Settlement amount received by an employee who relinquished his rights to share registration after employment termination, was deemed capital gains rather than salary by the Income Tax authorities.
– The assessee is an individual Chief Operating Officer, who received sweat equity shares from Tek Travels Pvt. Ltd. (TTPL), had his employment terminated and later settled disputes with TTPL by agreeing to relinquish his rights to 50,000 shares in exchange for Rs. 3.03 crores.
– The Assessing Officer initially taxed the settlement amount as salary, but the Commissioner (Appeals) classified it as capital gains. The Tribunal then decided that only 15,000 of the shares should be taxed as capital gains, while the remaining 35,000 shares were taxable as salary.
– Hon’ble High Court stated that the Tribunal mistakenly bifurcated the settlement amount into salary and capital gains, even though this division was not proposed by the parties.
– The settlement was related to the relinquishment of share registration rights, not employment termination. The Tribunal erred by treating part of the settlement as “profits in lieu of salary” under Section 17(3) rather than capital gains. As TTPL never disputed the share certificates or sought termination-related relief, the settlement should be classified entirely as capital gains.
– The Tribunal’s order was thus overturned, and the entire settlement amount was deemed capital gains.
Land Acquisition Officer’s TDS non-deduction of tax based on legal advice is justified; tax demand set aside and refund ordered
– The assessee is an individual Land Acquisition Officer, who stopped deducting tax at source on interest payments for land compensation after October 2012, following a Punjab and Haryana High Court ruling.
– However, the Assessing Officer deemed the officer as an assessee-in-default under Section 201(1) for not deducting tax and raised a tax demand.
– Aggrieved by this, assessee filed an appeal and matter reached to Tribunal.
– The Tribunal found that the officer acted based on valid legal advice and court orders.
– There was no fault in the officer’s actions, as they complied with the prevailing judicial directives.
– The liability imposed on the officer for non-deduction of TDS was unjustified
– The Tribunal ruled that the officer should not be penalized, and any amounts deposited should be refunded with interest at 6% per annum.
Tribunal confirms Corporate Social Responsibility (CSR) donations are eligible for section 80G deduction; revision by Principal Commissioner overturned
– The assessee incurred CSR expenditure under Section 135 of the Companies Act, which was disallowed in the computation of income. The assessee claimed Section 80G deduction for donations made as part of CSR, which the Assessing Officer accepted.
– The Principal Commissioner challenged the deduction, arguing that Section 80G benefits should not apply to CSR expenditure.
– Aggrieved by this, assessee filed an appeal and matter reached to Tribunal.
– The Tribunal has consistently ruled that CSR expenses mandated by Section 135 are not deductible under Section 37(1) but can be eligible for Section 80G deductions if they meet the criteria for Chapter VI-A.
– The Principal Commissioner erred in invoking Section 263, as the Assessing Officer’s decision to allow Section 80G deductions was consistent with Tribunal rulings. For Section 263 to apply, the order must be both erroneous and prejudicial to the revenue, which was not the case here.
– The Tribunal’s consistent stance supported the Assessing Officer’s view. The Principal Commissioner’s revision was deemed unjustified, and the order was quashed.
Conversion of loan into share capital would not exonerate assessee from application of provision of section 56(2)(viib)
– This section of the Income-tax Act, 1961, applies when shares are issued at a premium exceeding their fair market value (FMV), and such excess premium is chargeable to tax under the head “Income from other sources”.
– The conversion of a loan into share capital does not exempt the assessee from the provisions of Section 56(2)(viib). If shares are issued at a premium higher than their FMV, that excess is still taxable under this section.
– In this Case, The assessee (a company dealing in gold and diamond jewelry) issued shares at a premium on two occasions: Rs. 90 per share on 3rd Nov 2012 and Rs. 31.67 per share on 26th March 2013.The company valued the shares using the Discounted Cash Flow (DCF) method and determined the FMV for the first allotment.
– The Assessing Officer (AO) rejected the DCF method and applied the Net Asset Value (NAV) method to value the shares. Based on the NAV method, the AO found the fair market value of the shares to be Rs. 34.55 per share, making the premium of Rs. 55.45 (90 – 34.55) excessive. The AO added the excess share premium (over and above the FMV) to the company’s income under Section 56(2)(viib).
– The assessee did not provide an explanation for the wide fluctuation in share premium between the two allotments made within the same financial year (Rs. 90 vs. Rs. 31.67).The AO argued that such a significant change in premium within five months was unreasonable.
– The court upheld the AO’s decision, agreeing that there should not be such a wide fluctuation in the share premium within such a short time. The excess premium over and above the FMV was rightly charged to tax under Section 56(2)(viib).
– The case was decided in favor of the revenue, and the excess share premium was added to the income of the company.
CBDT issues clarification in respect of Income-tax Clearance Certificate (ITCC): PRESS RELEASE.
– It is being erroneously reported that all Indian citizens must obtain income-tax clearance certificate (ITCC) before leaving the country – a position that is factually incorrect.
– Misunderstanding Clarified: The requirement for an Income-Tax Clearance Certificate (ITCC) is not applicable to all Indian citizens leaving the country.
– Relevant Provision: Section 230(1A) of the Income-tax Act, 1961, mandates an ITCC under specific circumstances, effective from June 1, 2003.
