Double Tax Agreement Singapore Indonesia

April 9, 2021 at 6:14 am

Income from one country of a contracting state from real estate in the other contracting state may be taxed in that other state. Income from a company`s real estate and income from real estate used to provide independent personal services are also covered by this provision. Revenues from direct use, leasing or use in another form of real estate are covered by the agreement. The term “building” refers to real estate within the meaning of the law of the contracting state in which the property is located. It includes accessories, equipment, livestock, rights and land use, as well as variable or fixed payment rights in return for the activity or right to work, mineral resources, sources and other natural resources. However, ships and aircraft are not considered stationary. Capital gains were not regulated in the previous DBA agreement. It has been modified in line with the Organisation for Economic Co-operation and Development (OECD) model. The OECD model is an agreement developed by OECD countries, which focuses on guiding tax issues during bilateral negotiations. The first agreement between Singapore and Indonesia to avoid double taxation was concluded in 1990. After nearly two years of negotiations, Singapore and Indonesia recently signed a new double taxation agreement (DBA) that will replace the old DBA. The new DBA will enter into force after being ratified by both countries.

The new version amends the rules on cross-border rates and replaces the general rates set by the laws of both countries. The revised agreement aims to stimulate bilateral trade and investment flows between the two countries. On 4 February 2020, at a meeting in Jakarta, Indonesia and Singapore signed the updated agreement on the abolition of double taxation and the prevention of tax evasion. The purpose of the DBA is to reduce the double taxation of income collected in one jurisdiction by a resident of the other jurisdiction. Both countries use the credit method to eliminate double taxation. Singapore also grants a credit for Indonesian tax paid on profits from which dividends are paid by an Indonesian-based company to a Singapore-based company, provided that the Singapore-based company directly or indirectly owns at least 10% of the beneficial company`s share capital. On 4 February 2020, Indonesia and Singapore signed the updated agreement on the elimination of double taxation and the prevention of tax evasion. After its replacement, the new DBA will replace the existing DBA, which has been in effect since 1992.