Dtaa with singapore
This query is : Resolved
17 September 2011
If a person resident in india is director in a company of singapore and he sales goods to a company of his son in india than what will be the tax liability of both father and son in india????
19 September 2011
PL TELL WHO IS SELLING GOODS FATHER OR HIS COMPANY
19 September 2011
company in which father is director is selling goods.
21 July 2024
In the scenario you described, where a resident of India (let's call him Mr. X) is a director in a company in Singapore, and this Singaporean company is selling goods to a company in India owned by Mr. X's son, the tax liability in India would typically be determined based on various factors, including the application of the Double Taxation Avoidance Agreement (DTAA) between India and Singapore.
Here’s a general outline of how the tax liability would be assessed:
1. **Residency and Source of Income**:
- Mr. X is a resident of India.
- The Singaporean company is a resident of Singapore.
- The Indian company (owned by Mr. X's son) is a resident of India.
2. **Taxation Under Indian Income Tax Act**:
- **Taxation in India for the Singaporean Company**: The profits earned by the Singaporean company from the sale of goods to the Indian company would typically be taxable in Singapore. Under Indian tax laws, if the income is sourced in Singapore, it would generally not be taxable in India unless it falls under specific provisions like business connection or permanent establishment in India.
- **Taxation in India for Mr. X**: As a resident of India, Mr. X would be liable to pay tax in India on his global income. If Mr. X receives any salary or other income from the Singaporean company for his services as a director, that income would be taxable in India. However, if Mr. X is only receiving director’s fees and does not have any other income from the Singaporean company that is sourced in India, his tax liability in India would be on the director's fees received.
- **Taxation in India for Mr. X’s Son**: The Indian company owned by Mr. X’s son would be liable to pay tax in India on the profits it earns from purchasing goods from the Singaporean company and selling them domestically. This taxation would follow regular Indian income tax laws applicable to resident companies.
3. **DTAA Between India and Singapore**:
- The DTAA between India and Singapore aims to avoid double taxation and prevent fiscal evasion of income taxes. It typically provides for rules on how income is taxed in each country, ensuring that income is not taxed twice.
- If the Singaporean company has a permanent establishment (PE) or business connection in India, the profits attributable to that PE could be taxed in India as per the DTAA.
4. **Transfer Pricing and Arm’s Length Principle**:
- If the transactions between the Singaporean company and the Indian company are considered related-party transactions, Indian transfer pricing regulations may apply. The transactions should be conducted at arm’s length prices to avoid any adjustments by the Indian tax authorities.
**Conclusion**:
- The Singaporean company’s profits from sales to the Indian company are generally taxable in Singapore, unless there is a PE or business connection in India.
- Mr. X’s tax liability in India would depend on the nature of his income from the Singaporean company.
- The Indian company’s tax liability in India would depend on its profits from purchasing goods and selling them domestically.
Given the complexities involved, it is advisable for Mr. X and his son to consult with a qualified tax advisor who can assess their specific situation in light of the DTAA between India and Singapore and provide tailored advice accordingly.
Here’s a general outline of how the tax liability would be assessed:
1. **Residency and Source of Income**:
- Mr. X is a resident of India.
- The Singaporean company is a resident of Singapore.
- The Indian company (owned by Mr. X's son) is a resident of India.
2. **Taxation Under Indian Income Tax Act**:
- **Taxation in India for the Singaporean Company**: The profits earned by the Singaporean company from the sale of goods to the Indian company would typically be taxable in Singapore. Under Indian tax laws, if the income is sourced in Singapore, it would generally not be taxable in India unless it falls under specific provisions like business connection or permanent establishment in India.
- **Taxation in India for Mr. X**: As a resident of India, Mr. X would be liable to pay tax in India on his global income. If Mr. X receives any salary or other income from the Singaporean company for his services as a director, that income would be taxable in India. However, if Mr. X is only receiving director’s fees and does not have any other income from the Singaporean company that is sourced in India, his tax liability in India would be on the director's fees received.
- **Taxation in India for Mr. X’s Son**: The Indian company owned by Mr. X’s son would be liable to pay tax in India on the profits it earns from purchasing goods from the Singaporean company and selling them domestically. This taxation would follow regular Indian income tax laws applicable to resident companies.
3. **DTAA Between India and Singapore**:
- The DTAA between India and Singapore aims to avoid double taxation and prevent fiscal evasion of income taxes. It typically provides for rules on how income is taxed in each country, ensuring that income is not taxed twice.
- If the Singaporean company has a permanent establishment (PE) or business connection in India, the profits attributable to that PE could be taxed in India as per the DTAA.
4. **Transfer Pricing and Arm’s Length Principle**:
- If the transactions between the Singaporean company and the Indian company are considered related-party transactions, Indian transfer pricing regulations may apply. The transactions should be conducted at arm’s length prices to avoid any adjustments by the Indian tax authorities.
**Conclusion**:
- The Singaporean company’s profits from sales to the Indian company are generally taxable in Singapore, unless there is a PE or business connection in India.
- Mr. X’s tax liability in India would depend on the nature of his income from the Singaporean company.
- The Indian company’s tax liability in India would depend on its profits from purchasing goods and selling them domestically.
Given the complexities involved, it is advisable for Mr. X and his son to consult with a qualified tax advisor who can assess their specific situation in light of the DTAA between India and Singapore and provide tailored advice accordingly.
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