On March 16, 2016 the Singaporean Ministry of Finance issued a press release announcing that on March 16, 2016 the Second Protocol Amending the Agreement Between the Government of the Republic of Singapore and the Government of the United Arab Emirates for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (Hereafter: the Protocol) entered into force on March 16, 2016.

Based on Article XI, Paragraph 2 of the Protocol the fact that the Protocol entered into force on March 16, 2016 means that its provisions shall have effect as follows:

(i)     in respect of taxes withheld at source, on amounts liable to be paid, deemed paid or paid (whichever is the earliest) on or after January 1, 2017;

(ii)   in respect of tax chargeable (other than taxes withheld at source) for any year of assessment beginning on or after January 1, 2018; and

(iii)  in respect of Article 26 (Exchange of Information), for requests made on or after March 16, 2017 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 discuss a selection of amendments the  Protocol makes to the Agreement Between the Government of the Republic of Singapore and the Government of the United Arab Emirates for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income as concluded on December 1, 1995 (Hereafter: the DTA).

Permanent establishment

The Protocol amends Article 5, Paragraph 3 sub a of the DTA in such way that a building site, a construction, assembly or installation project or supervisory activities in connection therewith, but only where such site, project or activities continue for a period of more than 12 months (was 9 months).

The Protocol amends Article 5, Paragraph 3 sub b of the DTA in such way that the furnishing of services, including consultancy services, by an enterprise of a Contracting State through employees or other personnel in the other Contracting State, provided that such activities continue for the same project or a connected project for a period or periods aggregating more than 300 days in a calendar year concerned. (was 6 months in any calendar year)

Appropriate adjustment clause

Article IV of the Protocol arranges that a new Paragraph 2 containing a so-called appropriate adjustment clause is included in Article 9 of the DTA (“Associated Enterprises”)

This newly to be included Paragraph 2 reads as follows:

“Where a Contracting State includes in the profits of an enterprise of that State – and taxes accordingly – profits on which an enterprise of the other Contracting State has been charged to tax in that other State and the profits so included are profits which would have accrued to the enterprise of the first-mentioned State if the conditions made between the two enterprises had been those which would have been made between independent enterprises, then that other State shall make an appropriate adjustment to the amount of the tax charged therein on those profits. In determining such adjustment, due regard shall be had to the other provisions of this Agreement and the competent authorities of the Contracting States shall if necessary consult each other.”

Dividends and Interest

The Protocol arranges that the Source State is no longer allowed to withhold withholding taxes over dividend distribution and interest payments if they are paid to a resident of the other Contracting State. (Under the DTA before amendments withholding taxes are maximized to 5 percent of the gross amount of the dividends and 7 percent of the gross amount of the interest)

Royalties

Under the Protocol the definition of royalties is narrowed by deleting “or for the use of, or the right to use, industrial, commercial or scientific equipment” from the definition.

Limitation on relief

The Article containing provisions regarding the limitation on relief (Article 22 of the DTA) will be deleted from the DTA.

Exchange of information

The existing article containing provisions regarding the exchange of information (Article 26 of the DTA) will be replaced by a new Article 26 (“Exchange of information).

Click here to be forwarded to the document containing the text of the DTA and the Protocols to the DTA as available on the website of the Inland Revenue Authority of Singapore, which will open in a new window.

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

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