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Singapore, Saudia Arabia DTA Comes Into Effect

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

15 July 2011


The Ministry of Trade and Industry has announced that Singapore’s comprehensive double taxation agreement (DTA) with the Kingdom of Saudi Arabia, which entered into force on July 1, 2011, provides a range of new tax benefits for both Saudi Arabian and Singapore businesses.

It is expected that the DTA will spur new economic collaboration between the two countries, and expand the existing trade and investment relations. Saudi Arabia is already Singapore’s largest trading partner in the Middle East. Bilateral trade between Saudi Arabia and Singapore rose by over 28% to SGD16.4bn (USD13.5bn) last year, from SGD12.8bn in 2009, and had already increased by 42% in the first five months of 2011.

Saudi Arabia is also the last country in the Gulf Cooperation Council (GCC) to sign a comprehensive DTA with Singapore. Singapore already has existing DTAs in force with the rest of the GCC – Qatar, United Arab Emirates, Oman, Kuwait and Bahrain. Besides the DTAs, the GCC signed, in December 2008, its first free trade agreement with Singapore in December 2008, which is currently pending ratification.

Prior to the new DTA, Singapore and Saudi Arabia companies were subject to double taxation in trade and cross-border investment activities. Now, however, companies in both countries will be able to utilize tax credits on foreign tax paid and dividends remitted to and from the other country, as well as tax relief on foreign income earned in the other country.

Companies in both countries will also enjoy full tax exemptions (within originating countries) for profits derived from the operation of aircraft and ships in international traffic; a reduction of withholding tax on dividends, interest and royalties to 5%, 5% and 8% respectively; and a reduction in Saudi Arabia’s capital gains tax to 15% from 20%, subject to shareholding requirements.

On the potential benefits of the DTA for businessmen in both countries, Francis Chong, the Director of the Emerging Markets Division within Singapore’s Ministry of Trade and Industry, said: “Currently, Singapore companies invest in various sectors in Saudi Arabia, such as real estate, transport, logistics and infrastructure. These companies are expected to benefit substantially from the implementation of the DTA. The benefits will also be enjoyed by Saudi Arabia companies with projects in Singapore in the airlines, manufacturing, financial services, and oil and gas sectors, amongst others.”

TAGS: tax | marine | double tax agreement (DTA) | Saudi Arabia | interest | royalties | law | aviation | Singapore | tax credits | agreements | withholding tax | dividends | Gulf Cooperation Council

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