{"id":15241,"date":"2019-04-05T18:31:58","date_gmt":"2019-04-05T13:01:58","guid":{"rendered":"https:\/\/enterslice.com\/learning\/?p=15241"},"modified":"2020-08-28T14:36:56","modified_gmt":"2020-08-28T09:06:56","slug":"amendments-affecting-foreign-investors","status":"publish","type":"post","link":"https:\/\/enterslice.com\/learning\/amendments-affecting-foreign-investors\/","title":{"rendered":"Foreign Investors to Pay Higher Taxes Starting from April 1"},"content":{"rendered":"

The recent amendments to the SEBI’s Listing Obligations and Disclosure Requirement Amendment<\/a> Regulations, 2018, insider trading regulations and revisions in the Double-taxation avoidance agreements (DTAAs) with Mauritius and The Avoidance of Double Taxation Agreement<\/strong><\/a> (DTA) with Singapore, have ushered higher corporate governance standards for Indian Listed companies and higher taxes for foreign investors coming from Mauritius and Singapore effective from 1st<\/sup> April, 2019. These changes will give India the right to tax capital gains arising on Indian equity shares sold by a Singaporean or Mauritian resident.<\/p>\n\n\n\n

Here in this update, we’ll discuss the recent amendment to the SEBI regulations of disclosure requirement and insider trading and its impact on the foreign investors<\/strong><\/a>. <\/p>\n\n\n\n

Recent Amendments affecting Foreign Investors<\/strong><\/h2>\n\n\n\n
\"Recent<\/figure>\n\n\n\n

Restrictions on communication and\ntrading by insiders<\/strong><\/h2>\n\n\n\n

Under the SEBI’s Prohibition of Insider   Trading   (Amendment) Regulations, 2018, there is a restriction put on communication and trading by insiders. The Board of directors<\/strong><\/a>, who are dealing with UPSI are required to formulate a code of conduct to regulate and report trading.<\/p>\n\n\n\n

This\nprovision is intended to mandate the persons other than listed companies and\nintermediaries that are required to handle UPSI to devise a code of conduct\ngoverning trading securities by their designated persons.<\/p>\n\n\n\n

These\nentities include professional firms such as auditors, accountancy firms, law\nfirms,  analysts,  insolvency professional entities,\nconsultants, banks, etc., assisting or advising listed companies. Even entities\nthat usually run outside the capital market<\/a> may handle UPSI. This provision\nwould mandate all of them to formulate a set of code of conduct. Through this,\nthey’ll now have to put internal controls so as to check the insider trading.<\/p>\n\n\n\n

The end of the concessional tax\nregime for Foreign Investors<\/strong><\/h2>\n\n\n\n

After prolonged negotiations, concessional tax regime which was earlier present for foreign investors came to an end as India amended its DTAAs with Mauritius and signed the Revised Double Taxation Avoidance Convention (DTAC) and it also amended the Avoidance of Double Taxation Agreement (DTA) with Singapore. Under the amended treaty, which began on 1st<\/sup> April 2017, the capital gains tax was imposed at 50% of the prevailing domestic rate and the full rate was to be applied from April 1st<\/sup>, 2019. It also gave India the right to collect tax on capital gains arising on Indian equity shares sold by foreign investors from Singapore or Mauritius. <\/p>\n\n\n\n

Amended Capital Gains Taxation\nScheme<\/strong><\/h2>\n\n\n\n
\n Shares\n Acquired\n <\/td>\n Capital\n Gains Tax on the Sale of Shares\n <\/td>\n Rate of\n Tax\n <\/td><\/tr>
\n Before April 1, 2017<\/strong>\n <\/td>\n Taxable at the country where\n investor resides\n <\/td>\n 100% of the capital gains tax rate\n <\/td><\/tr>
\n Between April 1, 2017-March 31,\n 2019<\/strong>\n <\/td>\n Taxable where the company is tax resident\n <\/td>\n 50% of the capital gains tax rate\n <\/td><\/tr>
\n After March 31, 2019<\/strong>\n <\/td>\n Taxable where the company is tax\n resident\n <\/td>\n 100% of the capital gains tax rate\n <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

The\nafter effect of this is the tax cost for foreign investors has increased. The\ngovernment claimed that it was done because it wants foreign investors to come\nto India on the basis<\/a> of returns investment in the country and not on account\nof tax considerations. It wants to create a uniform playing field for these\nforeign investors who are investing capital in India. <\/p>\n\n\n\n

How will it <\/strong>impact foreign\ninvestors and the Indian Market?<\/strong><\/h2>\n\n\n\n