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October 8, 2021

Singapore And Indonesia Double Tax Agreement

Filed under: Uncategorized — admin @ 1:37 am

For example, in accordance with the MLI, the preamble to the DBA has been modified by the fact that the objective of the DBA is to eliminate double taxation “without creating opportunities for non-taxation or tax reduction through fiscal evasion or avoidance (including through agreements to purchase contracts for the indirect benefit of residents of third parties) provided for in this Convention”. The country has remained largely unscathed by the global economic crisis, which has left a hole in several regional economies. Indonesia`s abundant natural resources remain the main driving force of international conglomerates; However, the situation is gradually changing, with a focus on Indonesian consumers. According to reports, foreign direct investment increased by 27% in the first quarter of 2013 to a record 65.5 trillion rupiah, or nearly $7 billion. Large population, young labour and a growing middle class are settling in Indonesia. The Boston Consulting Group recently predicted that Indonesia`s middle class and wealthy consumers would double to 141 million by 2020. Most importantly, the country`s unit labour costs are much lower than traditional destinations such as China, India or Vietnam, which, combined with the recent relaxation of the licensing process and the government`s efforts to reduce bureaucracy, will improve the country`s competitiveness in manufacturing. Indonesia is becoming an important investment target in the region. The updated DTA agreement allows Singapore and Indonesian companies to benefit from a lower withholding tax on royalties.

Income received by a Member State established in a Contracting State from immovable property situated in the other Contracting State may be taxed in that other State. Income from the fixed assets of an enterprise and the income of immobile persons used for the provision of independent personal life services are also covered by this provision. Income from the direct use, rental or other use of immovable property is the subject of the contract. The term “immovable property” means immovable property within the meaning of the law of the Contracting State in which the property is located. It includes accessories, equipment, livestock, rights and usufruct rights of fixed assets, as well as rights to variable or fixed payments in return for the exploitation of mineral deposits, sources and other natural resources or the right to work. However, ships and aircraft are not considered immovable property. The updated agreement reduces the withholding tax for the subsidiary`s royalties and profits. There is now a regulation on income tax on investments (capital gains) in addition to the inclusion of internationally agreed standards to resolve cases of contract abuse. It is remarkable that, in the old version of the agreement, the withholding tax on all types of royalties was 15%. The DBA provides for an exemption from double taxation where income is taxed in both Contracting States.

In the case of Indonesia, singapore tax, which must be paid for Singapore`s income, is allowed as an account of the Indonesian tax payable on that income. The Indonesian tax payable on income from Indonesia is granted as an account of singapore tax payable on such income. The credit thus granted must not exceed the tax calculated before the credit of the country concerned. Capital gains were not regulated by the old DBA agreement. The provision has been added to the new DBA and will be amended in accordance with the Organisation for Economic Co-operation and Development (OECD) model. On 4 February 2020, at a meeting in Jakarta, Indonesia and Singapore signed the updated agreement on the elimination of double taxation (DBA) and the prevention of tax evasion. . .


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