuPay cards globally.

Supreme Court says.

The decisions of the Supreme Court are of utmost importance. They become the law of the land and must be respected and followed by all citizens of the country. Here are some of the reasons why Supreme Court decisions are so important:

Now income proof mandatory for Rs 10 lakh investments in small savings schemes

 The Department of Posts has issued a circular on May 25, 2023, where it has revised the KYC norms for investing in small savings schemes for investors. The new KYC norms have been made stricter for those making large value transactions in the post office schemes. The proof of source of funds is needed along with the common KYC documents i.e., PAN, Aadhaar.

𝐔𝐀𝐄 𝐂𝐨𝐫𝐩𝐨𝐫𝐚𝐭𝐞 𝐈𝐧𝐜𝐨𝐦𝐞 𝐓𝐚𝐱 - 𝐃𝐞𝐭𝐞𝐫𝐦𝐢𝐧𝐢𝐧𝐠 𝐐𝐮𝐚𝐥𝐢𝐟𝐲𝐢𝐧𝐠 𝐈𝐧𝐜𝐨𝐦𝐞 𝐟𝐨𝐫 𝐐𝐮𝐚𝐥𝐢𝐟𝐲𝐢𝐧𝐠 𝐅𝐫𝐞𝐞 𝐙𝐨𝐧𝐞 𝐏𝐞𝐫𝐬𝐨𝐧𝐬

 
Whilst we are still analyzing and digesting yesterday’s Cabinet and Ministerial Decisions, it appears that the determination of Qualifying Income for Qualifying Free Zone Persons will be a notably complex task.

CBDT provides procedural reliefs and clarifications applicable to charitable institutions

This Tax Alert summarizes Circular No. 6/2023 dated 24 March 2023 (Circular) issued by the Central Board of Direct Taxes (CBDT), for extending certain due dates applicable to charitable trusts and other eligible institutions (Charitable Institutions) and various other aspects affecting compliance arising out of certain amendments made by Finance Act 2023.

CBIC issues SOP for scrutiny of GST returns for FY 2019-20 onwards

This Tax Alert summarizes the recent Instruction issued by Central Board of Indirect Taxes and Customs (CBIC) prescribing Standard Operating Procedure (SOP) for scrutiny of returns under Goods and Services Tax (GST) for financial year (FY) 2019-20 onwards.

USA draft law on WHT

 House Republicans introduced a draft law on Thursday that would increase US withholding tax (WHT) on individuals / companies that come from a UTPR country (based on citizenship / incorporation rather than residence reporting here: WHT would increase by 5% at first, but going up to 50% if UTPR is not removed. They call this a ‘reciprocal tax’ or ‘retaliatory tax’. The chances of this making into law during this session of Congress are very slim given Democrat control of Senate and the possibility of a presidential veto.

TP rules of Malaysia

 The TP world has been rocked again – new rules have been published in the Federal Gazette to change the TP landscape. The TP Rules 2023 are effective for YA 2023 onwards.

My initial thoughts are as follows:

1.      The TP Rules 2023 provide additional powers to the Director General ("DG") to make adjustments to controlled transactions. This includes the specific power to adjust the price of controlled transactions to the median of the range under Rule 13 of the TP Rules 2023. Interestingly enough, the DG appears to have the power to adjust the controlled transaction to the median where comparability defects cannot be quantified, identified or adjusted. Taxpayers should take note and plan accordingly.

2.      The redefinition of the term median and the arm’s length range. It is noted that the TP Rules 2023 have provided new rules to the game and defined the arm’s length range to being at the 37.5 percentile up to the 62.5 percentile. The median is instead appears to be defined as the midpoint of the arm’s length range under Rule 13(5)(b).

3.      An integration of elements of the prevailing Documentation Chapter of the Malaysian TP Guidelines into Schedules to the TP Rules 2023.

