With the globalization of trade, taxation is a major matter for corporations and individuals. This applies whether the business is small or more established, providing incomes are generated internationally. Taxation must therefore be regulated in order to prevent issues between countries. The Double Taxation Agreements DTA of Singapore are drafted to settle these international matters.

What is Double Taxation ?

Double taxation occurs in international trade or cross-border transactions. In other words, this double taxation arises when there is a conflict of laws between the two Contracting States which declare themselves competent to apply the tax on the same income of the taxpayer.

Double taxation results in high tax rates, thus being a burden for taxpayers, threatening international trade and discouraging investments flows.

What is a Double Taxation Agreement (DTA)?

The Double Taxation Agreements – DTA apply on a subsidiary basis, only after the Contracting States pronounced themselves on the tax situation. 

The Double Taxations Agreements apply to individuals and companies who are residents of one or both of the contracting states and to taxes on income imposed on behalf of each Contracting State irrespective of the manner in which they are levied.  

Double Taxations Agreements have many benefits such as providing rules regulating taxation for cross-border transactions, defining the rights and limits of the tax authority of two jurisdictions, and encouraging trade between countries. It also aims to prevent tax evasion and allows claims for relief for taxes paid overseas.

DTAs in Singapore

To prevent double taxation, Singapore has entered into Avoidance of Double Tax Agreements and other similar tax agreements with many countries around the world. The List of the Singapore Double Taxation Agreements is listed here: List of DTAs, Limited DTAs and EOI Arrangements (iras.gov.sg)

In Singapore, many methods are used to relieve double taxation, either under its domestic law or under its DTAs. The main one is the tax credit given onto the foreign tax incurred by a taxpayer, also known as the Double Tax Relief in Singapore.

Other reliefs are offered in the jurisdiction, such as tax exemption from domestic tax, reduced tax rate applicable to some types of income, relief by deduction, and tax sparing credit.

Conclusion

When trade is conducted across borders, conflicting domestic tax laws between countries may arise, resulting in double taxation on incomes. DTAs have been put in place to prevent the negative impact occurred through international trade and not discourage businesses from operating abroad.

Over the years, Singapore has built itself a well-known extensive network of Double Taxation Agreements all over the world with multiple countries, which attract investors to set up their businesses there. The protection from double taxation guaranteed by such agreements also allows for Singapore based companies to easily expand overseas.

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