Singapore Tax Treaty Benefits Investors of Both Countries12 Oct 2018
We refer to the article “Sudah 28 Tahun, Ternyata RI Masih Manjakan Singapura” (Indonesia Apparently Still Indulging Singapore after 28 years), published by CNBC Indonesia on 9 October 2018.
The article raised two issues. First, it claimed that Article 11(3) of the Singapore-Indonesia Avoidance of Double Taxation Agreement ("DTA") “indulges Singapore”. Second, it quoted a state official who claimed that Indonesians were making use of the DTA to avoid taxes in Indonesia.
It is not true that the DTA indulges Singapore. Provisions under the DTA are reciprocal, like any other DTA. So, under Article 11(3), Singapore tax residents are exempted from Indonesian tax on interest income derived from bonds issued by the Indonesia government, and are taxable only in Singapore. Similarly, Indonesian tax residents are exempted from Singapore tax on interest income derived from Singapore government bonds and are only taxable in Indonesia. Provisions like Article 11(3) aim to encourage two-way investment flows. Attracting investments from abroad is just as critical as attracting domestic investment, given that all investors have choices worldwide on where and how they wish to invest.
As for abuse of tax treaties, Singapore does not condone illicit activities. We will not hesitate to take firm action against cross-border tax evasion. If there is any specific instance of such activities, we welcome Indonesia authorities surfacing this to us, in the spirit of mutual cooperation.
Singapore has implemented all internationally-agreed standards for countering base erosion and profit shifting (“BEPS”), and for ensuring tax transparency. Singapore has robust tax cooperation with Indonesia. Like Indonesia, Singapore has signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS. This Convention tackles treaty abuse. We have also commenced exchange of information with Indonesia, including automatic exchange of financial account information.
Singapore values its wide-ranging co-operation with Indonesia, and looks forward to further collaboration in tax matters.
Ministry of Finance
12 October 2018