4.      The TPD’s must be dated now to show the specific date that it has been prepared under Rule 4(2) and must be submitted upon request within 14 days from the date of service of a notice under Rule 5(3)

5.      Methods for selections of the TP methodologies must be supported by proper justification – in the event this is not done, the DG has the right to replace the selected method under Rule 6(3) . This appears to be an attempt to fill an existing gap in law which was an area of contention in TP cases argued at the Courts in Malaysia

6.      Detailed selection of comparable data must now be in any contemporaneous TPD and this includes the basis for selection, which refers to both quantitative and qualitative reasons – Schedule 2 of the TP Rules 2023

7.      Specific rules have been included to address issues regarding intragroup services under Rule 9 and intangible assets under Rule 10

What is Dual & Split Residency

 

What is Dual Residency?
 
As the name suggest, under dual residency an Individual is considered as resident of two countries for the same period according to the residential status conditions of the respective jurisdictions.

Types of Forms to be submit in Returns for USA

The following information returns provide potential sources of taxpayer gross income :

W-2 - Wage and Tax Statement

W-2G - Certain Gambling Winnings

Form 1099-B, Proceeds from Broker and Barter Exchange Transactions

Form 1099-C Cancellation of Debt

Form 1099-DIV - Dividends and Distributions

Form 1099-G - Certain Government Payments

Form 1099-INT - Interest Income

Form 1099-K - Payment Card and Third Party Network Transactions

Form 1099-MISC - Miscellaneous Income

Form 1099-NEC - Nonemployee Compensation

Form 1099-OID - Original Issue Discount

Form 1099-PATR - Taxable Distribution Received from Co-Operatives

Form 1099-Q - Payments from Qualified Education Programs (Under Section 529/530)

Form 1099-R - Distributions from Pensions, Annuities, Retirement or Profit Sharing Plans, IRAs, Insurance Contracts, etc,

Form 1099-S - Proceeds from Real Estate Transactions

Form 1099-SA - Distributions From an HSA, Archer, MSA, or Medicare Advantage MSA

Schedule K-1 (Form 1065) - Partner's Share of Income, Deductions, Credits, Etc,

Schedule K-1 (From 1120-S) - Shareholder's Share of Income, Deductions, Credits, Etc,

SC holds warranty replacement by dealer against credit note issued by manufacturer is exigible to sales tax

 This tax alert summarizes the recent ruling of the larger bench of Supreme Court (SC) on whether replacement of defective parts of cars under warranty by the dealer, against credit note issued by the manufacturer, is exigible to sales tax.

Earlier, SC in the case of Mohd. Ekram Khan had concluded that such transactions were taxable as the manufacturer had made payment for the parts by issuing credit notes to the dealers. Pursuant to the same, Revenue passed orders demanding sales tax on such transaction undertaken by various dealers.

Divergent rulings were passed by various High Courts (HC) on the above issue and hence, cross appeals were filed before the SC to decide the correctness of the judgement in case of Mohd. Ekram Khan (supra).

The key observations of the SC are:

Angel Tax.

The amendment in the angel tax provisions vide Finance Act 2023 bringing foreign investments within its ambit, left a bitter taste with both, foreign investors focused on writing cheques to invest into India's lucrative markets and Indian businesses looking at overseas investors as their biggest carrots to fund their transformative and evolutionary ideas. Although the Government tried to play its cards right by introducing this amendment to curb circulation of unaccounted money, this change ended up throwing the baby out with the bathwater, by adversely affecting genuine investments.

ISSUE OF CARBON CREDIT

 

There was a piece of news a few months ago that India may keep its carbon markets insulated from the international carbon trade under play.

Accounting of Property, Plant, and Equipment (PP&E)

PP&E are tangible assets that are used in the production or supply of goods or services, held for rental purposes, or for administrative purposes. PP&E are typically long-lived assets, with a useful life of more than one year.

Choosing the Right Business Structure for Your US Business

 When starting a business in the US, one of the most important decisions you will make is choosing the right business structure. The business structure you choose will have a significant impact on your taxes, liability, and how you manage your business.

SC ruling on warranty replacement has multiple facets - Key Takeaways..

 

Though the issue before the Hon’ble SC was the one on warranty sale made by dealers on behalf of the manufacturer if subject to sales tax, key observations were made which to me seems important and be explored in different cases.

TCS on foreign credit card.

