The Agreement between the Government of the Republic of Singapore and the Government of the Lao People’s Democratic Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (Hereafter: the DTA) entered into force on November 11, 2016.

The fact that the DTA entered into force on November 11, 2016 means that based on Article 28, Paragraph 2 of the DTA (“Entry Into Force”) the provisions of the DTA shall have effect:

(a)   in Lao PDR:

(i)     in respect of tax chargeable for the year of assessment beginning on or after January 1, 2017 and subsequent years of assessment; and

(ii)   in respect of Article 26 (“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 Singapore:

(i)    in respect of tax chargeable for any year of assessment beginning on or after January 1, 2018; and

(ii)   in respect of Article 26 (“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 a selection of provisions included in the DTA of which we think they might interest our readers.

 

Taxes covered

Based on Article 2, Paragraph 3 of the DTA (“Taxes Covered”), the existing taxes to which the DTA shall apply are in particular:

(a)   in the case of Lao PDR:

-  the tax on profits (income) of enterprises and organisations; and

-  the tax on income of individuals;

(b)   in the case of Singapore:

-  the income tax.

 

Article 2, Paragraph 4 subsequently arranges that the DTA shall apply also to any identical or substantially similar taxes which are subsequently imposed in addition to, or in place of, the existing taxes referred to in paragraph 3 above.

 

Residency

With respect to the residency of a person other than an individual, Article 4, Paragraph 3 of the DTA (“Resident”) arranges that where by reason of the provisions of Article 4, Paragraph 1 a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident only of the State in which its place of effective management is situated. If its place of effective management cannot be determined, the competent authorities of the Contracting States shall settle the question by mutual agreement.

 

Permanent establishment

Article 5, Paragraph 3 of the DTA (“Permanent Establishment”) arranges that the term "permanent establishment" also includes:

(a)   a building site, a construction, installation or assembly project, or supervisory activities connected therewith, but only where such site, project or activities lasts for 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 300 days within any 12-month period.

 

Immovable property

Article 6, Paragraph 1 of the DTA (“Income From Immovable 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.

 

With respect to immovable property Article 13, Paragraph 1 of the 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.

 

Associated enterprises

Article 9, Paragraph 2 of the DTA (“Associated Enterprises”) contains a so-called appropriate adjustment clause.

 

Dividends

If the beneficial owner of the dividends is a resident of the other Contracting State, Article 10, Paragraph 2 of the DTA (“Dividends”) maximizes the withholding tax a Source State is allowed to withhold over dividends to:

(a)   5 per cent of the gross amount of the dividends if the beneficial owner is a company (other than a partnership) which holds directly at least 10 per cent of the capital of the company paying the dividends;

(b)   8 per cent of the gross amount of the dividends in all other cases.

 

Article 10, Paragraph 7 subsequently arranges that where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a resident of that other State or in so far as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other State, nor subject the company's undistributed profits to a tax on the company’s undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State.

 

Interest

If the beneficial owner of the interest is a resident of the other Contracting Party, Article 11, Paragraph 2 of the DTA (“Interest”) maximizes the withholding tax a Source State is allowed to withhold over such interest to 5 per cent of the gross amount of the interest.

 

Royalties

If the beneficial owner of the royalties is a resident of the other Contracting State, Article 12, Paragraph 2 of the DTA (“Royalties”) maximizes the withholding tax a Source State is allowed to withhold over such royalties or fees for technical services to 5 per cent of the gross amount of the royalties.

 

Other

Furthermore the DTA contains a.o. provisions regarding a Mutual Agreement Procedure (Article 25) and regarding the Exchange of Information (Article 26).

 

Click here to download the text of the DTA from the website of the Inland Revenue Authority of Singapore.

 

Are you looking for other DTAs? Then check our section DTAs & TIEAs, a very efficient way to locate numerous DTAs.

 

 

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