Singapore-UK Double Tax Treaty Guide

Singapore tax payable with reference to income derived from a Singaporean source is to be permitted as a credit against any UK tax payable on the same income. Equally, UK tax payable with reference to income derived from a UK source is to be permitted as a credit against any Singaporean tax payable on the same income.

Ottavia has prepared this guide to provide a broad overview of the bilateral tax treaty between the Government of the United Kingdom of Great Britain and Northern Ireland (UK) and the Government of the Republic of Singapore. This treaty was signed to enhance investment opportunities, investor confidence and trade flows between the two countries through providing relief from double taxation in relation to income tax, corporation tax, capital gains tax and other similar taxes. The latest version of the double taxation agreement was signed on 15 February 2012, and came into force on 27 December 2012. The provisions of the double taxation agreement took effect in April 2013 in the UK and in January 2013 in Singapore.

The provisions of the double taxation agreement are to apply to persons residents in one or both Contracting State and includes individuals, companies and other bodies of persons but is not to include partnerships.

Taxes covered by the provisions of the double taxation agreement are:

  • Income tax, corporation tax and capital gains tax in the UK
  • Income tax in Singapore

To benefit from the provisions of the double taxation agreement, the person is required to be a tax resident of either the UK or Singapore, determined by the person’s domicile, place of management or incorporation, residence or any other similar criterion.

The Singapore-UK double taxation agreement

Snapshot of the DTA

The key features of the double taxation agreement are summarised in the table below:

TOPIC TREATY PROVISIONS
Scope of DTA Tax residents of The United Kingdom of
Great Britain and Northern Ireland and tax
residents of Singapore
Taxes Covered by the DTA Income Tax – Singapore, Income Tax,
Corporation Tax and Capital Gains Tax – UK
Income from Immovable Property Taxed in the country in which the property is located
Business Profits Taxed in the country in which the enterprise is resident. May be taxed elsewhere when the enterprise carries on business in the other Contracting State through the operation of a permanent establishment (PE)
Air Transport/Shipping Profits Taxed in the operator’s country of residence
Dividends 5 per cent of the gross dividend amount where the beneficial owner is a company which indirectly or directly controls a minimum of 10 per cent of the voting power in the paying company.
15 per cent of the gross dividend amount in all other cases – Singapore tax exemption is given for foreign dividends and dividends paid to non-residents
Interest Taxed at a rate of 15 per cent of the gross interest amount where the income was accrued before 31st December 1999 and 10 per cent in all other cases. To be taxed the country in which the interest income arises (i.e. source country) but may also be taxed in recipient’s country.
Royalties Taxed at a rate of 15 per cent of the gross royalty amount where the income was accrued before 31st December 1999 and 10 per cent in all other cases. To be taxed in the country in which the interest income arises (i.e. source country) but may also be taxed in recipient’s country.
Directors’ fees Directors’ fees Taxed in the country in which the company paying the fees is resident.
Personal/Professional Services Income Taxed in country in which the recipient is resident. May also be taxed in the other country in certain situations.
Employment Income Taxed in the country in which the recipient of the income exercises employment. Tax exemptions apply under certain conditions.
Pensions Taxed in the recipient’s country of residence.
Government Payments Remuneration of government officials is to be taxed by the relevant government unless the official receiving the income is a citizen or permanent resident of the country in which the services are performed.
Payments made to Visiting Students or Trainees Payments made to a visiting student or business apprentice for their maintenance or connected to their education or training are exempt from taxation in the visiting country in which they are pursuing training or education.
Payments made to Visiting Teachers or Researchers Payments made to a visiting teachers or researchers apprentice connected to their teaching services or research activities are exempt from taxation in the visiting country in which they are conducting research or providing their teaching services.
Method of Relieving Double Taxation In UK: Tax credit relief
In Singapore: Tax credit relief

Important provisions

Dividend taxation

Where a resident of a Contracting State receives dividends paid by a company resident in the other Contracting State, that income may be taxed in the first-mentioned State (the State in which the recipient resides).

Such dividends may also be taxed in the other Contracting State (the State in which the paying company is resident) according to the laws of the State. However, where the recipient is the beneficial owner of the dividends, the tax charged is not to exceed:

  • 5 per cent of the gross dividend amount where the beneficial owner of the dividend is a company which indirectly or directly controls a minimum of 10 per cent of the voting power in the paying company.
  • 15 per cent of the gross dividend amount in all other cases.

This provision is not to affect the taxation of the paying company on the profits out of which the dividends were paid.

The provisions are not to apply where the beneficial owner of the dividends is resident in a Contracting State and carries on business through the operation of a fixed base or Permanent Establishment in the other Contracting State in which the company paying the dividends is resident, and the dividends paid are effectively connected with the aforementioned fixed base or Permanent Establishment.

Please note that Singapore does not levy a tax on foreign dividends, and dividends paid to non-residents are exempt from withholding tax. Due to Singapore’s single tier tax system, any dividends paid by a company are exempt from taxation in the hands of the shareholders.

Where the dividends do not quality for tax exemption, and the recipient is directly or indirectly in possession of a minimum 10 per cent stake in Singapore company paying the dividend, the dividend is to be subject to UK tax, but credits will be made available for any Singapore tax paid on profits from which the dividends were distributed. These credits may be used to offset any UK tax payable on the dividends.

Interest taxation

Interest that arises in a Contracting State and paid to a person resident in the other Contracting State is eligible for taxation in the other State (the State in which the recipient resides). Interest is said to arise in a given Contracting State when the payer is a resident of that State. Interest may also be taxed in the Contracting State in which it arose according to the relevant legislation under the following conditions:

  1. Where the recipient of the interest is the beneficial owner of the interest, any tax charge is not to exceed
    1. 15 per cent of the gross interest amount where the interest arose or was accrued on or before 31 December 1999.
    2. 10 per cent of the gross interest amount in any other case.
  2. Tax is to be exempt in the Contracting State in which the interest arises where the recipient of the payment is the Government of the State or a financial institution such as a bank in addition to being the beneficial owner of the interest, or the interest is paid by a financial institution such as a bank.

The above provisions are not to apply where the beneficial owner of the interest has a fixed base or Permanent Establishment in the same Contracting State in which the payer is resident, and the interest payments are in connection with the aforementioned fixed base or Permanent Establishment.

Should a special relationship exist between the payer of the interest and its recipient that causes the interest paid to be in excess of what would have otherwise been paid in the absence of such a relationship, then the provision of the treaty is only to apply to the amount that would have otherwise been paid. Any amount of interest paid in excess of this is to be taxed according to the respective laws of each Contracting State.

Singapore levies a withholding tax rate on interest of 15 per cent when the income has been derived from operations taking place outside Singapore. The withholding tax rate is 20 per cent where interest income derived from operations carried out within Singapore is received by an individual, and at the current headline corporate tax rate (17 per cent) for a non-individual.

Royalty taxation

Royalties paid to a resident of a Contracting State and arising in the other Contracting State are to be taxed in the first-mentioned State (the State in which the recipient resides). Royalties are said to arise in a given Contracting State when the payer is a resident of that State.

Royalties may also be taxed in the Contracting State in which the payer resides in accordance with the laws of the State. Should the recipient of the royalties be a beneficial owner of the royalties, any tax charged is not to exceed:

  • 15 per cent of the gross royalty amount where the arose or were accrued on or prior to 31 December 1999.
  • 10 per cent of the gross royalty amount in all other cases.

Royalties are considered to encompass any payment of any kind received as consideration for the right to use or use of any trade mark, copyright patent, design or model, plan, et cetera.

Should a special relationship exist between the payer of the royalty and its recipient that causes the royalties paid to be in excess of what would have otherwise been paid in the absence of such a relationship, then the provision of the treaty is only to apply to the amount that would have otherwise been paid. Any amount of royalties paid in excess of this is to be taxed according to the respective laws of each Contracting State.

In the UK, the general withholding tax on royalties is 20 per cent, and in Singapore the rate is 10 per cent. The double taxation agreement significantly limits the tax burden of royalty recipients.

Capital gains taxation

Any gains derived by a resident of a Contracting State through the alienation of any immovable property situated in the other Contracting State are to be taxed in the other State (the State in which the property is situated). Where a resident of a Contracting State derives gains, those gains may be taxed in the other State under the following circumstances.

  • Where gains were derived from the alienation of shares, deriving a minimum of three-quarters of their value either indirectly or directly from immovable property located in the other Contracting State, or
  • Gains derived from the alienation of interest in a trust or partnership. The assets of the trust or partnership must derive a minimum of three-quarters of their value either indirectly or directly from immovable property located in the other Contracting State.

Where a resident of a Contracting State derives gains from the alienation of a Permanent Establishment or a fixed base – or movable property connected to a PE or fixed base – located in the other Contracting State, those gains may be taxed in the other State (the State in which the fixed base or PE is situated).

Gains derived by a resident of a resident of a Contracting State from the alienation of aircraft or ships operated by an enterprise of the same State in international traffic – or movable property pertaining to the operation of such ships or aircraft – are only to be taxed in that same State.

Where a resident of a Contracting State derives capital gains from the alienation of any other property, those gains are only to be taxed in the Contracting State in which the alienator is resident. A Contracting State may still levy tax on any capital gains made from the alienation of any property by an individual who:

  1. Is a national of that Contracting State;
  2. Is resident in the other Contracting State; and
  3. Was resident in the first-mentioned State at any point during the five years immediately prior to the alienation of the property.

Singapore does not levy a tax on capital gains. Depending on their total taxable income, individuals are taxed between 18 and 28 per cent on capital gains, and the capital gains of companies are subject to the normal rates of Corporation Tax with no annual exemption.

Income derived from the use of immovable property

The Contracting State in which the immovable property is located shall have the right to levy taxes on any income derived by a resident of the other Contracting State from the letting, direct use or use in any other form of the immovable property. Income derived by an enterprise from immovable property and income from immovable property used for performing independent personal services are also covered under this provision.

The term ‘immovable property’ refers to properties defined to come under the definition by the law of the Contracting State in which the property is situated. It is to include accessories, equipment, livestock, rights and usufruct of the immovable property as well as any rights to fixed or variable payments received as consideration for the right to work or working of mineral deposits, sources and other natural resources. Ships and aircraft are not to be considered as immovable property.

The Contracting State in which the immovable property is located shall have the right to levy taxes on any income derived by a resident of the other Contracting State from the letting, direct use or use in any other form of the immovable property. Income derived by an enterprise from immovable property and income from immovable property used for performing independent personal services are also covered under this provision.

The term ‘immovable property’ refers to properties defined to come under the definition by the law of the Contracting State in which the property is situated. It is to include accessories, equipment, livestock, rights and usufruct of the immovable property as well as any rights to fixed or variable payments received as consideration for the right to work or working of mineral deposits, sources and other natural resources. Ships and aircraft are not to be considered as immovable property.

Income from business profits

The profits of an enterprise resident in a Contracting State are only to be taxed in that State, unless the enterprise carries on business in the other Contracting State through the operation of a Permanent Establishment or fixed base. Only the portion of the income attributable to the PE or the fixed base are to be taxed in the other Contracting State.

For the purpose of determining the profits of the Permanent Establishment, it is to be allowed all expenses that could be reasonably attributable to it, and all deductions that were deductible were the PE an independent enterprise. Profits of the PE are to be determined as if it were a separate and distinct enterprise from the enterprise of which it is a PE, and engaged in the same or similar activities under the same or similar conditions.

Income from air & shipping transport

Profits derived by an enterprise resident in a Contracting State through the operation of aircraft or ships in international traffic are only to be taxed in that State. Profits are considered to include income derived from rentals on a bareboat basis, as well as profits from the use, maintenance or rental of containers and any equipment for the transport of containers such as trailers, use for the transportation of merchandise or goods.

Interest on funds connected to the operation of aircraft or ships in international traffic is to be considered profits from these operations and the provisions of the double taxation agreement relating to interest are not to apply on this income.

Individual income taxation

Provision of independent personal services

Income derived from the provision of activities of an independent character such as professional services by an individual resident in a Contracting State are only to be taxed in that same State. The other Contracting State may levy a tax on the income if:

  • the individual retains a fixed base in the other State for the purpose of performing their activities. Only the portion of the income attributable to the fixed base is subject to tax in the other State; or
  • the individual was present in the other State for a period or periods exceeding 183 days in the aggregate within the relevant fiscal year. Only the portion of the income attributable to the period of time spent in the other State and the activities performed in the other state is subject to tax in the other State.

Provision of dependent personal services

Remuneration such as wages and salaries derived by a resident of a Contracting State in respect of employment are only to be taxed in that State, unless the resident’s employment was exercised in the other Contracting State, in which case it may be taxed in the other State.

The Contracting State in which a recipient of remuneration was resident may only tax income derived in respect of employment exercised in the other State where:

  • the recipient was present in the other Contracting State for a period or periods not exceeding 183 days in the aggregate in any 12-month period commencing or ending in the relevant fiscal year; and
  • the services are performed on behalf of or for a resident of the Contracting State; and
  • the remuneration is subject to taxation by the Contracting State; and
  • the remuneration is not directly deductible for the purposes of taxation from the profits of a fixed base or Permanent Establishment situated in the other Contracting State.

Remuneration derived by an enterprise resident in a Contracting State from employment exercised aboard an aircraft or ship operated in international traffic may be taxed in that same State.

Directors’ fees

Where a resident of a Contracting State derives directors’ fees and other similar payments in their capacity as a member of the board of directors of a company resident in the other Contracting State, that income may be taxed in the other State (the State in which the paying company is resident).

Annuities and pensions

Remuneration paid in consideration of past employment or self-employment such as a pension to an individual residing in a Contracting State is only to be taxed in that State.

Other income

Where a resident of Singapore receives any payment out of income received by a trustee or personal representative resident in the UK, that amount is to be treated as arising from the same sources and in the same proportions as the income received by the trustees or personal representatives out of which that amount is paid. Tax paid by the trustees or personal representatives in respect of income paid to the beneficiary is to be treated as if it had been paid by the beneficiary.

Withdrawals made by a resident of the UK from their Supplementary Retirement Scheme account are to be taxed in Singapore.

Government service remuneration taxation

Any remuneration, other than a pension, such as wages or salaries paid by a Contracting State or a political subdivision or a local authority or a statutory body of the same to an individual in respect of services rendered to the same organisation are only to be taxed in the that State. Such income is only to be taxed in the other Contracting State where the services were rendered in that State and the receiving individual is a resident of that State.

Teachers’ remuneration taxation

An individual residing in a Contracting State immediately prior to visiting the other Contracting State at the invitation of the government or of a recognised educational institution such as a university, college or school solely for the purposes of teaching at a such an institution for a period no longer than two years is to be exempt from taxation in the first mentioned Contracting State (the State in which the individual resides) on his remuneration for such teaching.

Provisions for the relief of double taxation

The double taxation agreement provides relief for persons where income is subject to taxation in both Contracting States.

In the case of the UK, any Singapore tax payable on income derived from Singapore sources is to be permitted as a credit against any UK tax payable on the same income. The UK tax payable on income derived from the UK is to be allowed as a credit against any Singapore tax payable on the income. The credit provided is not to exceed the respective country’s tax calculated before the credit was granted.

Income derived from the UK by a Singapore resident is to be exempt from Singapore tax subject to the conditions of exemption of income received from outside Singapore as described in the Singapore Income Tax Act.

For further details on the specific provisions covered under the double taxation agreement between the UK and Singapore, please refer to the Inland Revenue Authority of Singapore website.

For a broad overview of Singapore’s double taxation agreements, please refer to Ottavia’s Singapore Double Taxation Agreements Guide.

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