11 Jul 2007
An Avoidance of Double Taxation Agreement (DTA) provides for avoidance of double taxation of income earned in one Contracting State by a resident of the other and makes clear the taxing rights between the two Contracting States on all forms of income from cross-border economic activities between the two Contracting States. The DTA thus helps to facilitate the flow of trade, investment, technical know-how and expertise between the two Contracting States by eliminating double taxation of income.
The existing DTA between Singapore and China, signed on 18 April 1986 and amended by an Exchange of Notes signed on 29 July 1996, has been in force since 12 December 1986. Both countries agreed during the inaugural meeting of the Joint Council for Bilateral Cooperation (JCBC) in May 2004 to update the DTA so as to strengthen the economic relationship.
Singapore and China have successfully completed negotiations on a new DTA. The main improvements under the new DTA include the following:
- The rates of withholding tax on dividends and royalties will be further reduced as follows:
- For dividends, the rates will be reduced from the current 7% (for corporate shareholders holding at least 25% of the share capital) and 12% (others) to 5% and 10% respectively.
- For royalties, the rate on lease payment for industrial, commercial or scientific equipment will be reduced from the current 10% to 6%.
- Gains from the disposal of shares of Chinese companies will be taxed in China only if the alienator of such shares has held at least 25% of the share capital of the company at any time during the 12 month period before the date of the alienation.
The new DTA will continue to help investors avoid the burden of double taxation of income between Singapore and China, and further facilitate the cross-flow of trade, investment, financial activities and technical know-how between the two countries.
The new Agreement will enter into force after ratification by both countries. The provisions of the new Agreement will apply to income arising in the year after its entry into force. Upon ratification of the new Agreement, the provisions of the old Agreement signed on 18 April 1986 and amended by an Exchange of Notes signed on 29 July 1996 will cease to apply from then on.
The full text of the new DTA will be available on the website of the Inland Revenue Authority of Singapore at www.iras.gov.sg after the signing of the DTA.