On June 1, 2016 the Inland Revenue Authority of Singapore announced that the Convention between the Government of the Republic of Singapore and the Government of the French Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income as concluded on January 15, 2015 (Hereafter: the new DTA) entered into force on June 1, 2016. The new DTA will replace the Convention between the Government of the Republic ofSingapore and the Government of theFrenchRepublic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income that was signed inParis on September 9, 1974.
Based on Article 29, Paragraph 2 of the new DTA (“ENTRY INTO FORCE”) the fact that the new DTA entered into force on June 1, 2016 means that its provisions shall have effect:
(a) In Singapore:
(i) in respect of tax chargeable for any year of assessment beginning on or after 1 January in the second calendar year following the year in which the Convention enters into force;
(ii) in all other cases, on or after 1 January of the calendar year next following the date on which the Convention enters into force.
(b) In France:
(i) in respect of taxes on income withheld at source for amounts taxable after the calendar year in which the Convention enters into force;
(ii) in respect of taxes on income which are not withheld at source, for income relating, as the case may be, to any calendar year or accounting period beginning after the calendar year in which the Convention enters into force;
(iii) in respect of the other taxes, for taxation the taxable event of which will occur after the calendar year in which the Convention enters into force.
Article 29, Paragraph 3 of the new DTA arranges that the provisions of the Convention between the Government of the Republic of Singapore and the Government of the French Republic for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income signed in Paris on 9 September 1974 shall cease to have effect as from the date on which the corresponding provisions of this Convention shall have effect for the first time.
Article 29, Paragraph 4 of the New DTA subsequently arranges that notwithstanding Article 29, Paragraph 3, the provisions of (bb) of sub-paragraph (c) and of subparagraph (d) of paragraph 2 of Article 24 of the Convention between the Government of the Republic of Singapore and the Government of the French Republic for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income signed in Paris on 9 September 1974 shall remain applicable to:
(a) any interest and royalties paid during a 12-month period as from the date of entry into force of this Convention;
(b) interest paid in respect to any debt-claims arrangement entered into before 1st March 2012, but only for the duration of the arrangement that is remaining as at 29th February 2012;
(c) payments received in respect to any agreement for the use of, or the right to use, industrial, commercial or scientific equipment, provided the financial terms and conditions of the agreement are set up before 1st March 2012, and provided the equipment is delivered before 1st January 2013, but only for the duration of the agreement that is remaining as at 29th February 2012;
provided that the conduct of operations resulting in a tax credit had not for main purpose to obtain the benefit of such tax credit.
Below we will discuss as selection of provisions of the DTA of which we think they might interest our readers.
Taxes covered
Based on Article 2, Paragraph 2 of the new DTA (“TAXES COVERED”), the existing taxes which are the subject of this new DTA are:
(a) in Singapore:
(i) the income tax;
(b) in France:
(i) the income tax;
(ii) the corporation tax;
(iii) the contributions on corporation tax; and
(iv) widespread social security contributions and contributions for the reimbursement of the social debt;
including any withholding tax or advance payment with respect to the aforesaid taxes;
Article 2, Paragraph 3 subsequently arranges that the new DTA shall also apply to any identical or substantially similar taxes which are subsequently imposed in addition to, or in place of, the existing taxes.
Permanent establishment
Article 5, Paragraph 3 of the new DTA (“PERMANENT ESTABLISHMENT”) arranges that the term "permanent establishment" also encompasses:
(a) a building site, a construction, assembly or installation project or supervisory activities in connection therewith, but only if such site, project or activities lasts more than 12 months;
(b) the furnishing of services, including consultancy services, by an enterprise of a Contracting State directly or through employees or other personnel engaged by the enterprise for such purpose, but only if activities of that nature continue (for the same or a connected project) within the other Contracting State for a period or periods aggregating more than 365 days within any 15-month period.
Immovable property
Article 6, Paragraph 1 of the new DTA (“INCOME FROM IMMOVABLE PROPERTY”) arranges that income from immovable property may be taxed in the Contracting State in which such property is situated.
Article 13, Paragraph 1 of the new DTA (“CAPITAL GAINS”) arranges that Gains from the alienation of immovable property, as defined in paragraph 2 of Article 6, may be taxed in the Contracting State in which such property is situated.
