SINGAPORE Law and Practice Contributed by: Lee Woon Shiu and Cheung Kuan Swan (Catherine), DBS Private Bank
habitually exercise authority to conclude contracts in Singapore. While the domestic definition is intentionally broad, definitions found in Singapore’s tax treaties are gen - erally consistent with those in the OECD Model Tax Convention (OECD Model). Any deviations from the OECD Model in Singapore’s treaties are usually trea - ty-specific and may involve changes to the duration threshold for construction projects or the scope of activities considered preparatory or auxiliary. Furthermore, the MLI has influenced the PE defini - tion in certain treaties by introducing anti-fragmen - tation rules and updating the agency PE provisions to address Base Erosion and Profit Shifting (BEPS) concerns. 3. Taxation of Cross-Border Income 3.1 Income From Immovable Property In Singapore, both residents and non-residents are subject to income tax on earnings derived from immovable property, such as rental income. Residents are required to declare this income as part of their total assessable income, which is taxed at progres - sive resident rates. For non-residents, rental income is typically taxed at the prevailing non-resident tax rates. Expenses directly attributable to the generation of rental income are generally deductible for both resi - dents and non-residents. Capital gains from the sale of immovable property are generally not taxed in Singapore unless the sale con - Business profits are generally taxed on an accrual basis. In line with Singapore’s territorial tax system, Companies are subject to taxation on profits arising in or derived from Singapore, as well as on profits received or deemed received in Singapore from for - eign sources. Deductions are permitted for expenses that are wholly and exclusively incurred in the produc - tion of income. stitutes a trading activity. 3.2 Business Profits
Business profits generated or accrued within Singa - pore are subject to corporate income tax for compa - nies, while individuals carrying on a trade or business (including sole proprietors and partners) are taxed at individual income tax rates. Resident companies are taxed at a flat rate of 17% on their chargeable income. A range of tax incentives is available to reduce the effective tax rate, including tax exemptions for newly incorporated companies and partial tax exemptions. Non-resident companies are also taxed at 17% on profits sourced in Singa - pore, typically through a permanent establishment. Expenses that are wholly and exclusively incurred in generating the income are deductible. 3.3 Passive Income The taxation of passive income in Singapore depends on the nature of the income and where it is sourced. Dividends Under Singapore’s single-tier corporate tax system, dividends paid by resident companies are generally exempt from tax at shareholder level. Foreign-sourced dividends received by a resident company may also qualify for exemption, subject to specific criteria. Sin - gapore does not impose withholding tax on dividends paid to residents or non-residents. Interest Interest income arising in Singapore is ordinarily tax - able. For non-resident recipients, withholding tax applies at 15%, although this rate may be reduced or eliminated under an applicable DTA. Royalties Royalties originating from, or accrued in, Singapore are typically taxable. Withholding tax is levied at 10% on royalties paid to non-residents. However, this rate may be reduced or waived under a relevant DTA. Withholding Tax (General) Under Singapore law, payments to non-residents for certain types of services and income (including inter - est, royalties and management fees) are subject to withholding tax. The applicable rates vary depend - ing on the nature of the income and may be reduced where a DTA exists between Singapore and the recipi -
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