To invest in a general insurance venture with SBI through Singapore, instead of the original proposal to bring money through a Mauritian subsidiary

The government and financial sector regulators have asked Insurance Australia Group (IAG) to invest in a general insurance venture with State Bank of India (SBI) through Singapore, instead of the original proposal to bring the money through a Mauritian subsidiary – reported Business Standard.

According to the regulators, IAG would still be eligible for tax benefits as per India’s Comprehensive Economic Cooperation Agreement (CECA) with the city-state. IAG’s investment in the joint venture, in which it would hold 26%, is estimated to be worth INR5.4 billion, including an entry premium.

Although the tax benefits under CECA are the same as those offered by the Double Taxation Avoidance Agreement with Mauritius, the Indian government had assured that companies do not use Singapore merely to avail of fiscal incentives.

As a result, a clause has been inserted in CECA allowing only companies with a presence for a specified number of years and having invested a certain sum of money to be eligible for tax benefits.

The Insurance Regulatory and Development Authority (IRDA) has given the general insurance venture first-stage approval. SBI was expected to commence operations by the end of the year, as quoted in the magazine.