Article 13, Paragraph 3 of the new DTA subsequently arranges that gains from the alienation of shares or other rights in a company, a trust or any other institution or entity, the assets or property of which consist of more than 50 per cent of their value, or derive more than 50 per cent of their value, directly or indirectly through the interposition of one or more other companies, trusts, institutions or entities, from immovable property referred to in Article 6 and situated in a Contracting State or of rights connected with such immovable property may be taxed in that State. For the purposes of this provision, immovable property pertaining to business carried on personally by such company shall not be taken into account.
Appropriate adjustment clause
Article 9, Paragraph 2 of the new 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 new DTA (“DIVIDENS”) maximizes the dividend withholding tax that the Source State is a allowed to withhold over dividends to:
(a) 5 per cent of the gross amount of the dividends 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;
(b) in all other cases, 15 per cent of the gross amount of the dividends.
Article 10, Paragraph 4 of the new DTA subsequently arranges that where an investment vehicle organised under the laws of a Contracting State,
(a) which derives income or gains from immovable property;
(b) whose income or gains are not taxed;
(c) which distributes most of its income annually,
makes a distribution of income to a resident of the other Contracting State who is the beneficial owner of that distribution, the distribution of that income shall be treated as a dividend. However, where the beneficial owner holds, directly or indirectly, 10 per cent or more of the capital of the investment vehicle, the distribution may be taxed at the rate provided for by the domestic law of the Contracting State in which the distribution arises.
Interest
Article 11, Paragraph 2 of the new DTA (“INTEREST”) maximizes the withholding tax that the Source State is a allowed to withhold over interest payments to 10 per cent of the gross amount of the interest if the beneficial owner of the interest is a resident of the other Contracting State.
Article 11, Paragraph 3 of the new DTA subsequently arranges that notwithstanding the provisions of Article 11, Paragraph 2, interest referred to in Article 11, Paragraph 1 shall be taxable only in the Contracting State of which the recipient of the interest is a resident, if such recipient is the beneficial owner of such interest and if one of the following conditions is met:
(a) Such recipient is a Contracting State, a territorial authority or a statutory body thereof, including the central bank of that state; or such interest is paid by one of those states, territorial authorities or statutory bodies;
(b) Such interest is paid in respect of a debt-claim or of a loan guaranteed or insured or subsidised by the government of a Contracting State or by any other person acting on behalf of a Contracting State;
(c) Such interest is paid by an enterprise of one of the Contracting States to an enterprise of the other Contracting State.
Royalties
Article 12, Paragraph 1 of the new DTA (“ROYALTIES”) arranges that the Source State in principle is not allowed to withhold withholding taxes over royalty payments.
Article 12, Paragraph 3 of the new DTA however arranges that notwithstanding the provisions of Article 11, paragraph 1, royalties received as consideration for the use of, or the right to use, any copyright of literary or artistic work, including cinematograph films and tapes for television or broadcasting or for information concerning commercial experience may be taxed in, and according to the law of, the Contracting State in which they arise.
Limitation of Relief
The new DTA contains an article on Limitation of Relief (Article 22) which reads as follows:
1. Where this Convention provides (with or without other conditions) that income from sources in France shall be exempt from tax, or taxed at a reduced rate, in France and, under the laws in force in Singapore, the said income is subject to tax by reference to the amount thereof which is remitted to or received in Singapore and not by reference to the full amount thereof, then the exemption or reduction of tax to be allowed under this Convention in France shall apply only to so much of the income as is remitted to or received in Singapore.
2. However, this limitation does not apply to income derived by a Contracting State from sources in the other Contracting State. For the purposes of this Article, the term "Contracting State" shall include the persons referred to in paragraph 3(a) of Article 11.
3. Paragraph 1 shall not be construed to apply when Singapore exempts income from sources in France for the purpose of eliminating double taxation as mentioned in paragraph 1(a) of Article 23.
Anti-Abuse
Article 28 (“MISCELLANEOUS”) contains a General Anti Abuse Clause which reach as follows:“The benefits of any reduction in or exemption from tax provided for in this Convention shall not be available where the main purpose for entering into certain transactions or arrangements was to secure a more favourable tax position and obtaining that more favourable treatment in these circumstances would be contrary to the object and purpose of the relevant provisions of this Convention.”
Other
The new DTA also contains articles containing provisions regarding a Mutual Agreement Procedure (Article 25) as well as for the Exchange of Information (Article 26).
Click here to be forwarded to the English version of the new DTA as available on the website of the Inland Revenue Authority of Singapore, which will open in a new window.
Click here to be forwarded to the French version of the new DTA as available on the website of the French Ministry of Finance, 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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