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Singapore – China Double Tax Treaty

Singapore – China Double Tax Treaty

Singapore has turned into one of the leading economies in Asia, as a consequence of improving international taxation treaties and offering a more attractive business environment to foreign investors. Singapore has signed a double taxation treaty (DTA) with China, amongst many other states, to prevent double taxation on the income earned by a company which has operations in a country, but is a resident of the other signing country. If you are a Chinese investor interested in opening a company in Singapore, you should know that the latest ratified DTA, signed by the above mentioned states offers advantageous conditions for business development.

Improved conditions of the Singapore – China DTA listed by our specialists who can help investors open a company in Singapore

The first DTA signed by Singapore and China was ratified in 1986; as the market conditions and the relationships between the two states have evolved, a new treaty was ratified in 2007, in July, and came into force in September. If you are interested in Singapore company formation, you should know that the new agreement offers an improvement in taxes applicable to corporations.

Withholding tax on dividends received by the shareholders has changed as follows:

• the corporate shareholders owning at least 25% of the share capital, are taxed at the rate of 5% on dividends (from 7%, as stipulated by the previous DTA);

• the other shareholders are taxed at a rate of 10% on dividends (a decrease from 12%, as imposed by the 1986 DTA).

Taxes on royalties have also been decreased, as such, the lease payment on industrial, commercial and scientific equipment is reduced from 10% to 6%. Our consultants in company formation matters can offer you a better insight on the provisions on the treaty and which apply to your corporation. They can also help you expand your business to this country either by setting up a branch office or a subsidiary or by opening a new company in Singapore.

Business profits in the Singapore-China DTA

The profits of a company registered in Singapore will be taxed only in Singapore. An exception is applied in case the company has a permanent establishment in the other state (China, in this case), but the tax applies only to the profits resulted from the activity of the permanent establishment in China.

If you want to open a company in Singapore, please contact our company formation team, who can provide you with relevant information according to your company’s development needs on the business market in Singapore.