Double Tax Agreement Between Singapore And Indonesia

The approach to avoid double taxation of savings income is similar to the one described above with respect to dividend income. Interest is taxed in the country where the beneficiary of the interest resides (i.e. country B). 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. Indonesia is becoming an important investment target in the region. AI encourages and protects investment between two countries. Singapore and Indonesia signed a bilateral investment agreement on 11 October 2018.

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. Income from one country of a contracting state from real estate in the other contracting state may be taxed in that other state. Income from a company`s real estate and income from real estate used to provide independent personal services are also covered by this provision. Revenues from direct use, leasing or use in another form of real estate are covered by the agreement. The term „building“ refers to real estate within the meaning of the law of the contracting state in which the property is located.

It includes accessories, equipment, livestock, rights and land use, as well as variable or fixed payment rights in return for the activity or right to work, mineral resources, sources and other natural resources.