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How Singapore DTAs benefit International Tax Planning?

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.

Paul Hype Page & Co – Acra service provider and Asean Chartered Accountant.

Paul Hype Page & Co. have 3 physical offices in Singapore, Malaysia and Indonesia

Our Firm Goal is to assist Foreigner and Foreign Companies to set up business in Asean.


How we can help you:

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Step 1- Listen to your Business plan and Relocation needs.

Step 2- Analysis your Singapore Tax Planning

Step 3- Recommend the most suited type of Company Incorporation , Open Bank account  and

Work Visa

Step 4- Arrange for your Spouse and Children Visa

Step 5- Assist as your company to hire staffs and handle all HR matters

Step 6-  Every financial year end, we assist you with your yearly Acra Financial and Tax Compliance

Step 7- Assist you to expand business to Malaysia, Indonesia , Vietnam and Thailand.

Get in Touch with Us Today.

Paul Hype Page