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Singapore-Japan Double Tax Treaty

Singapore-Japan Double Tax Treaty

Most of the largest Japanese companies have established presences in Singapore which is responsible for manufacturing precision items for the high-tech products. This has led to a strong economic bond between the two countries and determined their governments to sign various investment agreement. One of the oldest treaties is the Singapore-Japan double taxation agreement which was first signed in 1961. The treaty was last amended in 2010 in order to accommodate more advantageous tax conditions for Japanese and Singapore companies.

Our lawyers in Singapore can offer more information on the double tax treaty with Japan.

Taxes covered by the Singapore-Japan double tax agreement

The agreement for avoidance of double taxation between Singapore and Japan provides for companies and individuals residing in one or both countries. The treaty covers the following taxes which will benefit from tax exemptions or deductions based on the source of income:

  • –          the income tax in Singapore;
  • –          the income, the corporate and the inhabitant taxes in Japan.

Like most of Singapore’s double tax treaties, the one with Japan also provides for the avoidance of double taxation related to similar taxes imposed in both countries.

Special tax rates in the Singapore-Japan double taxation treaty

In order to avoid double taxation, the agreement between Singapore and Japan has included several special provisions related to permanent establishments of Japanese and Singapore companies in the other state. Subsidiaries and branch offices are deemed permanent establishments under this agreement provided that they operate in the other country for at least 6 months. These enterprises will only be taxed in the country where the income is generated. Our Singapore lawyers can offer more information on the permanent establishment status.

For other incomes, the Singapore-Japan double tax treaty provides for the following special tax rates:

  • –          a 5% rate on dividend payments if the dividends are paid to a company holding 25% of the voting shares in the company paying them and a 15% in all other cases;
  • –          a 10% rate on interest payments;
  • –          a 10% rate on royalties payments.

You can contact our law firm in Singapore for information on taxation in the city-state.