Recent Amendment: The Finance (No. 2) Act, 2024, updates Section 230(1A) to include the Black Money Act but does not alter the conditions for obtaining an ITCC.
Conditions for ITCC:
– Serious Financial Irregularities: Required if involved in significant financial issues or if a tax demand is anticipated.
– Outstanding Tax Arrears: Required if direct tax arrears exceed Rs. 10 lakh and are not stayed by any authority.
– Approval Process: ITCC requirement must be justified and approved by the Principal Chief Commissioner or Chief Commissioner of Income-tax.
– CBDT Instruction No. 1/2004: Outlines that ITCC is only needed in rare cases, not as a general requirement for all citizens.
– Conclusion: ITCC is required only for specific situations involving serious financial irregularities or substantial tax arrears; recent amendments have not changed these requirements.
CBDT’s pan 2.0 project to streamline and modernise process of issuing and managing pan and tan, making it simpler, more user friendly and efficient
– The Cabinet Committee on Economic Affairs (CCEA) has approved the Income Tax Department’s PAN 2.0 Project, aiming to streamline and modernize the issuance and management of PAN and TAN.
– Presently, PAN-related services are spread across three platforms: e-Filing Portal, UTIITSL Portal and Protean e-Gov Portal
– The PAN 2.0 Project will integrate these services into a single unified portal for easier access to PAN/TAN services, including Application and updates, Corrections and Aadhaar-PAN linking, Re-issuance requests and Online PAN validation.
Benefits
– Quicker processing times for PAN issuance.
– A one-stop platform for all PAN/TAN-related matters
– Focus on paperless processes to reduce paperwork.
– PAN 2.0 supports the Digital India initiative by making processes more efficient and establishing PAN as a common identifier for all digital systems of specified government agencies.
– Personal and demographic data will be better protected, including through a PAN Data Vault
– A dedicated call centre and helpdesk will be available to address user queries and issues.
– PAN will be issued free of cost, reducing financial barriers.
– The project will ensure faster service delivery, effective grievance redressal, and better protection of sensitive data.
– The integration of services aims to create a seamless, transparent, and inclusive system for taxpayers.
CIRCULAR NO. 15/2024 [F. NO. 400/08/204-IT(B)] – INSTRUCTIONS TO SUB-ORDINATE AUTHORITIES – FIXING MONITORYLIMIT OF INCOME-TAX AUTHORITIES IN RESPECT OF REDUCTION OR WAIVER OF INTERESTPAID OR PAYABLE UNDER SECTION 220(2)
– Section 220(2) of the Income-tax Act deals with the consequences of non-payment of income tax by a taxpayer. If a taxpayer fails to pay the demanded amount under Section 156, they are liable to pay interest at 1% per month (or part of the month) on the delayed amount.
– Income tax act empowers specific income-tax authorities (Pr. CCIT, CCIT, Pr. CIT, or CIT) to reduce or waive the interest paid or payable under Section 220(2) under certain conditions.
– Monetary Limits for Reduction or Waiver:
– Pr. CIT/CIT: Powers to reduce or waive interest up to Rs. 50 lakhs.
– CCIT/DGIT: Powers to reduce or waive interest from Rs. 50 lakhs to Rs. 1.5 crore.
– Pr. CCIT: Powers to reduce or waive interest above Rs. 1.5 crore
– The reduction or waiver of interest is subject to the satisfaction of the following conditions under Section 220(2A):
– Payment of the amount has caused or would cause genuine hardship to the taxpayer.
– Default in payment was due to circumstances beyond the taxpayer’s control.
– The taxpayer has co-operated in any inquiry related to the assessment or recovery of dues.
– The instructions mentioned in this Circular will be applicable from the date of its issue i.e., from 4th November 2024.
Income-tax (Tenth Amendment) Rules, 2024: This amendment introduces safe harbour provisions for the diamond industry and clarifies procedures for businesses wishing to opt for simplified tax treatment.
In rule 10TD, in sub-rule (3B), The assessment years for the provision have been extended to include 2024-25.
Introduction of New Rules:
– Rule 10TI: Defines terms like “eligible assessee”, “eligible business”, and “gross receipts” for businesses engaged in selling raw diamonds.
– Rule 10TIA: Specifies the safe harbour for income from the sale of raw diamonds, where the profits should be at least 4% of gross receipts for the safe harbour option to apply.
– Rule 10TIB: Provides the procedure for exercising the safe harbour option, including the requirement to submit Form No. 3CEFC before filing the income tax return.
– Rule 10TIC: Clarifies that the Mutual Agreement Procedure (MAP) cannot be invoked for businesses that have exercised the safe harbour option unless the option is declared invalid.
The income-tax authorities will accept the safe harbour option unless declared invalid if:
– The profits from the eligible business are at least 4% of gross receipts.
– Specific conditions regarding deductions and losses apply.
– The option can be invalidated if the assessee provides incorrect or concealed facts.
– The assessee must submit this form to the Assessing Officer to exercise the safe harbour option for income from selling raw diamonds.
– The rules are deemed to have come into force on 1st April 2024.
