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Double Taxation Agreements in Singapore
When two countries reach an agreement to avoid their residents from getting taxed in both countries, that is a Double Taxation Agreement (DTA). But how do DTAs affect your business in Singapore?
Double Taxation Agreements Explained
A DTA could affect your business because of the domestic tax laws that apply to the countries in question. For example, if you were doing business in Singapore and dealing with Australia, you might be subject to the domestic tax laws in both Singapore and Australia. That means you could potentially be taxed twice.
But when a DTA is in place, there is some form of certainty about the kind of tax you will be subject to. A DTA will define each country’s tax rights and stop international tax evasion as well.
Cross-border transactions will be clearly defined when there is a DTA in place. Plus, if you have paid taxes overseas, you get to claim some relief when there is a DTA on your side.
A DTA Is a Good Thing
A DTA is a good thing because the residents benefit from it. In Singapore, a resident is defined as a company or individual conducting business in Singapore. This is per the Singapore Income Tax Act.
Furthermore, an individual is defined as a resident when they have been in Singapore for 183 days or more. This is during the preceding year of assessment. A company is considered a resident when the business is conducted in Singapore.
How You Can Claim Tax Relief in Singapore Under a DTA
To claim relief under a tax treaty, you need to submit a Certificate of Residence. The submission should be made to the foreign country, proving your tax residency in Singapore.
If your tax residency is in another country, you must submit your documents to the Inland Revenue Authority of Singapore. A Certificate of Residency must also be provided to claim relief under the Singapore DTA agreement.
What Type of Income Does a DTA Cover?
A DTA typically covers several types of income. This includes business profits, dividends, and interest. It also covers income from any immovable property, associated enterprises, air, and shipping transport. Any royalties or fees for technical services incurred are also covered under a DTA.
Other income and finances covered under DTAs include capital gains, director fees, independent and dependent personal services, income from the government, and non-governmental annuities and pensions. Researchers, teachers, artists, sports persons, trainers, students, and other income also fall under the DTA.
Need Help With Your DTAS?
Still not sure about how DTAs apply to your business? Let us help you find out. Come and speak to our friendly tax and accounting professionals. We’re well-versed in all things related to taxes. We can help you manage your accounting and taxation needs.
For more information, get in touch with 3E Accounting today.