Singapore And New Zealand Sign New DTA

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

26 August 2009

It has been announced that New Zealand and Singapore have a signed a new double tax agreement (DTA) to replace the existing agreement, which was signed in 1973.

The governments of the two countries signed the revised DTA that now incorporates the new internationally-agreed OECD standard for the exchange of information. This is the second agreement that Singapore has signed that incorporates that standard.

The revised DTA between Singapore and New Zealand will also minimise the double taxation of income that may occur as a result of cross-border economic activities between both countries, thus promoting bilateral trade and investment.

Another key change under the revised DTA is lower withholding tax rates for dividends, interest and royalties, which are 15% under the existing DTA. The new withholding tax rates for interest and royalties are a maximum of 10% and 5% respectively. Interest arising in one country and paid to the government of the other remains exempt from withholding tax.

The withholding tax rate for dividends is 5% if the beneficial owner of the shares is a company that owns directly at least 10 per cent of the voting power of the company paying the dividends, or 15% otherwise.

In addition, there is a change to the definition of a “permanent establishment” to incorporate a building site, or a construction, installation or assembly project, if it lasts more than 12 months, instead of six months in the existing DTA.

New Zealand’s Revenue Minister, Peter Dunne said: "The agreement will modernise our tax treaty arrangements with Singapore and bring them into line with best international practice. In particular, the new agreement will allow for full exchange of information on tax matters between our two countries.”

"Business between the two countries is worth nearly NZD700m (USD480m) a year to New Zealand exporters, while goods worth NZD1.9bn are imported from Singapore,” he continued. Singapore is also an important source of investment for New Zealand, with recent direct investment from Singapore totalling NZD1.6bn. This updated agreement reflects the significance of Singapore as one of New Zealand's more important trading and investment partners.”

The government of Singapore, for its part, confirmed its endorsement of the new standard for exchange of information. It stated that it has been renegotiating existing DTAs and negotiating new DTAs with numerous jurisdictions, including OECD countries.

The updated DTA between the two countries will come into force once both countries have completed their ratification procedures.

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