May/June 2018  
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Asia-Pacific Tax Bulletin
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Issue No. 3 - 2018 of the Asia-Pacific Tax Bulletin is now available online.

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72nd Congress of the International Fiscal Association
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Practical Aspects of Tax Treaties
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Number 3 - 2018 contains the following:
China (People’s Rep.)
Taxation of Indirect Share Transfers – An Analysis from a Corporate Conflict Perspective
Jiayi Nie and Zihao Wang
In this article, the authors contrast the economic substance approach adopted by China’s State Administration of Taxation to taxing offshore indirect share transfers of Chinese-resident companies with the veil-piercing doctrine applied in liquidations under Chinese corporate law. The authors conclude that the veil-piercing principles underlying the taxation of indirect share transfers are not consistent with the principles under company law; rather, a new order has been created by the tax regulations. The article also addresses the choice-of-law question when tax payable arising from offshore indirect share transfers is transformed into a civil liability.
Review and Rewrite of the Income Tax Act 1961
Saurabh Jain
In this article, the author discusses the Indian government’s latest proposal to rewrite the country’s direct tax legislation. The article identifies certain key features of the processes of rewriting the income tax laws in Australia, New Zealand and the United Kingdom, and proposes some positive outcomes from the experiences of those countries which could be adopted by the Indian task force as it undertakes its tax legislation rewriting process.
Introduction of the Principal Purpose Test and Discretionary Benefits Provisions into Singapore’s Tax Treaties: Not as Black as It Is Painted – Part 2 – Consequences
Blazej Kuźniacki
This is the second part of a comprehensive two-part article, which addresses the manner in which, and the possible reasons why, Singapore adopted the principal purpose test (PPT) and the discretionary benefits provisions in the OECD’s Multilateral Instrument, and the potential consequences of that decision. This part examines hypothetical consequences of the incorporation of the PPT and the discretionary benefits provision into Singapore’s tax treaties. The author challenges certain aspects of mainstream scholarship, according to which the introduction of the PPT by offshore financial centres will most likely have a negative impact on efforts to attract foreign direct investment or otherwise jeopardize their business and tax competitive position. He concludes that Singapore’s – and other jurisdictions with a similar approach to taxation of income – way of meeting the minimum standard under the OECD’s BEPS Action 6 is quite bizarre: on the one hand, it may still allow highly mobile income to be channelled to tax havens and otherwise attract FDIs. On the other hand, it may allow the tax authorities of Singapore’s tax treaty partners that are high-tax jurisdictions to deny benefits under their treaties with Singapore to arrangements or transactions with economic substance and non-tax business purpose.
Taxability of Gains from Sales of Shares and Properties under Section 10(1)(g) of the Income Tax Act
Tan How Teck
This article examines four cases concerning the application of section 10(1)(g) of Singapore’s Income Tax Act – which imposes tax on gains or profits of an income nature that do not fall within any of the preceding paragraphs of section 10(1) – to profits derived from the sale of shares and real property. While the GBU case, decided in 2017, has endorsed the narrower scope of the so-called IB proposition in applying section 10(1)(g), the author submits that the conceptual distinction between that provision and section 10(1)(a), which taxes gains or profits from a trade, business, profession or vocation, remains unclear.
Companies Held Not to Be Associated by Family Relationship
Abhishek Dugar and Lakshita Bhandari
This case note summarizes the determination of the Rajasthan High Court, and the preceding rulings by the Commissioner of Income Tax – Appeals and the Income Tax Appellate Tribunal, in Jaipur Silver Jewels P. Ltd v. Commissioner of Income Tax, that two companies are not associated enterprises simply because (i) the sole shareholder of one company is the sister-in-law of the director of the other company, and (ii) premises occupied rent free by one company are owned by the brother of the director of the other company.
Dedicated Space at Commonwealth Games Constitutes a Permanent Establishment
Abhishek Dugar and Lakshita Bhandari
This case note reviews the Authority for Advance Rulings’ decision in the Production Resource Group case that a dedicated space at the 2010 Delhi Commonwealth Games to provide lighting, sound, video and LED technology services constituted a permanent establishment in India, and the income arising therefrom was business profits sourced in India, taxable in accordance with article 7 of the India-Belgium tax treaty (1993).
High Court Finds TNMM More Appropriate than CUP Transfer Pricing Method
Abhishek Dugar and Lakshita Bhandari
This case note reviews the Bombay High Court’s finding in Principal Commissioner of Income Tax v. Amphenol Interconnect Private Ltd that the transactional net margin method was a more appropriate method than the comparable uncontrolled price method to determine the arm’s length price of goods traded, and commission payments made, between associated parties, due to differences in the volume of goods sold, geographical markets, timing and other functional factors.
Treaty Benefits Allowed for Capital Gains Where Shareholder Not Merely a Name Lender
Abhishek Dugar and Lakshita Bhandari
This case note reviews the ruling issued by the Authority for Advance Rulings to AB Holdings, which stated that, because AB Holdings had made investments from its own funds through proper banking channels and had taken key investment decisions in its board of directors’ meetings, its management and control was in Mauritius; therefore, it was not a puppet of its United States holding company, and shares that it held in an Indian company were held by it in reality, and not in name only. Consequently, the gain derived on an intra-group transfer of the shares escaped tax in India under article 13(4) of the India–Mauritius income tax treaty.
Treaty Benefits Denied for Capital Gains Where Shareholder Not “Real” Owner of Shares
Abhishek Dugar and Lakshita Bhandari
This case note reviews the ruling issued by the Authority for Advance Rulings to AB Mauritius, which stated that, because AB Mauritius held shares in an Indian company in name only, the gain derived on an intra-group transfer of the shares did not escape tax in India under article 13(4) of the India–Mauritius income tax treaty. Instead, the Authority determined, on the basis of the share purchase agreement and board meeting minutes, that, in reality, the shares in the Indian company were owned by AB Mauritius’s United States owners and the gain on the transfer of the shares was taxable in India in accordance with the India–United States tax treaty.
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