Liquidated Damages for Breach of Contract Liable to GST – Andhra Pradesh AAR
In this ruling, the applicant M/s Transmission Corporation of Andhra Pradesh Limited sought clarity on the applicability of GST on liquidated damages recovered from suppliers or contractors for breach of contract or non-performance within the stipulated period. The key question was whether such liquidated damages could be considered as “consideration” for a supply and therefore subject to GST.
The Andhra Pradesh AAR held that the liquidated damages paid by the defaulting party to the non-defaulting party for breach of contract are indeed a “consideration” for the supply of a service. These payments are regarded as compensation for tolerating an act, which qualifies as a taxable service.
The AAR emphasized that the amounts paid as liquidated damages are not arbitrary or ad-hoc. They are calculated based on a pre-determined formula and are linked to a specific failure or breach of contract. Such payments are made with a clear intention, either to derive some advantage or to mitigate a disadvantage, which implies a benefit to the paying party.
The AAR also noted that the applicant’s reliance on Circular number 178, which clarifies the GST position on liquidated damages, was not absolute or universally applicable. The circular should be applied reasonably, considering the facts of each case.
The Andhra Pradesh AAR ruled that liquidated damages recovered by the applicant for breach of contract or non-performance are taxable under GST as they constitute a consideration for the supply of a service, specifically for tolerating the non-performance or breach of contract.
Penalties, Fines, and Liquidated Damages Levied by RBI Not Subject to GST – Maharashtra AAR
The Maharashtra AAR addressed two key issues regarding the applicability of GST on penalties, late fees, and fines levied by the Reserve Bank of India (RBI) and on penalties related to non-performance under contracts with third-party vendors.
Issue 1: Penalties, Late Fees, and Fines Levied by RBI
The applicant sought clarification on whether penalties, late fees, penal interest, and fines collected by the RBI for contraventions of provisions under various laws and regulations are subject to GST.
The AAR held that penalties, fines, and related charges levied by the RBI are imposed to maintain discipline and act as deterrents for banks, non-banking financial institutions, and other entities. These payments do not qualify as a “consideration” because they are not made in exchange for a service provided. Rather, they are imposed for violations of law, where no specific service is rendered in return.
As these fines and penalties are not consideration for any activity, they do not constitute a supply of service under the CGST Act, 2017. Therefore, they are not subject to GST.
Issue 2: Penalties for Non-Performance in Contracts with Vendors
The second issue pertained to whether penalties levied by RBI on third-party vendors for non-performance or under-performance under contractual agreements are subject to GST.
The AAR ruled that penalties imposed on vendors for non-performance are in the nature of liquidated damages. These payments are made to compensate the RBI for any injury, loss, or damage due to the breach of contract.
Like fines and penalties, liquidated damages do not involve a service being provided in exchange for the payment. Therefore, they do not qualify as a “consideration” for any supply.
The circular number 178, which addresses the GST treatment of liquidated damages, supports the view that penalties of this nature are not a consideration for an activity and are thus not liable to GST.
The Maharashtra AAR concluded that penalties, late fees, and fines levied by the RBI for legal violations, as well as penalties imposed on vendors for non-performance of contracts, are not subject to GST, as they do not constitute a supply of service.
No GST On Recovery of Bonuses and Allowances from Employees Upon Their Exit – Karnataka AAR
The Karnataka AAR in the case of M/s Fidelity Information Services India Pvt Ltd has held that GST is not leviable on the recovery of retention bonuses, joining bonuses, work-from-home allowances, and expenses related to the Tuition Assistance Program (TAP) from the employee when he voluntarily exits the organization within a stipulated time frame from the date of joining.
The AAR noted that the primary intent behind these bonuses and allowances is to incentivize employees to remain with the organization. The retention bonus, joining bonus, work-from-home allowance, and TAP expenses are classified as perquisites within the framework of the contractual agreements between the employer and employees. Since these are not provided as a consideration for services rendered but rather as incentives, they are not subject to GST.
Delayed Filing of GSTR-3B Return – Interest Not Payable On Amount Deposited In Electronic Cash Ledger On Or Before The Due Date – Gujarat High Court
The Gujarat High Court, in the case of M/s Arya Cotton Industries, held that the deposit of an amount in the electronic cash ledger constitutes the payment of tax since the tax amount is immediately credited to the Government’s account upon deposit. Therefore,
the taxpayer should not be liable to pay interest for the period between the deposit in the electronic cash ledger and the delayed filing of the return.
The Court noted that, according to the explanation to Section 49 of the CGST Act, the date when the taxpayer deposits the amount into the electronic cash ledger is considered the date on which the tax amount is credited to the Government’s account. Once the tax is deposited in the cash ledger, the liability is effectively settled. Upon filing GSTR-3B, if there is sufficient balance in the electronic cash ledger, the liability reflected in the return can be offset against this balance through a debit. This suggests that the amount in the electronic cash ledger is essentially an advance tax, which cannot be withdrawn or used for any purpose other than settling tax liabilities.
The Court emphasized that the imposition of interest is compensatory in nature, aimed at compensating for the delay in the payment of tax. If the amounts were already deposited and utilized for tax payment, levying interest would contradict the compensatory purpose of such a charge.
Differential Dealer Margin Provided by Petroleum Companies Liable to GST – Kerala AAR
In the case of M/s Achuthan Nair & Company, a retail dealer of petroleum products, the applicant receives a differential dealer margin from the petroleum company when sales volume falls below a mutually agreed threshold. This margin serves as financial support to prevent the closure of petrol pumps due to losses from low sales.
