Singapore, in a bid to further strengthen its Avoidance of Double Taxation Agreements (DTA) network, has seen new DTAs come into force and updated existing ones in the first five months of 2014.
Six countries have been engaged so far. According to SingaporeCompanyIncorporation.sg, a portal dedicated to incorporating a company in Singapore, the DTAs are expected to encourage and facilitate cross-border trade and investment between Singapore and the respective countries. In addition, DTAs allow companies to benefit from lower withholding tax rates on cross-border payments of dividends, interest and royalties. In addition, to facilitate compliance with international standards, most of Singapore’s DTA include the Exchange of Information (EOI) agreement.
6 DTAs in force to date
The first DTA agreement to come into force this year was between Singapore and Morocco. The agreement came into force on 15th January. Shortly after, the revised Singapore-Poland DTA entered into force on 6th February. On the same day, an ‘Exchange of Notes’ was implemented between Singapore and Austria in relation to the Exchange of Information (EOI) ct. The Singapore-Austria DTA entered into force early this month, on 1st May.
Next in line was the DTA signed between the city-state and Laos, which was signed on 21st February. April witnessed two more DTAs. Singapore and Sri Lanka signed a revised DTA on 3rd April, while a DTA agreement with Barbados came into force on 25th April.
Singapore’s current network of DTAs
Currently, the country has 75 Comprehensive DTAs which include EOI Arrangements for tax purposes. According to the Inland Revenue Authority of Singapore (IRAS) website, eight countries have signed, but not ratified, the DTA agreement with Singapore. They include the Czech Republic, Ecuador, Kazakhstan, Liechtenstein, Laos, Luxembourg, San Marino and Sri Lanka. Eight countries have limited treaties with Singapore, while one nation, Bermuda, has only an EOI arrangement in place.
Strengthening of DTA network to benefit Singapore companies
“With western businesses looking to establish their base in Asia via Singapore, the island nation’s efforts in stepping up the DTA network makes it an attractive business location. In addition to attracting investments, the DTA compliance requirements make sure that only legitimate businesses tap the tax opportunity. The rules make sure that the tax treaty is leveraged for genuine tax savings and not for illegal tax evasion,” commented Ms. Cheryl Lee, Operations Manager at SingaporeCompanyIncorporation.sg.
Singapore holding companies to benefit
The expansion of DTA network has created opportunities for foreign companies to tap the Asian market by making Singapore as their business hub. Foreign companies with the Singapore holding company structure would benefit from substantial tax savings after incorporating the DTA framework, resulting in a boost to the bottom-line.
In addition to the DTAs, tax schemes including the Headquarters Program and Global Trader Program encourage foreign entities to set up operations in Singapore and use it to hold investments in overseas subsidiaries.
“The strengthening of DTA network will attract more companies for genuine tax savings and to establish their global or Asia headquarters in Singapore. With the expansion of DTA network, the holding company structure will be adopted by more global players for substantial tax savings. And Singapore’s image as a clean fund management hub will be safeguarded through robust DTA compliance,” added Ms. Lee.
