NEWS：Tax Treaty Between Greece and Singapore – Details
Details of the Greece - Singapore Income and Capital Tax Treaty (2019), signed on 30 May 2019, have become available. The treaty was concluded in the Greek and English languages, each text having equal authenticity. In the case of divergence, however, the English text prevails. The treaty generally follows the OECD Model (2017).
The maximum rates of withholding tax are:
10% on dividends in general, but 5% if the beneficial owner of the dividends is a company, which holds directly at least 25% of the capital of the company paying the dividends;
7.5% on interest, but 0% if the beneficial owner is a bank or the interest is paid to the government of the Hellenic Republic, including local authorities and political subdivisions or any institution wholly or mainly owned by the government, or the interest is paid to the government of Singapore including the Monetary Authority of Singapore, the GIC Private Limited, a statutory body or any institution wholly or mainly owned by the government of Singapore;
7.5% on royalties; and for service fees there are no provisions.
Deviations from the OECD Model (2017) include that:
the wording of article 3 (General definitions) of the treaty is based on the OECD Model (2014). Therefore, no definition of the term "recognized pension fund" is provided;
the definition of the term "resident", under article 4(1) of the treaty, neither excludes persons subject to a limited tax liability nor contains recognized pension funds;
the tiebreaker rule for legal persons under article 4(3) of the treaty, does not contain the incorporation criterion and is based on the OECD Model (2014);
the definition of permanent establishment under article 5 (Permanent establishments) of the treaty contains the furnishing of services, including consultancy services, through employees or other personnel engaged by the enterprise for such purpose for a period or periods aggregating more than 183 days in any twelve-month period; it does not, however, contain any activities of the same enterprise or closely related enterprises exercised at that place or at another place in the same contracting state, which constitute complementary functions being part of a cohesive business operation; also, the wording of article 5(6), (7) and (8) of the treaty is based on the OECD Model (2014);
article 7 (Business profits) of the treaty generally follows the UN Model (2017);
article 10 (Dividends) of the treaty generally follows OECD Model (2014);
the definition of royalties under article 12(3) of the treaty, as well as article 12(5) of the treaty are based on the UN Model (2017);
the wording of article 13(4) is based on the OECD Model (2014); gains from the alienation of shares or comparable interests quoted on a recognized Stock Exchange are, however, excluded from the scope of application of article 13 (Capital gains);
article 21(3) is based on the UN Model (2017);
article 22 of the treaty (Income from hydrocarbons and natural resources) provides both Greece and Singapore with the right to tax any offshore activities in relation to the exploration or exploitation of the sea bed and sub-soil and their natural resources carried out by one of the contracting states and taking place in the other contracting state, provided that those activities are carried on for an aggregate period exceeding 30 days in any twelve-month period;
article 24(6) of the treaty provides that tax incentives granted to nationals of Greece or Singapore designed to promote economic or social development in accordance with national policy and criteria, are excluded from the scope of article 24 (Non-discrimination);
article 26 (Mutual agreement procedure) of the treaty is based on the OECD Model (2014); and
the treaty does not include any article on assistance in the collection of taxes or territorial extension.
Article 25 (Entitlement to benefits) contains a limitation-on-benefits (LOB) provision according to which no benefit will be granted in respect of an item of income or capital if it is reasonable to conclude, having regard to all relevant facts and circumstances, that obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in that benefit.
Both states generally provide for the ordinary credit method to avoid double taxation.
The treaty contains a Protocol, which provides definitions of the terms "statutory body", "recognized Stock Exchange" and "fiscal year". Also, the Protocol to the treaty clarifies that article 24(4) of the treaty (i.e. deduction of interest payments) may not apply in cases where no withholding tax has been imposed on interest arising in one contracting state and paid to a resident of the other contracting state.