A new Agreement for the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income between Singapore and Malaysia enters into force on 13 February 2006 following the completion of ratification formalities. The provisions of this new Agreement shall cover income derived on or after 1st January 2007. The provisions of the old Agreement will cease to apply from the effective date of the new Agreement.
2. The new Agreement will continue to help investors avoid the burden of double taxation of income between Singapore and Malaysia and further facilitate the cross-flow of trade, investment, financial activities and technical know-how between the two countries.
3. The revised terms under the new Agreement include the following:
a) The rates of withholding tax on interest and royalties will be reduced to 10% and 8% respectively. Under the old Agreement, interest and royalties are taxed at the prevailing domestic tax rates ranging from 10% to 15%.
b) The tax treatment of technical fees is also made clear under the new Agreement and the rate of withholding tax of 5% will apply to such payment.
c) Mutual tax sparing relief will apply to the first ten years for which the Agreement is effective.
d) In the case of dividends received from a Malaysian resident company, Singapore will allow a tax credit for the Malaysian tax on that portion of the profits out of which the dividends is paid. Malaysia will allow a similar tax credit on dividends received from Singapore if the Malaysian resident company holds at least 10% of the voting shares in the Singapore resident company.
4. The full text of the new Agreement is published in the Government Gazette today and is also available on the website of the Inland Revenue Authority of Singapore at www.iras.gov.sg.
MINISTRY OF FINANCE