The second protocol to the double tax agreement between Singapore and the United Arab Emirates, entered into force on 16 March 2016 and will be effective from January 1, 2017, reducing tax rates and changing the rules of the permanent establishment (PE).
The protocol, which was signed in October 2014, revises the conditions for the inclusion of longer periods of thresholds for determining the existence of a permanent establishment.
For example, the report claims that the PE occurs where there is a building site; construction, assembly or installation project; or supervisory activities in connection with this lasts for more than twelve months, in contrast to the threshold of nine months. In addition, under the revised protocol, provision of services, including consultancy services, will be a PE if such activities continued throughout the aggregation of 300 days in any period of twelve months, compared to six months. The agreement also upgrades the position of the exchange of tax information.
The protocol removes withholding tax on interest at source, provided that the interest income may be taxed only in the country of the recipient. Provisions establishing five percent tax rate on income from dividends, were replaced only in the recipient country, under certain conditions. However, this does not affect the taxation of the company in respect of the profits out of which the dividends are paid. With regard to income from royalties, income from the “use or use rights, commercial, industrial or scientific equipment” has been removed from the scope of double tax agreement.