Singapore-Thailand revised income tax treaty and protocol enter into force

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1 14 March 2016 Global Tax Alert Singapore-Thailand revised income tax treaty and protocol enter into force EY Global Tax Alert Library Access both online and pdf versions Executive summary On 15 February 2016, the revised tax treaty (Revised Treaty) and Protocol between Singapore and Thailand entered into force upon the exchange of Nature of taxes Singapore Thailand Taxes withheld at source Other taxes on income and capital Amounts liable to be paid, deemed paid or paid (whichever is the earliest) on or after 1 January 2017 Tax chargeable for any year of assessment 1 beginning on or after 1 January 2018 after 1 January 2017 Taxes chargeable for any tax year or accounting period beginning on or after 1 January 2017 The Revised Treaty and Protocol, signed on 11 June 2015, will replace the changes to the Organisation for Economic Co-Operation and Development Model Tax Convention, the highlights of the Revised Treaty include an increase in the time threshold for the creation of a construction permanent establishment (PE), reduction of the withholding tax rate on dividends, interest 2

2 2 Global Tax Alert Detailed discussion installation project, supervisory activities in connection The Revised Treaty includes a service PE provision in which, the furnishing of services, including consultancy services, by an enterprise of a Contracting State through employees or other personnel engaged by the enterprise for such purpose, would create a PE if the service activities continue (for the same or a connected project) within the other Contracting State for a period or periods aggregating more than 183 The Revised Treaty eliminates the provision where the purpose of advertising, or supply of information, for The Revised Treaty removes the provision which deems a person who habitually secures orders wholly or almost The taxing rights in respect of income derived by an enterprise of a Contracting State from the operation of aircraft in Contracting State from the operation of ships in international Thailand will accord Singapore the most favored nation use, maintenance or rental of containers, including trailers on funds directly connected with the operations of ships or Dividends The Revised Treaty provides a 10% reduced withholding tax rate on dividends (currently 20%) if the recipient is the 3 Branch remittance impose a 10% branch remittance tax on the gross amount of Interest The Revised Treaty provides a 15% reduced withholding tax rate on interest (currently 25%) if the recipient is the insurance company or a resident of the other Contracting State and is paid with respect to indebtedness arising as a consequence of a sale on credit of any equipment, Royalties Under the Revised Treaty, the current 15% withholding rate will be reduced to 5%, 8% or 10% if the recipient is the 4 extended to include the use of or the right to use, industrial, removes the taxing right on income derived from the Capital gains tax Under the Revised Treaty, gains derived from the disposal of shares deriving at least three-quarters of their value directly or indirectly from immovable property may be taxable in the Contracting State in which the immovable property is Removal of limitation of relief clause The article for limitation of relief has been removed in the reduced tax rate under the provisions of the treaty will apply regardless of the amount remitted to or received in the

3 Global Tax Alert 3 Elimination of double taxation The Revised Treaty provides that where a resident of Singapore owns directly or indirectly at least 10% (currently 25%) of the share capital of the dividend paying company resident in Thailand, the credit will take into account the Thai Time limit for seeking resolution under mutual agreement procedure (MAP) The Revised Treaty includes a three-year time limit from in accordance with the treaty provisions for a resident of a Introduction of most favored nation clause for shipping and interest The Protocol to the Revised Treaty provides for a most Thailand enters into an agreement with another country rates on interest that are lower than the rates provided in the Revised Treaty, the reduced rates provided for in that treaty will apply to Singapore residents effective as of the date of entry into force of that treaty, agreement or protocol or the Endnotes Singapore and Thailand sign revised income tax treaty 5% of the gross amount of the royalties if they are made as consideration for the use or the right to use any copyright broadcasting 8% for the use of, or the right to use, any patent, trade mark, design or model, plan, secret formula or process, or for 10% of the gross amount of the royalties in all other cases

4 4 Global Tax Alert Ernst & Young Solutions LLP, International Tax Services, Singapore Ernst & Young LLP, Singapore Tax Desk, New York

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