The Kerala Authority AAR held that the differential dealer margin received by the applicant constitutes consideration for the dealership’s commitment to continue operations despite lower sales. While the supply of petrol or diesel to the end customer is not subject to GST, the differential dealer margin paid to dealers for agreeing to continue operations under specific conditions qualifies as a taxable service. Specifically, this falls under the category of “agreeing to the obligation to refrain from an act, that is, closing the dealership,” making it a taxable supply under the GST regime.
Update on Import Policy for IT Hardware
Background
1. In August 2023, DGFT vide Notification No.23/2023 dated 03rd August 2023 categorised the import of specified IT hardware such as laptops, tablets, All-in-one Personal Computers, ultra small form factor Computers, and Servers under HSN code 8471 as “Restricted” goods.
2. Subsequently, DGFT vide Notification No.26/2023 dated 04th August 2023 notified that the restriction imposed on 3rd August 2023 will be effective from 01st November 2023.
3. DGFT vide policy circular no.06/2023-24 had clarified that the import authorisations issued would be valid up to 30th September 2024.
4. Now, DGFT has issued a clarification that the Importers are allowed to apply for import authorizations which will be valid up to 31st December 2024.
5. Further, the existing import authorizations issued up to 30th September 2024, will continue to be valid up to 31st December 2024.
6. For imports from 1st January 2025, importers will be required to apply for fresh authorizations. DGFT shall issue a detailed guidance for this process shortly.
Revenue Sharing Arrangement Not Liable To Tax – Tribunal Chennai Majority Order
The case involved a demand for service tax on a revenue-sharing arrangement between the appellant M/s M/s Mayajaal Entertainment Limited and licensees for using space in an entertainment center (multiplex theatres/shopping malls) to operate restaurants and food courts. The Revenue contended that the appellant was providing Business Support Services, making the transaction taxable.
Key Issues
1. Nature of the Arrangement: The appellant allowed licensees to use space for a period of 12 months to conduct their business of selling food and beverages. The appellant also agreed to provide uninterrupted power, employ staff for billing, and promote the licensee’s business.
2. Revenue Sharing Model: The payment structure was based on 20% of the net revenue from food sales, paid biweekly. This arrangement was crucial in determining whether the service provided fell under the definition of Business Support Services.
Findings
Comparison to Fixed Rent: In typical scenarios, a property owner would charge fixed rent for providing space and services. However, in this case, the payment was contingent on the revenue generated, indicating a shared business model rather than a traditional service transaction.
Circular number 109 – service tax: The arrangement was consistent with the clarifications in this circular, which states that no service tax is applicable for revenue-sharing agreements where income is shared between the parties. If no sales occurred, the licensee would not owe any payment, further supporting the idea that the arrangement did not constitute a traditional service.
Conclusion
The majority order concluded that the revenue-sharing arrangement between the appellant and the licensee did not fall under the definition of Business Support Services and thus, set aside the service tax demand.
Notification no S.O. 2751(E) dated 15th July 2024
Gist: MCA vide notification on July 15th, 2024, has amended the Specified Companies (Furnishing of information about payment to micro and small enterprise suppliers) Order, 2019 and substituted MSME Form-1.
Explanation:
– A proviso has been added that the specified companies which are having payments pending to any micro or small enterprises for more than 45 days from the date of acceptance or the date of deemed acceptance of the goods or services shall furnish the information in MSME Form-1.
– The form has been shifted to MCA V3 portal and additional fields for the amount paid within 45 days along with mode of payment, amount paid after 45 days, outstanding for 45 days or less and outstanding for more than 45 days have been added.
Notification no G.S.R 403 dated 15th July 2024
Gist: MCA vide notification on July 15th, 2024, introduced Companies (Management and Administration) Amendment Rules, 2024, and substituted Form MGT-6.
Explanation:
– The form MGT-6 has been revised and migrated from MCA V2 to V3 portal.
– Additional personal information with respect to the registered owner and beneficial owner is required to be incorporated in newly introduced additional fields.
– The concept of BO ID, a unique ID has been incorporated which will be allotted to a Beneficial Owner, that will be tagged to the PAN/ Passport number of the Beneficial Owner.
Notification no G.S.R 404(E) dated 15th July 2024
Gist: MCA vide notification on July 15th, 2024, introduced Companies (Significant Beneficial Owners) Amendment Rules, 2024, and substituted Form BEN-2.
Explanation:
– The Form BEN-2 has been shifted to MCA V3 portal and format of the form has been revised for reporting the changes in SBO particulars.
Notification no G.S.R 412(E) dated 16th July 2024
Gist: Rule 12A of Companies (Appointment and Qualification of Directors) Rules, 2014 amended.
Explanation:
– Effective from 1st August 2024, the applicants will have the flexibility to update their mobile number and email ID with MCA at any time during the financial year by filing e-Form DIR-3 KYC with a payment of Rs. 500.
MAS Revises Guidelines on Licensing for Payment Service Providers – New Licence Application Requirements
The Monetary Authority of Singapore (MAS) published updates to its Guidelines on Licensing for Payment Service Providers [PS-G01] (the Guidelines), which will take effect on 26th August 2024. The revisions to the Guidelines are intended to improve clarity, streamline application reviews, and enhance the licensing process for payment service providers under the Payment Services Act 2019 of Singapore (the PS Act).
