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Ratification Of The Agreement Between Singapore And Denmark For The Avoidance Of Double Taxation And Prevention Of Fiscal Evasion With Respect To Taxes On Income

21 Dec 2000

A new Agreement between the Government of the Republic of Singapore and the Government of the Kingdom of Denmark for the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income was signed on 3 July 2000. The new Agreement will replace the old Agreement signed on 3 February 1986.

2 The new Agreement enters into force today, following the completion of ratification formalities. The provisions of the new Agreement shall have effect on income derived on or after 1 January 2001. The provisions of the old Agreement will cease to apply from the effective date of the new Agreement.

3 The old Agreement has worked well for both countries but changes in economic circumstances and policies since then have made it necessary to review and revise the old Agreement.

4 Under the new Agreement, the profits derived by an enterprise of one country from operating ships to the other country is now exempt from tax in that other country (only 50% of profits is exempt under the old Agreement). The rates of withholding tax on interest and royalties have been reduced to 10% of the gross amount, from the treaty rate of 15% in the old Agreement. The withholding tax in Denmark on Danish dividends derived by a Singapore resident remains at 10% of the gross amount. However, the withholding tax will be 5% if the shareholder is a pension fund or other similar institution. Also tax exemption will be extended to dividends derived by a beneficial owner who is a company holding directly at least 25% of the capital of the dividend paying company. The holding would have to be for an uninterrupted period of no less than 1 year, and the dividends are declared within that period.

5 To provide relief from double taxation, Singapore will continue, in the new Agreement, to allow tax paid in Denmark as credit against Singapore tax on income arising in Denmark. In the case of dividends received from Denmark, the Danish tax on that portion of the profits out of which the dividends have been paid will also qualify for tax credit in Singapore if the shareholder is a company resident in Singapore owning at least 10% of the share capital of the dividend-paying company.

6 Generally, Denmark will now provide relief from double taxation by allowing a credit for Singapore tax paid against Danish tax on income of her residents. However, to continue to encourage Danish investments to Singapore, Denmark will exempt from tax dividends paid by a Singapore resident company to a Danish resident company holding directly or indirectly more than 25% of the shares of the dividend-paying Singapore resident company.

7 The terms of the new Agreement will continue to serve the purpose of helping investors avoid the burden of double taxation of income between Singapore and Denmark. The new Agreement will continue to facilitate the cross-flow of trade, investment, financial activities and technical know-how between Singapore and Denmark.

8 The full text of the new Agreement will be published in the Government Gazette today. Further enquiries on the new Agreement can be referred to the Inland Revenue Authority of Singapore at Tel : 3512122.