Singapore dislodges Mauritius for the 3rd time

New Delhi: During the last financial year, the foreign direct investment (FDI) inflows from Singapore were twice that from Mauritius in India. It is so because the companies chose to route the funds into the country through southeast Asian city-state. After the tax treaty with both Singapore and Mauritius was reworked, it became the most preferred route for overseas flow so far.

As per the latest government data, in fiscal 2018-19, the estimated inflows from Singapore were at 16.2 billion dollar as compared to 8.1 billion dollar from Mauritius. It is the third time when inflows from Singapore have topped those from Mauritius. According to a ToI report, the advisers are attributing this change to the revamped tax treaty. From April 2017, nearly after 33 years, India and Mauritius agreed to amend the tax treaty, following which authorities were allowed to tax capital gains on the transfer of Indian shares acquired.

There was a similar amendment which was made in the tax treaty with Singapore. It came into force from April 1, 2017. The original treaty with Mauritius did not require any significant presence, unlike the tax treaty with Singapore.

It may be noted that, since April 2000, around 32 per cent of the inflows have come through Mauritius. It is because investors from the countries such as the United States (US), the United Kingdoms (UK) and Germany, too, chose to route their investment via this window. Owing to the parity in the tax treatment, investors prefer to route their investments via Singapore.

The national publication cited Dhiraj Mathur, who was involved with FDI policy before turning a consultant as saying, "The choice of source of investment depends a lot on the bilateral tax agreement. Besides, Singapore offers other advantages on the ease of doing the business front."

Partner and leader for regulatory practice at PwC India, Akash Gupt said the presence of a large number of private equity (PE) investors in Singapore has helped to boost the inflows into India. EY India’s Rajiv Chugh said, "Now that there is tax neutrality, people are opting for Singapore as it is more accessible and approachable and offers tax incentives through lower tax rates if you locate your regional headquarters there."