Singapore and France signed a revised Agreement for the Avoidance of Double Taxation (DTA) on 15 January 2015, which is not yet in force.
The new DTA provides for lower withholding tax rates for dividends and new anti-abuse provisions. The most notable changes are the following:
1. Withholding Tax
- Withholding tax rate for dividends is reduced to 5 percent (from 10 percent previously) if the beneficial owner is a company which owns directly or indirectly at least 10 per cent of the share capital of the company paying the dividends. In other cases the withholding rate is 15 percent. However, since Singapore’s domestic withholding rate for dividends is nil, dividends will be exempt from withholding tax in Singapore.
- Distribution received from an investment vehicle that derives its income (that is not taxed) from immovable property shall be treated as a dividend. If the beneficial owner holds directly or indirectly at least 10 per cent of the share capital of the investment vehicle, the distribution will be taxed at the domestic rate of the country that the distribution arises.
- However, if the beneficial owner (resident of the other country) carries on business through a permanent establishment in the country of the payer of the dividends and the holding in respect of which the dividends are paid is effectively connected with the permanent establishment, the above two provisions will not apply. The country of the permanent establishment will impose a tax on the profits only to the extent that is attributable to the permanent establishment.
As a reminder, other withholding taxes:
- Interest — 10% (versus 15% under the general rules in Singapore).
- Royalties – taxed according to the law of the Contracting State in which they arise (10% in Singapore).
2. Anti –Abuse Provisions
It is worth noting a new article 28, which object is as follows:
- If the main purpose for entering into a transaction was to secure a more favorable tax position and that the transaction is contrary to the object and purpose of the DTA, the party shall not be entitled to the benefits of the DTA.
- Remunerations, including pensions, paid by the Contracting State (or government agencies of the Contracting State) to any individual in respect of services rendered to that State may be taxed in that State.
- However, under the revised DTA, if the services are rendered in the other Contracting State by a resident and national of that other Contracting State (the individual is also not a national of the first-mentioned Contracting State), these remunerations and pension shall only be taxable in the other Contracting State.
- In relation to supplementary saving schemes, any amount withdrawn by a resident of a Contracting State from a supplementary saving scheme constituted in the other Contracting State may be taxable in the other Contracting State, provided that the other Contracting State has granted a reduction on the contributions made to that supplementary saving scheme
Do note that the DTA has yet to be ratified and therefore does not have the force of law. The full text of the DTA is available here. Further notification will be given upon completion of the ratification processes.