On December 28, 2015 the Inland Authority of Singapore issued a press release that on that same date the Agreement between the Government of the Republic of Singapore and the Government of the Grand Duchy of Luxembourg for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital (Hereafter: the DTA) entered into force. The new DTA replace the existing/old Agreement stemming from 1993.
Based on Article 28, Paragraph 2 of the DTA (“ENTRY INTO FORCE”) the fact that the DTA entered into force on December 28, 2015 means that he provisions of the DTA shall have effect:
(a) in Singapore:
(i) in respect of taxes withheld at source on amounts liable to be paid, deemed paid or paid (whichever is the earliest) on or after January 1, 2016;
(ii) in respect of tax chargeable (other than taxes withheld at source) for any year of assessment beginning on or after January 1, 2017; and:
(iii) in respect of Article 26, for requests made on or after the date of entry into force concerning information for taxes relating to taxable periods beginning on or after January1, 2016; or where there is no taxable period, for all charges to tax arising on or after January 1, 2016;
(b) in Luxembourg:
(i) in respect of taxes withheld at source, to income derived on or after January 1, 2016;
(ii) in respect of other taxes on income, and taxes on capital, to taxes chargeable for any taxable year beginning on or after January 1, 2016;
(iii) in respect of Article 26, for requests made on or after the date of entry into force concerning information for taxes relating to taxable periods beginning on or after January 1, 2016; or where there is no taxable period, for all charges to tax arising on or after January 1, 2016.
Below we will discuss a selection of provisions included in the DTA of which we think they might interest our readers.
Taxes covered
According to Article 2, Paragraph 3 of the DTA (“TAXES COVERED”) the existing taxes to which the DTA shall apply are in particular:
(a) in Singapore: - the income tax;
(b) in Luxembourg:
(i) the income tax on individuals (l'impôt sur le revenu des personnes physiques);
(ii) the corporation tax (l'impôt sur le revenu des collectivités);
(iii) the capital tax (l'impôt sur la fortune); and
(iv) the communal trade tax (l'impôt commercial communal).
Permanent establishment
Paragraph 3 of Article 5 of the DTA (“PERMANENT ESTABLISHMENT”) arranges that the term "permanent establishment" also encompasses:
(a) a building site, a construction, assembly, installation or dredging project or supervisory activities in connection therewith, but only if such site, project or activities lasts more than 12 months; (was for a period or periods aggregating more than six months within any 12-month period)
(b) the furnishing of services, including consultancy services, by an enterprise of a Contracting State through employees or other personnel engaged by the enterprise for such purpose, but only if activities of that nature continue (for the same or a connected project) within the other Contracting State for a period or periods aggregating more than 365 days in any 15-month period (in the old provision no period was mentioned).
Associated enterprises
Article 9 of the new DTA (“ASSOCIATED ENTERPRISES”) contains a new Paragraph, which contains a so-called appropriate adjustment clause.
Dividends
Article 10 of the DTA (“DIVIDENDS”) arranges that the Source State is not allowed to withhold withholding tax over dividend distributions (was 10% (or 5% if the minimum capital requirement was met) under the old Agreement).
Interest
Article 11 of the DTA (“INTEREST”) arranges that the Source State is not allowed to withhold withholding tax over interest payments (was 10% under the old Agreement).
Royalties
Article 12, Paragraph 2 of the DTA (“Royalties”) arranges that if the beneficial owner of the royalties is a resident of the other Contracting State, the withholding tax the Source State is allowed to withhold over royalties is maximized to 7 per cent of the gross amount of the royalties (was 10% under the old Agreement).
Other
The DTA furthermore includes articles containing provisions regarding a Mutual Agreement Procedure (Article 25 of the DTA) and an article on the Exchange of Information (Article 26 of the DTA).
Click here to be forwarded to the text of the new DTA (with the text of the old Agreement attached as an annex) as available on the website of Inland Revenue Authority of Singapore.
Are you looking for an other DTA? Then check our section DTAs & TIEAs, a very efficient way to locate numerous DTAs.
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