Australia Singapore DTAA – Double Tax Treaty Guide

Australia Singapore DTAA ends double taxation of income between Singapore and Australia and further lowers Singapore’s already-low tax rates for firms and individuals, it was one of several accords that Singapore and Australia signed in 1969.

WHAT IS THE DTAA BETWEEN AUSTRALIA AND SINGAPORE?

A DTAA “Double Tax Avoidance Agreement” is an agreement between two nations that intends to end the practice of taxing the same income twice. A DTAA prevents this from happening because the tax laws of the two nations frequently allow for double taxation if income flows from one to the other.

The DTAA may also offer lower tax rates for specific forms of income than their standard tax rates; these provisions are advantageous to taxpayers and can lessen their overall tax burden. The DTAA prevents corporate and personal income from being taxed twice.

Residents of the participating nations are granted tax reductions under the Australia-Singapore DTAA. When income would ordinarily be liable to tax in both countries, there is a tax deduction available.

In general, if a taxpayer lives in Australia and receives income from Singapore, his income may be subject to tax in both jurisdictions. Nonetheless, per the DTAA’s rules, Australia will offer tax relief by offsetting the tax payable to the Australia Tax Office with the tax paid in Singapore on the income. Singapore would act similarly if the situation were reversed.

The below guide on DTA applies to Australian and Singaporean tax residents.

PERMANENT ESTABLISHMENT

A permanent establishment (PE) is a fixed place of business through which a firm conducts all or part of its operations. Typical permanent establishments include places of management, branches, offices, factories, workshops, locations for the exploitation of natural resources, etc.

BUSINESS PROFITS

Only the nation where an enterprise resides is allowed to tax its profits. The business is subject to taxation in both the contracting nation and the country where its permanent establishment is located if it conducts business there. However, note that the contracting country’s tax obligation only extends to earnings made by the permanent establishment there.

For more information about establishing a new business, refer to the Singapore company registration and Australia company registration.

PROFITS FROM AIRLINE OR SHIPPING

A resident of one of the contracting nations who derives income from operating ships or aeroplanes is solely subject to taxation there (i.e the country of residence of the operator).

Despite the aforementioned rule, income from the operation of ships or planes that are restricted to locations in the other contracting country are subject to taxation in that nation (i.e. the source country).

Airline or shipping profits include:

• earnings from membership in a pool service, a joint transit operating organisation, or an international operating agency.
• Interest on money held in one of the contractual nations by a resident of the other contracting country when those funds are used to operate ships or aircraft—other than those that are only used in the first-mentioned country—in any other context.
• Profits from operations of ships or aircraft confined shall be treated as derived from the carriage by ships or aircraft of persons, livestock, mail, goods or merchandise shipped in one of the contracting countries for discharge at another place in that contracting country or at one or more structures used in connection with the exploration for or exploitation of natural resources situated in waters adjacent to that contracting country.

INCOME FROM REAL ESTATE

In the nation where the property is located, income from real estate is taxable. Included in real estate property are:

• A lease of land.
• The right to explore for or exploit mineral, oil, or gas deposits or other natural resources; the right to receive variable or fixed payments as compensation for the right to explore for or exploit mineral, oil, or gas deposits; quarries or other locations where natural resources are extracted or exploited.
• Revenue from real estate owned by an organisation, as well as income from real estate used for providing professional services.

DIVIDENDS

Shareholders who reside in Singapore but receive dividends from an Australian-based company are subject to a 15% Australian tax on the total amount of dividend income.

Singapore tax is not applied to dividend income received by Australian residents from Singapore-resident companies with a profit source in Singapore.

Note that if the recipient of the dividend income has a permanent establishment in the nation where the company paying the dividend is based and that the holding giving rise to the dividends is in fact connected with a trade or business conducted through that permanent establishment, the aforementioned reduced tax rate or tax exemption will not be applicable. In these situations, the dividend will be regarded as permanent establishment income.

INTEREST

Interest is taxed In the country where the interest income originates or the source country. 

Australian citizens will be subject to Singapore tax at a reduced rate of 10% on the gross amount of interest if they receive interest income from Singapore. 

Similar to this, Australian taxation will be levied at a rate of 10% on the gross amount of interest paid to Singapore citizens who receive income from Australia.

If the resident of one of the contracting countries who is beneficially entitled to the interest has a permanent establishment in the other contracting country and the debt giving rise to the interest is effectively connected with a trade or business conducted through that permanent establishment, the above tax rate on interest does not apply, it should be noted. When interest income is generated in conjunction with a permanent establishment, it is regarded as business income generated by the permanent establishment and is taxed as such.

The aforesaid tax rate will only apply to the agreed-upon amount and not the excess amount paid if the interest paid exceeds the amount that both parties may have agreed upon in the absence of the special relationship between the borrower and lender.

Interest earnings on bonds, securities, debentures, or any other type of debt are referred to as interest income.

INCOME FROM PERSONAL OR PROFESSIONAL SERVICES

Revenue from either personal or professional services is taxable in the nation where the services are rendered. Under the following conditions, such income will not be subject to taxation:

The person stays in the nation where the services are being provided for no more than 183 days.

Not the country where the services are being rendered, but the other contracting country, is where the employer resides.

A permanent establishment (in the nation where the services are rendered) of an organization from the contractual country is not responsible for the individual’s compensation.

