EU asks for Singapore-like tax benefits

The European Union wants India to extend similar capital gains tax benefits to its investments in the country as is given to Singapore.

India has not formally acceded to this request. However, the matter is expected to be taken up by the joint task force.

Officials told Business Standard that expanding the scope of the Double Taxation Avoidance Agreement between the EU and India, to include capital gains tax and a possible bilateral investment agreement to include pre-establishment, was discussed by the Trade and Economic Relations Committee headed by Prime Minister Manmohan Singh.

Under the Comprehensive Economic Cooperation Agreement, India has extended to Singapore capital gains tax exemption on investment in India. Safety clauses in the agreement have excluded shell or conduit companies from the benefit. Singapore is the second country after Mauritius to get this benefit.

Sources said the task force would consider adopting the Singapore model for putting together an investment agreement. India has bilateral investment protection agreements with several countries. It is also negotiating an investment protection agreement with Canada.

Officials pointed out that finalising an investment agreement with the EU could take a while. This was because New Delhi has confined its investment pacts to only post-establishment cases. An exception was made for Singapore.

New Delhi is still examining the request made by the United Kingdom to grant concessions to its banks - Standard Chartered and HSBC - at par with those granted to Singapore banks.

An Official said, "We are still examining whether the UK individually can have a bilateral pact with India in a financial sector."

India is expected to talk about non-tariff barriers affecting its exports and the abuse of anti-dumping procedures with the EU.