DTAA between Thailand and Singapore
In today’s growing economy, cross-border transactions for businesses in increasing at a rapid pace. When conducting commercial operations, or generating earnings from several nations, individuals often have to pay taxes. As such, the same income may be taxed twice as a result of
taxes levied by various countries. Countries frequently create Double Taxation Avoidance Agreements (DTAAs) to address this issue. Thailand and Singapore double taxation avoidance agreement was created to improve business ties between the two nations. The Thailand-Singapore DTAA is a bilateral pact that attempts to eliminate double taxation on earnings generated by people an enterprises registered in Singapore and Thailand. The DTAA between Thailand and Singapore offers clarity and stability to people and businesses that operate across borders through the elimination of the possible hardship of paying taxes on the same earnings in two different countries.
In this guide, we will be exploring the Singapore and Thailand DTAA. We will be discussing the type of taxes and income that are covered by the Singapore and Thailand DTAA along with their provisions.
Singapore-Thailand Relationship Over the Years
Singapore and Thailand have had a long-standing and significant economic tie since the beginning of the nineteenth century. Thailand was among the first nations to develop diplomatic relations with Singapore, and since that time, their relationship has been continuously developed and maintained. One of Thailand’s biggest international investors is Singapore. With overall trade of approximately $17.5 billion in Singapore in 2022, Thailand is the nation’s ninth-largest trading partner.
By creating a number of cooperation programs like the Singapore-Thailand Enhanced Economic Relationship (STEER) and the Thailand-Singapore Civil Service Exchange Programme (CSEP), the Singaporean and Thailand governments have further strengthened broad institutional ties. Both initiatives seek to improve cross-border connections between citizens of the two nations. Through increased collaboration in the business, investment, and tourist sectors, bilateral ties are being improved between the nations.
Thailand-Singapore DTAA
An agreement was reached between Thailand and Singapore on June 11th, 2015, to eliminate double taxation and fiscal evasion regarding income taxes. This was the new Thailand and Singapore double taxation avoidance agreement which became effective on January 1, 2017.
The existing DTAA between Thailand and Singapore, ratified on September 15, 1975, has been in effect for over 30 years. In addition to other modifications, the new Thailand-Singapore DTAA extends the time frame for evaluating the presence of a permanent establishment (PE) and reduces the withholding tax rates for profits, interests, as well as royalties.
The Singapore and Thailand DTAA will be applicable to individuals who are residents of either one or both of the contracting nations. The Agreement guarantees that investors working in both jurisdictions would receive favorable tax treatment and improves the flow of investments and trade within the two nations. Many firms find it particularly advantageous to establish their management and other back-office activities in Singapore while continuing to run their revenue-generating activities in Thailand.
What does Tax Residency mean?
A person, business, or other legal entity is considered a “resident of a country” if it is liable for taxation there as per the regulations of that nation because of its domicile, residency, location of incorporation, or any other comparable factor.
In the event that a person can be considered to be a resident of both Singapore and Thailand, the significant considerations that establish the taxpayer’s residency status are listed below in decreasing order of importance:
- The nation in which the person resides permanently.
- The nation where the person has his or her core interests with regard to their personal and professional relationships.
- A person shall be regarded as a resident of the nation of which they are a national regardless of whether they have their regular residence in one of the two nations or neither of them.
The competent authorities of the two nations will decide the issue of residency by mutual agreement if none of the aforementioned guidelines apply.
Taxes included the DTAA between Singapore and Thailand
The Thailand-Singapore DTAA will be applicable to taxes when they are assessed by a Contracting State, one of its political subdivisions, or a local government no matter how income taxes are collected. All taxes levied on the revenue, whether they be levied on the earnings as a whole or on specific components of the earnings, such as taxes on gains from the sale of personal or real property, should be considered income taxes.
Here are the various taxes that are included under the Singapore and Thailand DTAA:
A. In Singapore
- Income Tax
B. In Thailand
- Income Tax
- Petroleum Income Tax
Kinds of income included under the Singapore and Thailand DTAA
| Kinds of income | Where is it taxable? |
| Income from immovable property | Is taxable in the jurisdiction in which the property is located. |
| Business profits | Are taxed in the nation in which the business operates and is governed |
| Permanent Establishment (PE) Profits | Are taxed in the nation in which the Permanent Establishment is located and does its operations, but only on the value that is specifically due to that PE. |
| Earnings generated from shipping and air transport | The earnings generated by an organization of a contractual nation are required to pay taxes on any income or profits earned from operating airplanes in international traffic in that contractual nation. A corporation of a contracting nation may have its revenue from operating ships in foreign trade taxed in another Contracting nation, but that other nation’s tax will be decreased by 50% of those earnings. |
| Dividends | A corporation that is a resident of one Contracting State that pays dividends to a resident of another Contracting State can be subject to taxation in that other State. Nevertheless, they can be liable to taxation in the Contracting State where the organization that is disbursing the dividends is based. Yet the tax so levied may not be higher than 10% of the total value of the dividends if the beneficiary of the dividends is a resident of the other Contracting State. |
| Royalties | Typically, royalties are taxed in the nation where the beneficiary resides. The DTAA allows for the taxation of royalties in the contractual nation from which they originate. If the receiver is a citizen of the other contractual nation, the tax thus assessed cannot surpass:
|
| Interests | Interest that is generated in one contractual nation and given to a citizen of another contractual nation could be subject to taxation in that other nation.
