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14 July 2011
Singapore/Spain
Investing from Spain - Use of a Singapore Holding CompanyOn April 13, 2011, Singapore and Spain signed an agreement regarding the avoidance of double taxation (“Singapore-Spain DTA”). Spanish businesses may wish to rely on the Singapore-Spain DTA and use Singapore as a base to invest into other Asian jurisdictions through a Singapore holding company.
Table 1: Comparing the withholding tax rates on dividends, royalties and interest
|
|
Spain domestic rates |
Singapore-Spain DTA |
Hong Kong-Spain DTA |
|
Dividends |
19% |
0-5% |
0-10% |
|
Royalties |
24% |
5% |
5% |
|
Interest |
19% |
0-5% |
0-5% |
Although the Singapore-Spain and the Hong Kong-Spain DTAs are largely similar, the Singapore-Spain DTA offers more favourable withholding tax rates on dividends than the Hong Kong-Spain DTA.
This provides an incentive to Spanish businesses to consider using a Singapore holding company rather than a Hong Kong holding company for tax-planning or tax-structuring purposes.
As a result of the recently signed Singapore-Spain DTA, Singapore has been taken off Spain’s black list of tax havens. Spanish tax legislation provides that a country is removed from Spain’s blacklist when that country signs a DTA containing an exchange-of-information clause.
Apart from the Singapore-Spain DTA, Singapore has an extensive tax treaty network. To date, Singapore has entered into and ratified comprehensive DTAs with 65 countries (with the Singapore-Ireland DTA, which came into force on April 8, 2011, being the 65th DTA).
Dividends paid by a Singapore holding company that is a Singapore tax resident are not subject to any tax in the hands of its shareholders, regardless of whether or not they are Singapore tax residents. There is also no withholding tax on dividends paid to foreign shareholders.