Revised China-Singapore Tax Treaty Enters Into Force

by Mary Swire, Tax-News.com, Hong Kong

18 September 2007

The Singapore government has announced that a revised treaty for the avoidance of double taxation between Singapore and China, which provides for reduced rates of withholding taxes, entered into force on Tuesday September 18.

The revised agreement was signed on 11 July 2007 by Moses Lee, Commissioner of Inland Revenue for Singapore and Wang Li, Deputy Commissioner of the Chinese State Administration of Taxation. It replaces the original agreement, in force since 12 December 1986 (and subsequently amended by an Exchange of Notes effective as of 1 July 1991), and will have effect on income derived on or after 1 January 2008.

The revised DTA provides for improvements in several of the terms of the existing agreement. Under the revised DTA, the withholding tax rate on dividends will be reduced from 7% (for corporate shareholders holding at least 25% of the share capital) and 12% (for other shareholders), to 5% and 10% respectively.

The withholding tax rate on lease payments for industrial, commercial or scientific equipment will be reduced from 10% to 6%. In addition, gains from the sales of shares in Chinese companies will be subject to tax in China only if the person making the sale has held at least 25% of the share capital of the company in the past 12 months.

The Singapore government said in a statement that the revised DTA will continue to help investors avoid the burden of double taxation of income between Singapore and China, while further strengthening the economic links between the two countries by facilitating the cross-flow of trade, investment, financial activities, technical know-how and expertise.

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