Singapore And Indonesia Sign An Updated Avoidance Of Double Taxation Agreement

The new section 13 is a remarkable complement to the DBA. It essentially provides that capital gains from the sale of real estate and personal assets are taxed in the state where the property is located. On the other hand, capital gains from the sale of shares in the state of residence of that person transferring shares are taxed, subject to certain exceptions. In other words, a Singapore-based resident who, under certain circumstances, would sell Indonesian shares would benefit from an exemption from Indonesian capital gains tax under updated Article 13 of the DBA. The two countries worked for five years to renew the agreement to ensure that a resident does not pay income tax in a down payment to both countries. The previous agreement had been in effect since 1992. On 4 February 2020, Indonesia and Singapore signed the updated agreement on the elimination of double taxation and the prevention of tax evasion. After its replacement, the new DBA will replace the existing DBA, which has been in effect since 1992. The new DBA will reduce withholding rates on royalties and branch profits. It also contains internationally agreed standards to combat the misuse of treaty provisions by unscrupulous taxpayers.

Finally, the updated tax provisions of the agreement enhance Indonesia`s attractiveness as an investment objective for Singapore-based investors. Withholding rates on interest and dividends under the updated DBA generally remain unchanged. The above changes may affect the relevant players in the sector (for example. B banks and professional agents) by imposing various obligations to comply with the new information exchange rules under the updated DBA and the SIR. The country remained largely unscathed by the global economic crisis, which left a gap in several regional economies. Indonesia`s rich natural resources remain the main power of international conglomerates; However, the situation is gradually changing, with a focus on Indonesian consumers. Foreign direct investment rose by 27% in the first quarter of 2013 to a record 65.5 trillion rupees, or nearly $7 billion. The large population, young workforce and growing middle class are attracting investment in Indonesia. The Boston Consulting Group recently predicted that Indonesia`s middle class and affluent consumers would double to 141 million by 2020. Most importantly, the country`s unit labour costs are much lower than traditional tourist destinations such as China, India or Vietnam, as well as the recent relaxation of the licensing process and government efforts to reduce bureaucracy and improve the country`s competitiveness in manufacturing.