On February 15, 2016 the Inland Revenue Authority of Singapore issued a short statement announcing that on that same date the Agreement Between the Government of the Republic of Singapore and the Government of the Kingdom of Thailand for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (Hereafter: the new DTA) as concluded on March 24, 2015 entered into force on February 15, 2016. The DTA will replace the current DTA stemming from 1975.
Based on Article 27, Paragraph 2 of the new DTA (“ENTRY INTO FORCE”) the fact that the new DTA enters into force on February 15, 2016 means that its provisions 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, 2017;
(ii) in respect of tax chargeable (other than taxes withheld at source) for any year of assessment beginning on or after January 1, 2018; and
(iii) in respect of Article 25 (Exchange of Information), 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, 2017; or where there is no taxable period, for all charges to tax arising on or after January 1, 2017.
(b) in Thailand:
(i) in respect of taxes withheld at source, on amounts of income derived on or after the January 1, 2017;
(ii) in respect of other taxes on income, on such taxes chargeable for any tax year or accounting period, beginning on or after January 1, 2017; and
(iii) in respect of Article 25 (Exchange of Information), 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, 2017; or where there is no taxable period, for all charges to tax arising on or after January 1, 2017.
Below we will discuss some of the provisions of the DTA of which we think they might interest our readers.
Taxes covered
Based on Article 2, Paragraph 3 of the new DTA (“TAXES COVERED”), The existing taxes to which the Agreement shall apply are in particular:
(a) in Singapore:
- the income tax;
(b) in Thailand:
- the income tax; and
- the petroleum income tax
Article 2, Paragraph 4 subsequently arranges that the new DTA shall apply also to any identical or substantially similar taxes that are imposed after the date of signature of the DTA in addition to, or in place of, the existing taxes.
Permanent establishment
Article 5, Paragraph 3 of the new DTA (“PERMANENT ESTABLISHMENT”) determines that the term “permanent establishment” shall also include:
(a) a building site, a construction, installation or assembly project or supervisory activities in connection therewith, where such site, project or activities last more than 12 months;
(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 where 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 183 days within any twelve-month period.
Immovable property
Article 6, Paragraph 1 of the new DTA (“INCOME FROM IMMOVABLE OF PROPERTY”) arranges that income derived by a resident of a Contracting State from immovable property (including income from agriculture or forestry) situated in the other Contracting State may be taxed in that other State.
Article 13, Paragraph 1 of the new DTA (“CAPITAL GAINS”) arranges that gains derived by a resident of a Contracting State from the alienation of immovable property referred to in Article 6 and situated in the other Contracting State may be taxed in that other State.
Article 13, Paragraph 2 subsequently arranges that gains derived by a resident of a Contracting State from the alienation of shares, other than shares traded on a recognised Stock Exchange, deriving at least three-quarters of their value directly or indirectly from immovable property situated in the other Contracting State may be taxed in that other State.
Dividends
Article 10, Paragraph 2 of the new DTA (“DIVIDENDS”) maximizes the dividend withholding tax that a Source State is a allowed to withhold over dividends to 10 per cent of the gross amount of the dividends if the beneficial owner of the dividends is a resident of the other Contracting State.
Interest
With respect to the withholding tax a Source State is allowed to withhold over interest, Article 11, Paragraph 2 of the new DTA (“INTEREST”) arranges the following:
“However, such interest may also be taxed in the Contracting State in which it arises and according to the laws of that State, but if the beneficial owner of the interest is a resident of the other Contracting State, the tax so charged shall not exceed:
(a) 10 per cent of the gross amount of the interest if the interest is beneficially owned by any financial institution or insurance company;
(b) 10 per cent of the gross amount of the interest if the interest is beneficially owned by a resident of the other Contracting State and is paid with respect to indebtedness arising as a consequence of a sale on credit by a resident of that other Contracting State of any equipment, merchandise or services, except where the sale was between persons not dealing with each other at arm’s length; and
(c) 15 per cent of the gross amount of the interest in all other cases.”
Royalties
With respect to the withholding tax a Source State is allowed to withhold over royalties, Article 12, Paragraph 2 of the new DTA (“ROYALTIES”) arranges the following:
“However, such royalties may also be taxed in the Contracting State in which they arise and according to the laws of that State, but if the beneficial owner of the royalties is a resident of the other Contracting State, the tax so charged shall not exceed:
(a) 5 per cent of the gross amount of the royalties if they are made as consideration for the use or the right to use any copyright of literary, artistic or scientific work including cinematograph films, or films or tapes used for radio or television broadcasting;
(b) 8 per cent for the use of, or the right to use, any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial, or scientific equipment; and
(c) 10 per cent of the gross amount of the royalties in all other cases.”
Other
The new DTA also contains an articles containing provisions regarding Branch Remittance (Article 10A). Furthermore the new DTA arranges for a Mutual Agreement Procedure (Article 24) as well as for the Exchange of Information (Article 25).
Click here to be forwarded to the text of the new DTA as available on the website of the Singaporean Inland Revenue Authority, which will open in a new window.
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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