The key changes to the Guidelines include the introduction of a requirement for new payment service license applications to submit a legal opinion and for all variation applications to include digital payment token (DPT) services. Additionally, the MAS introduces the requirement for new payment service license applicants to submit an independent external auditor (EA) assessment and for variation applicants to carry out DPT services.
To ensure greater clarity, better facilitate application reviews, and enhance the efficiency of the licensing process, MAS will, from 26th August 2024:
– require the submission of a legal opinion for (i) all new applicants applying for a standard payment institution or a major payment institution license, and (ii) existing licensees applying to vary their licence to add a digital payment token service;
– require the submission of an independent external auditor assessment for all new licence and licence variation applications to carry out DPT services; and
– implement a case on hold process for applications assessed to be insufficiently ready for review. 
Filing Of Income Tax Computations In Functional Currencies Other Than Singapore Dollars
The Inland Revenue Authority of Singapore (IRAS) has released the second edition of its e-Tax Guide on Filing Income Tax Computations in Currencies Other Than Singapore Dollars.
This guide explains the rules for filing income tax computations in non-SGD currencies and applies to businesses that prepare their financial statements in non-SGD functional currencies.
According to the e-Tax Guide, for accounting periods beginning on or after 1 January 2003, companies are required to prepare their financial statements in their functional currencies, which may be non-SGD. Sole proprietorships and partnerships may also choose to prepare their financial statements in non-SGD functional currencies.
Where a company, sole proprietorship or a partnership prepares its financial statements in a non-SGD functional currency, its tax computation should also be prepared in the same functional currency. This applies to all items within the tax computation up to:
(a) The chargeable income (after applying the partial or full tax exemption) for a company;
(b) Distributable profit / loss/ other income as well as the capital allowances (“CA”) claimed for a partnership;
(c) Adjusted profit / loss (but before any loss brought forward) and the CA claimed for a sole proprietorship. These three items will then be converted into S$ at the average rate for the relevant Year of Assessment (“YA”).
These three items will then be converted into SGD at the average rate for the relevant Year of Assessment. If a business shifts from SGD to a non-SGD currency as its functional currency, it will have to translate its existing SGD balances into the non-SGD functional currency. Such businesses can opt to use either the changeover rate or average rate method for the purpose of translating the existing SGD balances. The business has to elect its choice of method when the tax computation is first submitted in non-SGD functional currencies and such election is irrevocable. In addition to the existing SGD balances, there may be other items for which translation is necessary.
IRAS: Over 4,700 Companies Prosecuted in 2023 For Late Or Non-Filing Of Tax Returns
More than 4,700 companies were prosecuted in 2023 for late or non-filing of tax returns, amounting to total penalties that exceeded S$4.9 million, said the Inland Revenue Authority of Singapore (IRAS) in a statement on Thursday, 26th September 2024.
Amid the Corporate Income Tax (CIT) filing season, the tax regulator reminds all companies, including those with no business activities and those in a loss position, to file their CIT returns by 30th November 2024.
Companies that do not file their CIT Returns by the due date can be fined up to $5,000. Depending on factors such as the company’s past compliance records, IRAS may compound the offence instead of taking prosecution actions. A company that receives a letter of composition must pay the composition amount and file the overdue tax return, failing which it will be issued a Notice to Attend Court. Errant companies that fail to file their returns for 2 years or more may be ordered by the courts to pay a penalty twice the amount of tax assessed, in addition to the fine.
For companies that do not file their returns, IRAS may issue notices to the company directors to request the company’s financial information. Directors who fail to furnish the information by the stipulated date will be subject to heavier penalties of up to $10,000 or court attendance. Failure to attend court may result in a warrant of arrest issued against the company director. In 2023, 1,690 court summons were issued to directors who did not comply with these notices.
Singapore And Kenya Sign New Avoidance of Double Taxation Agreement
Singapore and Kenya signed a new Agreement between the Government of the Republic of Singapore and the Government of the Republic of Kenya for the Elimination of Double Taxation with respect to Taxes on Income and the Prevention of Tax Evasion and Avoidance (“DTA”) on 23rd September 2024. This new DTA replaces the earlier agreement signed on 12th June 2018.
The deal was finalized by Foreign Affairs Cabinet Secretary Hon. Dr. Musalia Mudavadi and Singapore’s Foreign Minister Dr. Vivian Balakrishnan during the United Nations General Assembly in New York.
The DTA clarifies the taxing rights of both countries on all forms of income flows arising from cross-border business activities and addresses the double taxation of such income. This will lower barriers to cross-border investment and boost trade and economic flows between the two countries.
Singapore And Rwanda Sign Protocol To Amend Agreement For Avoidance Of Double Taxation
Singapore and Rwanda have signed a Protocol amending the Agreement between the Government of the Republic of Singapore and the Government of the Republic of Rwanda for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (DTA).
The Protocol was signed by Minister for Transport and Second Minister for Finance, Mr Chee Hong Tat, and Minister of Finance and Economic Planning for Rwanda, Mr Yusuf Murangwa.
