Singapore: Changes to rules on foreign direct investment in India

Changes to rules on foreign direct investment

The Reserve Bank of India issued a notification in March 2017 to address concerns and to bring about changes to the foreign direct investment regulations in limited liability partnerships (LLPs).

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The regulatory framework is clearer for Singapore investors and other foreign investors to use LLPs to invest in India, given that:

  • The conditions requiring a resident designated partner have been removed.
  • Conversion of a company with foreign direct investment into an LLP is now permitted under the automatic route for companies being engaged in a sector when foreign investment up to 100% is permitted under the automatic route and there are no foreign direct investments linked to performance conditions.
  • Regulations will permit LLPs with foreign investment to use external commercial borrowing.

Also in light of recent tax treaty amendments between India and Singapore, company structures have become less beneficial because capital gains tax applies on investment in shares of Indian companies (after 1 April 2017) that are subsequently transferred by a Singapore tax resident investor.

 

Read an April 2017 report [PDF 303 KB] prepared by the KPMG member firm in Singapore: LLP – New Operating Entity of choice to be considered by Singapore investors to invest into India

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