Moneycontrol PRO
you are here: HomeNewsBusiness

Treaties may not save FPIs structured as trusts from higher dividend tax liabilities: Report

FPIs structured as trusts or associations of persons (AOPs) reportedly could pay up to 43 percent tax on dividend from listed companies

June 11, 2020 / 10:46 AM IST

Tweaks in the dividend tax structure in Budget 2020 may not bode well for many Foreign Portfolio Investors (FPIs). FPIs structured as trusts or associations of persons (AOPs) reportedly could pay up to 43 percent tax on dividend from listed companies as such entities are ineligible for benefits under the Double Tax Avoidance Agreements (DTAAs), The Economic Times reported.

Trusts and AOPs are not taxed in their home countries such as the United States, Ireland, Mauritius and Singapore among others. As per the DTAA however, only funds taxed at home can avail the treaty’s benefits.

Close to 40 percent of FPIs in India are structured as trusts, while another 10 percent are AOPs – and include sovereign wealth funds as well, experts told the paper.

While the change was lobbied for by the sector itself, many have now approached the Centre seeking an exemption, a source told the paper

Moneycontrol could not independently verify the report.

Close

DTAAs ensure that foreign investors are not doubly taxed but pay in at least one country.

In her Budget 2020 speech, Finance Minister Nirmala Sitharaman stated that dividend would now be taxed in the hands of investors as opposed to it being previously taxed at companies (flat 20 percent).

The move came considering FPIs can avail treaty benefits, where, for example, at the domestic rate for dividend tax on FPI being 40 percent (including surcharge), availing DTAA could slash this to 5-10 percent.
Moneycontrol News
first published: Jun 11, 2020 10:46 am

stay updated

Get Daily News on your Browser
Sections
ISO 27001 - BSI Assurance Mark