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

16 Mar 2001

An Agreement between the Republic of Singapore and the Portuguese Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income was signed in Singapore on 7 September 1999. This Agreement enters into force today following the completion of ratification formalities. Its provisions shall apply generally to income derived on or after 1 January 2002.

2 The main objective of the Agreement is to provide a framework to facilitate greater cross-flows of trade, investment, technical know-how and expertise between Singapore and Portugal, thereby strengthening bilateral economic links for the benefit of both countries.

3 Through the provisions of the Agreement, double taxation which may arise from the cross-border flows of income between the two countries will be eliminated. The taxing rights of each country on all forms of income are also specified. The Agreement therefore provides certainty to residents of both countries regarding their tax liabilities when they invest and operate in the other country. The Agreement should encourage entrepreneurs of each country to seek opportunities in the other country, resulting in greater economic cooperation between Singapore and Portugal.

4 The Agreement provides for an exemption of tax in the country of source on profits derived from the operation of ships or aircraft in international traffic. There are also provisions for the country of source to tax dividends, interest and royalties at a reduced rate of not more than 10% of the gross amount of such income. The Agreement also specifies the circumstances under which other types of income are taxable or exempt in Singapore or Portugal.

5 To eliminate double taxation, Portugal will allow tax paid in Singapore as a credit against Portuguese tax on income arising in Singapore. Similarly, Singapore will allow tax paid in Portugal as a credit against Singapore tax on income arising in Portugal. In the case of dividends received from Portugal, the Portuguese tax on that portion of the profits out of which the dividends are paid also qualifies for tax credit in Singapore if the shareholder is a Singapore resident company owning at least 10% of the share capital of the dividend-paying company.

6 The full text of the Agreement is published in the Government Gazette today. With the coming into force of this Agreement, Singapore now has in force comprehensive Agreements with 42 countries. Further enquiries regarding the Agreement may be referred to the Inland Revenue Authority of Singapore at Tel No. 351-2119.