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How Singapore DTAs benefit International Tax Planning?

Overview

How Singapore DTAs Benefit from International Tax Planning

How Singapore DTAs benefit International Tax Planning?

Firstly, Let us understand the primary objective of international tax planning 1. Reduction of enterprise tax liability 2. Minimization of litigation by ensuring that only appropriate tax treaty structures are implemented 3. Ensuring productive investment 4. Ensuring the enterprise’s economic stability

In order to achieve all the above objective, the very fist step for effective tax planning is the choice of using a low tax, tax treaty country such as Singapore or a non tax , non treaty country such as BVI as domicile of the income- receiving enterprise. With the implementation of an agreed standard of exchange of information (SEI) endorsed by the G20 group of countries and the United Nations and general attitude against international tax evasion. It is advisable against the use of non-treaty countries.

The reasons are as follow:

Non -tax countries are scrutinized more closely by tax authorities resulted in tax authorities to use SEI clause to further scrutinize holding companies established in non -tax jurisdictions. Locating a company in a treaty country such as Singapore provides additional treaty protection.

 

For Example:

How Singapore DTAs benefit International Tax Planning 1

In the example above, if the IRAS makes a determination pursuant to a s 33 of the Income Tax Act that the party having beneficial interest is Parent Co, it will be subject to the normal Singapore withholding tax.

 

Our suggestion 1

While the use of non-tax countries is still viable, in international tax planning, it is recommended one chooses a treaty country rather than a non-treaty, non-tax country for the following reasons:

Non-tax countries are scrutinized more closely by tax authorities. In this respect, there is a strong possibility that tax authorities worldwide will use the international Standard of Exchange of Information clause to further scrutinize holding companies establishes in non-tax jurisdictions. Locating a company in a treaty country provides additional treaty protection, which will generally be based on the OECD Commentary. This is particularly useful in the case of a Singapore outbound investment. In general, OECD member countries are obligated to abide by the OECD Model Convention unless a member country has made a reservation against it.

 

Our suggestion 2

In cases of multi-layer structures, where one or several of the intermediate holding companies is located in a non-tax country, it may be advisable to loop in at least one or two treaty countries so that in case the tax authorities use general anti-tax avoidance rules, a defence line can still be maintained along these treaty countries.

How Singapore DTAs benefit International Tax Planning 2

In the above example, the treaty country is sandwiched between the two non-treaty, non-tax jurisdictions. If the IRAS uses general anti-tax avoidance rules to pierce through the first intermediate holding company, the treaty country will act as another defence line in case of a tax assessment.

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Paul Hype Page & Co. is an ACRA-certified business adviser. Our team of seasoned professional can help you set up a company in Singapore very quickly and easily following all legal entities, and offer you sound advice on how to make it successful too.

What Are The Guidelines For Foreigners to Start a Business in Singapore4

In addition to business registration, we’ll also guide you how to:

  • Write a business plan – Learn how to write a compelling business plan by accessing our sample business plans, or other helpful market research information
  • Perform market research – Understand your business market, learn how it can enhance your business growth, and how to properly conduct a market research for your business
  • Legal issues for small business – If you are thinking about registration of company in Singapore, then you really need a lawyer. In addition, you will learn why legal counseling is very important part of any business.
  • Manage your finances – We’ll offer you the best resources and information to help you fully understand all financial concepts and teach you how to perform basic accounting tasks like budgeting, bookkeeping, financial analysis, among others.

To further aid you, we have provided here a resource area with industry specific information and other industry resources to help you successfully start and run your business.

  1. Singapore Business Opportunities 
  2. Singapore Business Licences
  3. Singapore Tax Planning
  4. Singapore Company Incorporation
  5. Singapore Company Yearly Statutory Requirements
  6. Singapore Working Visa Guide

By Eric Eio
Managing Partner of Paul Hype Page & Co.

Eric was awarded an ACCA graduate in 2000 and also graduated from University of Sydney with a Bachelor degree in Computer Science & Accounting. Since graduation, he had worked in Big 4 as an auditor , including a one year overseas stint with Ernst & Young, Shanghai in 2005. He left his last appointment as an Audit Managerial position with PricewaterhouseCoopers, Singapore in 2008 before setting up his own Certified Public Accountant Practice – Paul Hype Page & Co. His firm is being selected to be one of the advisory panel for Singapore top 500 SME.