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In many cases, several DBA agreements are signed in two countries, with different areas of application at different times. The Singapore-Hong Kong Limited Taxation Agreement applies to both individuals and companies established in one or both contracting states. The convention stipulates that residence on the basis of registration for tax purposes in Singapore or Hong Kong. To date, there are about 3,000 DTAs in the world, with 100 dtAs per year. The DBA aims to prevent the same income from being taxed by two or more states, thereby promoting cross-border investment. Studies have shown that foreign direct investment in developing countries with which there is a “tax savings agreement” is 1.4 to 2.4 times higher than it would otherwise have been. To understand how a DBA works, we must first learn what can lead to double taxation. Double taxation is due to the fact that tax rules can vary from country to country: the development of international trade and multinationals has increased the need to examine the issue of double taxation. As a company or individual looking for business opportunities and investments beyond your own country, you would of course deal with the problem of taxation, especially if you will have to pay twice taxes on the same income in the host country and in your country of origin. As a result, you are trying to structure your operations to optimize your tax position and reduce costs that, in turn, would increase your global competitiveness. It is the relevance of the DBA or Singapore`s tax treaties that comes into play.
Double taxation can be avoided if foreign income is exempt from national tax. The exemption may be granted for all or part of the foreign income. Tax exemption for dividends from foreign sources, branch and service revenues – Section 13 (8) of the Singapore Income Tax Act A Singapore-based reporting company may benefit from exemptions from dividends, profits from foreign branches and services transferred to Singapore if the following conditions are met: tax treaties allow them access to double taxation exemptions , either through tax credits, tax exemptions or tax exemptions. These facilities vary from country to country and depend on different income items. Learn more about Singapore`s double taxation conventions. An overview of the comprehensive bilateral tax treaty between Singapore and India to avoid double taxation of income. Find out more here. If you or your company meets the residency requirements mentioned above, you can use the provisions of a Singapore DTA with Singapore as a state of residence. Note that even if there is no DBA between Singapore and another country with which you do business, you may still be able to avoid double taxation by using Singapore`s unilateral tax credits for Singapore residents. A DBA is an agreement between two countries that aims to avoid double taxation of taxpayers` income that can flow between the two countries.
In Singapore`s list of tax treaties, you will know if your country has a tax agreement with Singapore and to know the specific provisions of this DBA. The cancellation of double taxation conventions is intended to eliminate this unfair penalty and encourage cross-border trade. If you are doing business with (or since) Singapore of a DTA country, it is unlikely that you will face double taxation. In addition, Singapore also grants unilateral tax credits to its resident companies in the event of double taxation by countries where Singapore does not have a DBA.