Singapore-Panama DTA Enters Into Force

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

22 December 2011

The double taxation agreement (DTA) between Singapore and Panama, which was signed on October 18, 2010, entered into force on December 19 this year.

The agreement is Singapore’s 68th DTA, and is aimed at encouraging and facilitating cross-border trade and investment between the two countries, by providing greater clarity on taxing rights and minimizing the scope of double taxation that may occur as a result of cross-border economic activities.

Amongst other provisions, the DTA lowers withholding taxes, sets out permanent establishment rules for businesses, and provides for the exchange of information for tax purposes based on the internationally-agreed Organization for Economic Cooperation and Development’s standard.

For example, dividends paid by a company which is a resident of one of the countries may be taxed in that country at a maximum rate of 4% if they are paid to a company (other than a partnership) resident in the other country holding directly at least 10% of the capital of the company paying the dividends; or at a maximum of 5% in all other cases of dividends paid between one country and the other.

Tax on interest arising in one country, the beneficial owner of which is a resident of the other, will not exceed 5% of the gross amount of the interest; except that interest paid to the other government or a bank in the other country will be exempt from tax.

In addition, royalties may also be taxed in the country in which they arise but, if the beneficial owner of the royalties is a resident of the other country, the tax so charged shall not exceed 5% of the gross amount of the royalties.

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