 

The FEMA Current Account Transactions Rules, 2000 hitherto exempted payments made through International Credit Cards (ICC) towards meeting expenses during an overseas visit, from RBI's approval on exceeding the monetary threshold prescribed. Omission of Rule 7 of the Current Account Transactions Rules brings such ICC payments within the Liberalised Remittance Scheme (LRS) limit which is capped at USD 250,000. RBI's approval is required for remittances made beyond such freely available limit. This amendment, in some sense, not only curtails the overall foreign remittances an individual can make but could also cast an additional cost of 20 percent on the remitter in the form of TCS. The Finance Act, 2023 had enhanced the TCS rates applicable on remittances made other than for education and medical purposes to 20 percent. Although a credit for such taxes can be claimed at the time of return filing, individuals could face cash flow/ working capital issues, due to timing difference between the point of taxation and subsequent tax refunds, which would be available only after the tax return is processed. For business spends made by an individual, which are later reimbursed by the employer company, TCS is bound to be an added hassle.

Methodology for collection of taxes is yet to be prescribed, not sure if credit card companies/ operators/ issuers, would be responsible for this, based on guidance set by the RBI. International purchases on internet/ web vis-a-vis foreign spends while travelling abroad are equally in vague and needs to be clarified.

Automated Return Scrutiny Module for GST Returns!

 Central Board of Indirect Taxes & Customs (CBIC) Implements Automated Return Scrutiny Module for GST Returns!

In a groundbreaking move, Union Minister for Finance and Corporate Affairs, Smt. Nirmala Sitharaman, has directed the swift rollout of an Automated Return Scrutiny Module for GST returns. This cutting-edge system has just been launched on the ACES-GST backend application for Central Tax Officers.

Indian Banks Block NRIs from Repatriating Profits from LLPs

In recent months, some Indian banks have blocked NRIs from repatriating profits from LLPs. This is a significant change, as profits from LLPs were previously considered current income and could be repatriated without restriction.

Date of issuance of debit note

 Date of issuance of debit note to determine the relevant financial year for the purpose of section 16(4)

Section 16(4) was earlier amended (with effect from 01.01.2021) vide the Finance Act, 2020, so as to delink the date of issuance of debit note from the date of issuance of the underlying invoice for purposes of availing ITC.

GST AMENITY SCHEME.

 

The Central Board of Indirect Taxes and Customs (CBIC) on May 17, 2023, issued a circular regarding the Amnesty Scheme for one-time settlement of default in export obligation by Advance and EPCG authorization holders with reference to Notification No. 32/2023-Customs dated April 26, 2023, to amend 13 Customs notifications pertaining to Advance Authorization (AA) and Export Promotion Capital Goods (EPCG) Schemes.

SC judges differ on invocation of doctrine of legitimate expectation with respect to sales tax incentive

 This tax alert summarizes a recent ruling of the Supreme Court (SC) on invocation of doctrine of legitimate expectation against removal of exemption granted to persons engaged in blending of tea under the West Bengal Sales Tax Act, 1994.

Karnataka HC holds hosting the game of rummy on online platform is not in the nature of betting or gambling

 

This tax alert summarizes the recent ruling of the Karnataka High Court (HC) on whether online games, such as rummy, played with or without stakes, tantamount to “betting” or “gambling”.

Petitioner in the present case is an online intermediary company, operating technology platforms that allow users to play online games, such as rummy, against each other, and charges a certain percentage of buy-in amount as its platform fee.

Revenue issued show cause notice (SCN) on the petitioner alleging that it is involved in betting/ gambling and is misclassifying its supplies to its customer as services instead of actionable claims (i.e., goods). Further, the taxable value declared by it is also incorrect. Aggrieved, petitioner filed writ petitions before the Karnataka HC.

The key observations of the HC are summarized below:

Supreme court upholds validity of pre-import condition under Advance Authorisation scheme

 This tax alert summarizes a recent ruling of the Supreme Court (SC). The question involved was whether the pre-import condition for claiming exemption of integrated tax and compensation cess on import of goods against Advance Authorisation (AA) is arbitrary and unreasonable.

Gujarat High Court (HC) had struck down the pre-import condition contained in para 4.14 of Foreign Trade Policy 2015-2020 (FTP). Aggrieved, Revenue preferred an appeal before the SC.

SC upheld the validity of pre-import condition under Advance Authorization (AA) scheme on the following grounds: