SINGAPORE Law and Practice Contributed by: Yang Shi Yong, Drew & Napier LLC
Dividends There is no withholding tax for dividends paid to a non-Singapore tax resident. Royalties Royalties which are paid to a non-Singapore tax resi - dent will generally be subject to withholding tax of 10%. 4.2 Key Treaty Jurisdictions for Inbound Investment Singapore has signed agreements for the avoidance of double taxation (DTAs), including limited DTAs, with more than 100 countries. The DTAs generally provide for the avoidance of double taxation and reduced rates of taxation on interest, royalties, etc. The pri - mary DTA countries that foreign investors would use will depend on the country to which the transaction relates. 4.3 Tax Authority Scrutiny of “Treaty Shopping” Practices Singapore signed the Multilateral Convention to Imple - ment Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the “Multilateral Conven - tion”) in 2017. The Multilateral Convention implements DTA measures proposed as part of the BEPS Project. As a signatory, Singapore has updated a significant number of its DTAs to include, amongst others, an anti-treaty shopping provision and a principal purpose test provision. Under the principal purpose test provision, DTA ben - efits will be denied in abusive cases. Where one of the principal purposes of using treaty country entities by non-treaty country residents is to obtain treaty ben - efits for artificial arrangements or structures without commercial purpose, this will fail the principal purpose test. 4.4 Transfer Pricing Issues for Inbound Investors Inbound investors should bear in mind that local trans - fer pricing rules (which are largely aligned with the OECD Transfer Pricing Guidelines (the “OECD Guide - lines”)) will apply if they choose to operate through local corporations, including:
be deemed income derived by the foreign employee one month before the later of: • the date employment ceases; or • the date the right is granted. The gains will be computed based on the open market price of the shares on that date, less the amount paid for the shares. 3.5 Taxation of Individuals on Shares in Public Corporations Dividends Individuals are exempted from tax on dividends paid by any Singapore tax resident company. Gains on the Sale of Shares The tax treatment on the gains on the sale of shares in publicly traded corporations is similar to that outlined in 3.4 Taxation of Individuals on Shares in Closely Held Corporations . However, the gains on the sale of shares acquired by reason of employment will be calculated based on: • for non-treasury shares, the open market price at the last transaction on the date on which the shares are first listed on the Singapore Exchange after the acquisition of the shares by the person, less the amount paid for such shares; and • for treasury shares, the open market price at the last transaction on the date an appropriate entry is made in the Depository Register by the Central Depository (Pte) Ltd to effect the acquisition of the treasury shares by the person, less the amount paid for such shares. 4. Taxation of Inbound Investments 4.1 Application of Withholding Taxes Interest Subject to certain exceptions, interest and other pay - ments in connection with a loan or indebtedness which are paid to a non-Singapore tax resident will generally be subject to withholding tax of 15%.
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