The compensation or other revenue received by public entertainers is not excluded from the aforementioned exemptions (such as stage, motion picture, radio or television artistes, musicians and athletes).

The jurisdiction in which the corporation paying the fees has tax laws that apply to directors’ fees.

An individual residing in one of the contracting nations will not be subject to taxation in the other contracting nation on income earned from a job held while travelling internationally aboard a ship or aircraft.

PENSION AND ANNUITY

Pensions and annuities are taxed in the recipient’s home country. Note that a pension paid to a person by the governments of Australia or Singapore in recognition of services provided in the performance of official duties is exempt from this provision.

GOVERNMENT PAYMENTS

Singapore tax is not applied to compensation (other than pensions) that the Australian government pays to anyone for services provided on its behalf, unless that person is a Singapore resident and is not an Australian citizen.

Except in situations where the individual is an Australian resident and not a Singapore citizen, compensation (other than pensions) provided by the Government of Singapore to any individual for services rendered on behalf of the Singapore Government is exempt from tax in Australia.

The aforementioned restrictions do not apply to revenue received in connection with a Government business operation (i.e. a trade or business carried on by a Government for purposes of profit).

ROYALTIES

In the country where the royalty revenue originates, or the source country, it is taxed at a lower rate.

Australian citizens who receive royalties from Singapore are subject to a 10% Singapore tax, which is a reduced rate compared to other countries. Similarly to this, Australian taxation will be levied at a rate of 10% on the gross amount of royalties for Singapore citizens who receive income from Australia.

Notably, the resident of one of the contracting countries who has a permanent establishment in the other contracting country and the information, right, or property giving rise to the royalties is effectively connected with a trade or business carried out through that permanent establishment, the above tax rate on royalty income does not apply. When royalty revenue is generated with a permanent establishment, it is regarded as business income generated by the permanent establishment and is taxed as such.

The aforesaid tax rate will only apply to the agreed-upon amount and not the excess amount paid if the amount of royalties paid exceeds the amount that both parties may have agreed upon in the absence of the special relationship between the payer and the recipient of the royalties.

• Royalty income refers to payments received in connection with the: 
• Use of, or the right to use, any copyright (aside from those associated with literature, drama, music, or the arts), patent, design, model, plan, secret formula, trademark, or similar property or right; industrial, commercial, or scientific machinery; or 
• providing information regarding industrial, commercial, or scientific experience.
• Payments for the use of, or the right to use, motion picture films, tapes for use in connection with radio broadcasting, films or video tapes for use in connection with television, or payments related to the operation of mines, quarries, or the exploitation of natural resources are not included in royalty income.

PAYMENTS MADE TO TRAINEE STUDENTS

Students from one contracting nation who are presently studying or training in another contracting country are not subject to taxation in the other contracting country on funds received from abroad for maintenance, education, or training.

OVERVIEW OF A DOUBLE TAX AVOIDANCE AGREEMENT IN AUSTRALIA-SINGAPORE

The DTAA specifies where a resident of Singapore or Australia’s various forms of income will be liable to tax. 

The sort of income or payments received, and the state where the income is taxed are listed in the following table. This is significant because, according to the DTAA, the place of taxation will decide the tax rate that applies to that particular sort of income.

Australia-Singapore DTAA

In the following situations, certain services are not taxable in the other state even if they are provided there:

• If the person’s total time spent living in the other state for the income year is less than 183 days.
• The person provides their services on behalf of a person who lives in another state.
• No permanent establishment in the other state can be linked to income or profits.

Any personal income that a public entertainer, such as singers, athletes, stage and movie show artists, gets from their own pursuits is not eligible for these exemptions. The state in which the public entertainers provide their services levies taxes on them.

EXCHANGE OF INFORMATION

Where necessary, the tax authorities of the contracting nations shall exchange tax data.

The shared information will be kept private and will only be shared with parties involved in the assessment, collection, enforcement, or prosecution of the taxes covered by the DTA (including any court or tribunal).

Any commercial, business, industrial, or professional trade secret or commercial procedure will not be disclosed.

EXEMPTIONS

Even if the services are rendered in the other state, they are not taxed there under the following conditions:

• If the person’s total time spent living in the other state for the income year is less than 183 days.
• The person provides their services on behalf of a person who lives in another state.
• There is no permanent establishment in the other state that can be linked to income or profits.

Any personal income that a public entertainer, such as singers, athletes, or stage and movie show artists, gets through their personal activities is not eligible for these exemptions. The state in which the public entertainers provide their services levies taxes on them.

CONCLUSION

Overall, the Singapore-Australia Tax Treaty states:

• Real estate income is subject to taxation in the state where the property is located.
• Unless a business maintains a permanent establishment in another State, its profits are only subject to taxation in the State in which it is located.
• When a Singapore resident receives dividends from an Australian firm, the dividend tax rate is 15% or less of the gross amount of dividends. Singapore’s dividend tax is not applicable to Australian residents who receive dividends from Singapore-based businesses.
• In the state where they are earned, interest and royalties are taxed at 10% or less.
• Payment for personal services is subject to taxation in both the state where the service is performed and the state where the recipient resides. If certain services are provided in another State, the tax exemption may be granted, but only in certain situations.
• Businesses may rest certain that there won’t be any disclosure of sensitive information during information sharing between tax authorities (when necessary). Only those involved in the assessment, collection, enforcement, or prosecution of taxes covered by the DTA, including courts and tribunals, have access to the information.