Singapore and Indonesia sign updated tax treaty

The governments of Singapore and Indonesia finally signed, on 4 February 2020, a new treaty for the elimination of double taxation with respect to taxes on income and the prevention of tax evasion and avoidance after five years of negotiations.

The new treaty will replace the existing treaty, which has been in effect since 1992, and will provide for a 10% withholding tax rate on dividends paid to a company that owns directly at least 25% of the capital of the payer company; otherwise, the rate will be 15%. A 10% rate will apply to interest.

In respect of royalties, a 10% rate will apply to royalties paid for the use of, or the right to use, any copyright of literary, artistic, or scientific work; and any patent, design or model, plan, secret formula, or process; an 8% rate will apply to royalties paid for the use of, or the right to use, industrial, commercial, or scientific equipment, or for information concerning industrial, commercial, or scientific experience.

The treaty further provides for tax exemption in the source state for certain capital gains and incorporates internationally-agreed standards to counter treaty abuse.