The Protocol amends the preamble of the DTA and introduces a new Article 26A (Entitlement to Benefits), which are part of the internationally agreed Base Erosion Profit Shifting minimum standards for countering treaty abuse.
Singapore Enhances International Tax Cooperation through Automatic Exchange of Information on Crypto-Assets
On 26 November 2024, Singapore, with 60 other jurisdictions at the 17th Global Forum Plenary Meeting in Asunción, Paraguay, committed to the implementation of the Crypto-Asset Reporting Framework (“CARF”). Under the Global Forum’s CARF Commitment Process, Singapore has been identified as one of the 52 jurisdictions relevant to the CARF in 2024 and is expected to commence exchanges under the CARF by 2027 or 2028 at the latest. The Global Forum will closely monitor and update the list of jurisdictions to reflect the evolution of the crypto-asset sector.
In line with Singapore’s commitment to international tax transparency, we signed the Multilateral Competent Authority Agreement on Automatic Exchange of Information pursuant to the Crypto-Asset Reporting Framework (“CARF MCAA”) and the Addendum to the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (“the Addendum to the CRS MCAA”). This further strengthens our reputation as a trusted and responsible business hub.
These agreements provide for: (a) automatic exchange of tax relevant information on Crypto-Assets between the tax authorities of signatory jurisdictions; and (b) amendments to the Common Reporting Standard (“CRS”) such as strengthening of due diligence and reporting requirements. Like other exchange of information agreements that Singapore has entered into, the agreements incorporate internationally agreed standards on confidentiality and data safeguards.
The signing of the CARF MCAA and the Addendum to the CRS MCAA follows Singapore’s earlier endorsement of the CARF Joint Statement on 10 November 2023, where jurisdictions stated their intention to work towards swiftly transposing the CARF into domestic law and activating exchange agreements in time for exchanges to commence by the agreed timeline, and to implement the amended CRS under the same timeline.
Major financial centres and digital asset hubs, including France, Japan, Germany, Switzerland, United Arab Emirates, United Kingdom and United States of America, have also committed to implement the CARF.
IRAS will work with the industry to provide guidance to help reporting entities meet their reporting obligations.
Major Retail Banks To Introduce Singpass Face Verification, Further Strengthening Resilience Against Phishing Scams
On 18th September 2024, The Monetary Authority of Singapore (MAS) and The Association of Banks in Singapore (ABS) has announced that major retail banks in Singapore will progressively implement Singpass Face Verification (SFV) over the next three months to strengthen the digital token (DT) setup process for retail banking customers.
SFV will be triggered in higher risk scenarios to strengthen and complement existing authentication methods for DT setup. SFV uses a face scan to verify a customer’s identity against national records before the customer’s DT can be activated for use. This makes it more difficult for a scammer to take over a customer’s DT by setting it up on his own device using phished credentials such as an SMS, one-time passwords (OTPs) and/or bank card information.
The use of SFV is the latest security measure that banks are rolling out to protect customers from scams. Other initiatives and self-help tools include the phasing out of OTPs for bank account login by DT users and the Money Lock feature, through which customers can “lock up” specified amounts of their funds that cannot be accessed digitally.
Singapore Publishes National Anti-Money Laundering Strategy
On 30th October 2024, the Ministry of Home Affairs, Ministry of Finance and Monetary Authority of Singapore announced the publication of Singapore’s National Anti- Money Laundering Strategy, as part of continuing efforts to maintain the effectiveness of Singapore’s anti-money laundering (AML) framework. The national AML strategy outlines Singapore’s strategic approach to address money laundering risks and guides its risk-targeted actions to combat ML amid rapidly changing risks and criminal typologies.
MAS also publishes risk assessment reports, including the proliferation financing national risk assessment and counter- PF Strategy, updated virtual assets risk assessment of legal persons, and money laundering and terrorism financing risk assessment of legal arrangements on 30th October 2024.
The National AML Strategy has three key pillars:
Prevent – to deter proceeds of crime from entering Singapore’s system and prevent the misuse of Singapore’s system by criminals,
Detect – to identify illicit flows and activities and ensure timely and effective mitigation, disruption and enforcement actions, and
Enforce – to take firm and dissuasive actions against persons who abuse Singapore’s system for ML.
These three pillars are in turn supported by three inter-dependent building blocks of (i) Whole-of-Society Coordination and Collaboration; (ii) Legal and Regulatory Framework; and (iii) International Cooperation, which form the foundation of Singapore’s AML framework.
The National AML Strategy also takes into account Singapore’s updated Money Laundering National Risk Assessment (ML NRA) which synthesised observations on ML risks over the years, as well as other risk assessments and reviews developed to enhance Singapore’s risks understanding and risk mitigation measures.
Money Laundering National Risk Assessment
Singapore’s Money Laundering (ML) National Risk Assessment (NRA) forms part of Singapore’s continuing efforts to maintain the effectiveness of its anti-money laundering (AML) regime amidst our evolving risk landscape. It synthesises the ML risks observed by the Singapore law enforcement agencies, Singapore’s Financial Intelligence Unit – the Suspicious Transaction Reporting Office (STRO), and supervisory authorities, as well as feedback from private sector entities and counterpart foreign authorities.
