On April 20, 2017 the Government of the Republic of Singapore and the Government of the Republic of Latvia signed a (second) Protocol Amending the Agreement between the Republic of Singapore and the Government of the Republic of Latvia for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, which entered into force on February 18, 2000 (Hereafter: the Protocol).
Although the Protocol has been signed, it has not entered into force yet. For the Protocol to enter into force, the respective ratification procedures have to have been finalized in both countries.
Below we will discuss a selection of provisions included in the Protocol of which we think they might interest our readers.
Permanent establishment
The Protocol arranges that Article 5, Paragraph 3 of the DTA (“PERMANENT ESTABLISHMENT”) shall be deleted and replaced by the following:
“3.
(a) A building site, a construction, assembly or installation project or supervisory activities connected therewith constitute a permanent establishment only if such site, project or activities last for a period of more than twelve months. (ITP: Is nine months under the DTA that is currently in place)
(b) The furnishing of services, including consultancy services, by an enterprise of a Contracting State through employees or other personnel engaged by the enterprise for such purpose constitutes a permanent establishment 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 183 days in any twelve month period.”
Dividends
The Protocol arranges that Article 10, Paragraph 2 of the DTA (“DIVIDENDS”) shall be deleted and replaced by the following:
“2. However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but if the beneficial owner of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed:
a) 0 per cent of the gross amount of the dividends if the beneficial owner is a company (other than a partnership) (ITP: Is 5% with a minimum direct participation requirement of 25% under the DTA that is currently in place);
b) 10 per cent of the gross amount of the dividends in all other cases.
This paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.”
Interest
The Protocol arranges that Article 11, Paragraph 2 of the DTA (“INTEREST”) shall be deleted and replaced by the following:
“2. However, such interest may also be taxed in the Contracting State in which it arises and according to the laws of that State, but if the beneficial owner of the interest is a resident of the other Contracting State, the tax so charged shall not exceed:
(a) 0 per cent of the gross amount of the interest, if the interest is paid to:
(i) the Government of the other Contracting State who is the beneficial owner of the interest;
(ii) a financial institution of the other Contracting State who is the beneficial owner of the interest;
(iii) a company (other than a partnership) that is a resident of the other Contracting State who is the beneficial owner of the interest, where the interest is paid by a company that is a resident of the first-mentioned Contracting State; or
(iv) a resident of the other Contracting State who is the beneficial owner of the interest, where the interest is paid in respect of a loan, debt-claim or credit that is guaranteed or insured by the Government of either Contracting State;
(b) 10 per cent of the gross amount of the interest in all other cases.”
(ITP: under the DTA currently in place the withholding tax a Source State is allowed to withhold over interest is maximized at 10%)
Royalties
The Protocol arranges that the withholding tax that a Source State is allowed to withhold over royalties shall be maximized at 5 per cent of the gross amount of the royalties (ITP: Is 7.5 per cent under the DTA that is currently in place)
The Protocol furthermore arranges that the definition of royalties as provided in Article 12, Paragraph 3 of the DTA (“ROYALTIES”) shall be replaced by the following definition: “The term "royalties" as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience.”
Exchange of Information
The Protocol arranges that the article on the exchange of information as included in the DTA currently in place shall be deleted and replaced by a new article on the exchange of information (Article 26 of the DTA).
Other
The Protocol furthermore a.o. arranges that Article 22 of the DTA (“LIMITATION OF BENEFIT”) will be amended.
Click here to be forwarded to the text of the Protocol as available on the website of the Inland Revenue Authority of Singapore, which will open in a new window.
Are you looking for the text of the DTA that is currently in place between Singapore and Latvia or another DTAs? Then check our section DTAs & TIEAs, a very efficient way to locate numerous DTAs.
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