On August 24, 2016 the Singaporean Ministry of Finance issued a press release announcing that on that same date the Republic of Singapore and the Federal Democratic Republic of Ethiopia signed an Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (Hereafter: the DTA).
Although the DTA has been signed, it has not entered into force yet. For the DTA to enter into force, the respective ratification procedures have to have been finalized in both countries.
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 Agreement shall apply are in particular:
(a) in the case of Singapore: - the income tax;
(b) in the case of Ethiopia:
(i) the tax on income and profit; and
(ii) the tax on income from mining, petroleum and agricultural activities.
Article 2, Paragraph 4 subsequently arranges that the DTA shall apply also to any identical or substantially similar taxes that are imposed after the date of signature of the Agreement in addition to, or in place of, the existing taxes.
Permanent establishment
Article 5, Paragraph 3 of the DTA (“Permanent Establishment”) arranges that a building site, a construction, assembly or installation project or supervisory activities in connection therewith constitute a permanent establishment only if such site, project or activities last more than six months.
Article 5, Paragraph 6 of the DTA arranges that notwithstanding the preceding provisions of Article 5 of the DTA, an insurance enterprise of a Contracting State shall, except in regard to re-insurance, be deemed to have a permanent establishment in the other Contracting State if it collects premiums in the territory of that other State or insures risks situated therein through a person other than an agent of an independent status to whom Article 5, Paragraph 7 applies.
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.
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.
Article 13, Paragraph 4 of the DTA subsequently arranges that gains derived by a resident of a Contracting State from the alienation of shares deriving more than 50 per cent of their value directly or indirectly from immovable property 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 5 per cent of the gross amount of the dividends.
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 Party, Article 12, Paragraph 2 of the DTA (“Royalties”) maximizes the withholding tax a Source State is allowed to withhold over such royalties to 5 per cent of the gross amount of the royalties.
Other
Furthermore the DTA contains provisions regarding a Mutual Agreement Procedure (Article 24) and regarding the Exchange of Information (Article 25).
Click here to be forwarded to the text of the DTA as available on the website of the Singaporean Ministry of Finance.
Are you looking for other DTAs? Then check our section DTAs & TIEAs, a very efficient way to locate numerous DTAs.
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