The ML NRA provides an overview of Singapore’s key ML risks, taking into account an extensive range of qualitative and quantitative indicators on threats, vulnerabilities and control factors. Singapore’s key ML threats arise from a range of predicate offences, as criminals seek to exploit Singapore’s political and economic stability, strong rule of law, infrastructure, and wide range of services that our financial and other sectors provide.
The ML NRA identifies Singapore’s key threats as fraud (particularly cyber-enabled fraud), organised crime, corruption, tax crimes and trade-based ML.
The banking (including wealth management) sector is assessed to pose the highest ML risks, while among the designated non-financial businesses and professions (DNFBP) sectors, corporate service providers pose higher ML risks. Other higher risk sectors include digital payment token service providers, cross-border money transfer service providers (including remittance agents), licensed trust companies, real estate sector and precious stones and metals dealers.
The findings from the ML NRA, together with other risk assessments conducted by the authorities, serve as a guide for all stakeholders, including financial institutions (FIs) and DNFBPs, to detect and keep pace with the priority and emerging risks, take appropriate preventive measures as well as to allow more timely detection, disruption and enforcement on illicit activities.
FIs and DNFBPs, especially entities in sectors which are assessed to pose higher ML risks, should also take reference from the ML NRA in assessing their risks and enhance their controls accordingly.
MAS Announces Green Finance and Capital Markets Initiatives to Strengthen Financial Cooperation with China
On 11th November 2024, the Monetary Authority of Singapore (MAS) has announced new green finance and capital markets initiatives to strengthen financial cooperation with China. The initiatives were announced at the 20th Joint Council for Bilateral Cooperation (JCBC) meeting in Singapore, which was co-chaired by Singapore Deputy Prime Minister, Mr Gan Kim Yong, and People’s Republic of China Vice Premier of the State Council, Mr Ding Xuexiang.
The initiatives include:
Catalysing Green Financing Flows. The China-Singapore Green Finance Taskforce (GFTF), established by MAS and the People’s Bank of China (PBC) in 2023, has been working to expand the Common Ground Taxonomy (CGT) under the International Platform on Sustainable Finance’s (IPSF) to include the Singapore-Asia Taxonomy. The exercise, which compares the green criteria of the European Union, China and Singapore taxonomies, will be completed by the end of this year. This will enable easier comparison of the green taxonomies of Singapore and China and facilitate the provision of cross-border green loans, green bond issuance and fund investments. In this regard, industry partners from both countries have been collaborating on Panda Bond issuances[1] through a Green Corridor, to further catalyse green financing flows between Singapore and China.
Explore Piloting the “Over-the-Counter” Bond Market Framework between China and Singapore.
MAS and the PBC are exploring a pilot with Singapore and Chinese banks to enhance international investors’ access to China’s bond market. The pilot will leverage the existing “over-the-counter” bond market framework in China, to enable participating banks in Singapore to provide trading and custody services for selected fixed income products for the China Interbank Bond Market.
Strengthening Collaboration in Indices and Exchange Traded Funds (ETF) Product Links. Building on the good progress and strong investor interest in the ETF Product Links between the Singapore Exchange (SGX) and the Shenzhen and Shanghai Stock Exchanges[2], MAS and the China Securities Regulatory Commission (CSRC) are also in discussions to expand the suite of products on the ETF Product Links. In addition, SGX and China Securities Index are in discussions to develop a second index after the successful launch of their Emerging Asia Technology Index in January 2024. These collaborations will enrich the regional capital markets ecosystem with new ETF products and indices to cater to the evolving needs of investors.
Facilitating Financial Institutions’ Access to Chinese Markets. Singapore and China continue to work in collaboration to facilitate the growing interest of financial institutions based in Singapore and China to expand in each other’s markets:
First Listing of Panda Bond in Singapore. MAS and PBC welcome the first Panda Bond to list on the Singapore Exchange – UOB’s three-year, RMB 5 billion Panda Bond[3]. The listing of Panda Bonds in Singapore will foster greater interest and participation by international investors and issuers in the Panda Bond market.
Memorandum of Understanding (MoU) between UOB and the Shanghai Gold Exchange (SGE). UOB and SGE have concluded an MoU to cooperate in proprietary trading and physical delivery of gold products and provide innovative services to ASEAN gold suppliers and investors.
At the JCBC meeting, MAS also welcomed the listing of eligible Chinese companies interested to expand business operations in Southeast Asia on SGX. This is in line with CSRC’s policy of supporting eligible onshore companies to access international capital markets for growth.
MAS plans to support asset tokenization commercialization
On 4th November 2024, The Monetary Authority of Singapore (MAS) has announced its plans to advance tokenisation in financial services.
These include:
– forming commercial networks to deepen liquidity of tokenised assets;
– developing an ecosystem of market infrastructures;
– fostering industry frameworks for tokenised asset implementation; and
– enabling access to common settlement facility for tokenised assets.
Deepening liquidity of tokenised assets through formation of commercial networks
MAS has, under Project Guardian, convened over 40 financial institutions, industry associations and international policymakers across seven jurisdictions to carry out industry trials on the use of asset tokenisation in capital markets. To date, more than 15 industry trials have been conducted in six currencies across multiple financial products.