Although such interest might additionally be taxed in the participating nation where it originates and in accordance with its rules, if the beneficial proprietor of the interest is a resident of the other participating nation, the tax thus imposed cannot be greater than:
|
| Capital gains | Are taxable in the nation in which the property is situated. |
| Revenue generated from independent personal services | Such income is taxed in the beneficiary’s nation of residence unless the receiver has a fixed base frequently accessible in another nation for the purposes of carrying out his or her operations, or unless the recipient stays in the other nation for over 183 days in any 12-month time frame. |
| Revenue generated from dependent personal services | Taxed in the nation of residence of the receiver, unless the work is performed in another nation. |
| Directors’ fees | Taxable in the nation where the corporation (paying the directors’ salaries) is located. |
| Earnings of artists and sports persons | Taxable in the nation where the activity is carried out. |
| Pensions | Taxes are levied in the nation where the receiver resides. |
| Payments received by students | When receiving training or education in another contracting state while temporarily residing there only for that reason, students and trainees who were residents of one contracting state immediately prior to their visit are exempt from paying taxes in that state. |
Important Provisions of the DTAA
Several significant clauses that control how income is taxed in the two nations are included in the Thailand-Singapore DTAA. Among the important provisions include:
Elimination of Double Taxation
According to the nature of income, the DTAA ensures that both individuals and businesses are only taxed once, either in the country where they reside or where the revenue was generated.
Avoiding Fiscal Evasion
The agreement has clauses in it that forbid tax evasion and the abuse of the agreement. This ensures that the benefits of the DTAA are not misused and safeguards the integrity of the tax systems in both countries.
Permanent Establishment and Tax Resident Status
The DTAA specifies the standards for evaluating a person’s tax resident status and whether a permanent establishment is present. The distribution of taxing authority between the two nations must take into account these factors.
Conclusion
Thailand and Singapore double taxation avoidance agreement provides an important foundation for advancing international trade, boosting economic cooperation, and stimulating cross-border investments. The agreement improves the business environment and fortifies bilateral ties between Thailand and Singapore by preventing double taxation while offering clarity on how different types of income are taxed.
If you conduct business in Thailand or Singapore, you need to understand the Thailand-Singapore DTAA in order to avoid paying taxes twice. Our experts at OdintConsulting can guide you with any queries you may have regarding the DTAA between Thailand and Singapore. Our skilled personnel has an in-depth understanding of the DTAA’s provisions and specifics, allowing us to provide insightful analysis and customized solutions for your unique tax-related problems. We are available to help, whether you need help comprehending the eligibility requirements, figuring out the applicable tax rates, or making sure the agreement’s terms are being followed.
FAQ’s
Here are the various taxes that are included under the Singapore and Thailand DTAA:
A. In Singapore
- Income Tax
B. In Thailand
- Income Tax
- Petroleum Income Tax
- The DTAA lowers the overall tax burden of people and enterprises operating in both countries by preventing double taxation or by offering tax credits.
- By granting favorable tax treatment and lowering tax obstacles, the DTAA promotes cross-border investment.
- For the benefit of taxpayers, the agreement establishes precise rules and standards for the taxation of different sources of income.
The DTAA between Singapore and Thailand covers several kinds of earnings including royalties, interests, dividends, capital gains, business profits, etc.
A permanent establishment is an established place of company operations, which might be a place of administration, a branch, a headquarters, a location where natural resources are extracted, a storage facility, a construction site, or a location where a national enterprise provides services.
The DTAA between Singapore and Thailand went into effect on January 1st, 2017.
The former Double Taxation Agreement, which was signed on September 15, 1975, has been replaced by the present DTA.
- The latest DTA increases the time frame from six to twelve months when assessing the existence of a permanent establishment.
- The percentage of the dividends’ aggregate value that must be withheld as tax has been reduced from 20% to 10%.
- Except for financial organizations, all beneficiaries are subject to a 15% withholding tax instead of the previous 25% rate on interest payments.
- The rate of withholding tax on royalties was reduced from 15% to 5%, 8%, or 10%, based on the kind of royalties.