As Project Guardian participants commercialise their products and services following successful industry trials, MAS is facilitating commercialisation to take place in a coordinated, networked manner. By connecting a broader set of participants’ products and services across multiple currencies and assets, greater improvements in capital raising, secondary trading, asset servicing and settlement of tokenised assets may be realised. This will deepen liquidity across primary and secondary markets for tokenised asset transactions. To this end, Citi, HSBC, Schroders, Standard Chartered and UOB have formed the Guardian Wholesale Network industry group, with the intent of establishing a multi-member network to commercialise their respective asset tokenisation trials and scale usage.
Developing ecosystem of market infrastructures to facilitate seamless cross-border transactions
MAS launched the Global Layer One (GL1) initiative in 2023 to foster the development of foundational digital infrastructures, upon which commercial networks could be deployed. Since the launch, a core group of global banks, BNY, Citi, J.P. Morgan, MUFG and Societe Generale-FORGE have been leading efforts to define the business, governance, risk, legal and technology requirements of the GL1 platform.
To build on this, GL1 is expanding its scope to support the development of an ecosystem of compatible market infrastructures, enabling tokenised assets to be traded seamlessly across borders. Specifically, GL1 will undertake the following additional activities:
– Control Principles – Alignment on governance, risk management controls and settlement arrangement conventions for cross-border transactions. This provides clarity on roles, responsibilities and controls needed to safeguard market integrity and financial stability.
– Specifications – Development of specifications for market infrastructures and asset lifecycle. This encourages interoperability between diverse systems.
– Compliance by Design – Creation and provision of templates including programmable compliance checks to build an ecosystem of compatible service providers. This accelerates onboarding for new participants.
To support these developments, MAS is pleased to announce the addition of new industry participants, including Euroclear and HSBC. GL1 will also set up a new market infrastructure working group, comprising global financial market infrastructure providers, that will focus on digital asset securities control principles.
Industry frameworks for implementation of tokenisation
To facilitate broad based acceptance and implementation of tokenised assets by financial institutions, two industry frameworks developed by Project Guardian industry group members were published today.
– Guardian Fixed Income Framework (GFIF) – GFIF integrates the International Capital Market Association’s Bond Data Taxonomy, Capital Markets and Technology Association’s Token Standards, and the Global Financial Markets Association’s Design Principles for Tokenised Securities. This provides an industry guide to implementing tokenisation in debt capital markets, strengthening industry capabilities and catalyse adoption of tokenised fixed-income solutions.
– Guardian Funds Framework (GFF) – GFF provides a set of recommendations for industry best practices for tokenised funds. This includes the Guardian Composable Token Taxonomy to facilitate the development of tokenised investment vehicles comprising multiple assets, simplifying the process of incorporating new tokenised funds, and help achieve efficiencies in fund settlement.
Notification under the Trade Marks Rules, 2017:
The Ministry of Commerce and Industry (Department for Promotion of Industry and Internal Trade) has issued a notification dated 16th August 2024 under the Trade Marks Act, 1999 (“Act”) to further amend the Trade Marks Rules, 2017 by publishing the Trade Marks (Holding Inquiry and Appeal) Rules, 2024 (hereinafter referred to as “Amendment”). The key provisions introduced by the Amendment are as follows:
a) The Amendment provides the manner in which a complaint can be filed for contravention of the provisions of Section 107 [Penalty for falsely representing a trademark as registered] of the Act, counterstatements, and appeals to ensure transparency in the adjudication of trademark disputes. The Amendment sets out the manner of holding an inquiry and the procedure to be followed for an appeal if any person is aggrieved by the order of the adjudicating officer.
b) The Amendment further sets out that an appeal can be filed electronically in Form III within sixty days of the adjudicating officer’s order, extendable in certain cases for valid reasons.
c) As per the Amendment, all communications are required to be made electronically, and any penalties imposed are to be credited to the Consolidated Fund of India.
Notification under the Geographical Indication of Goods (Registration and Protection) Rules, 2002:
The Ministry of Commerce and Industry (Department for Promotion of Industry and Internal Trade) has issued a notification dated 16th August 2024 under the Geographical Indications of Goods (Registration and Protection) Act, 1999 (“Act”) to further amend the Goods (Registration and Protection) Rules, 2002, by publishing the Geographical Indications of Goods (Holding Inquiry and appeal) Rules, 2024 (hereinafter referred to as “Amendment”). The key provisions introduced by the Amendment are as follows:
a) The Amendment provides the manner in which a complaint can be filed electronically in Form I for contravention of the provisions of Sections 38 [Falsifying and Falsely Applying Geographical Indications], 39 [Penalty for Applying False Geographical Indications], 40 [Penalty for Selling Goods to which False Geographical Indication is applied], 41 [Enhanced Penalty on Second or Subsequent Conviction], and 42 [Penalty for Falsely Representing a Geographical Indication as Registered] of the Act.
b) The Amendment sets out the manner of holding an inquiry, filing of counter-statements and submitting evidence by the respondents. The adjudicating officer has the authority to require the attendance of witnesses and the production of documents.
c) The Amendment further sets out that an appeal can be filed electronically in Form III within sixty days of the adjudicating officer’s order, extendable in certain cases for valid reasons. All communications are to be conducted electronically, with orders and penalties published on the Intellectual Property India website.
Trade Marks (Holding Inquiry and Appeal) Rules, 2024.pdf
Geographical Indications of Goods (Holding Inquiry and appeal) Rules, 2024.pdf
