Greece-Singapore DTAA: Double Tax Avoidance Agreement

This article offers insights into the Greece-Singapore Double Tax Treaty, offering a valuable resource for individuals and companies engaged in business activities spanning both Greece and Singapore. Delving into the treaty's scope, covered taxes, taxation rules for various income types, and provisions for mitigating double taxation, it equips readers with essential knowledge for optimizing tax strategies in cross-border operations.

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This article includes the following topics:

Singapore-Greece DTA — At A Glance
Introduction to Singapore-Greece Business Relations
What is the Greece-Singapore Double Tax Treaty?
Scope of the Singapore-Greece DTA
Key Provisions of the DTA
Residency-Based Taxation
Taxation of Income
Avoidance of Double Taxation
Conclusion

Greece-Singapore Double Taxation Avoidance Agreement

Introduction to Singapore-Greece Business Relations

Singapore and Greece enjoy robust and enduring relations characterized by strong trade and investment flows. The bilateral economic ties between Singapore and Greece are particularly prominent in the merchant shipping sector, offering substantial potential for attracting investment and further growth. Both nations also exhibit satisfactory cooperation, supporting each other's candidacies in international organizations and reflecting the depth of their mutual collaboration.

Diplomatic engagements, such as the visit of the Greek Minister of Foreign Affairs to Singapore on November 29, 2017, have reaffirmed a commitment to strengthening Greece-Singapore relations, with a focus on advancing bilateral economic cooperation.

Singapore serves as an ideal and natural partner for Greek companies seeking to access burgeoning markets in ASEAN. Situated at the nexus of a rapidly developing region, Singapore offers an attractive base for global companies to establish their regional operations. Its conducive business environment, characterized by sound legal and regulatory frameworks, coupled with its consistent ranking as one of the easiest countries in the world to conduct business, makes Singapore an appealing destination for global enterprises.

Singapore currently hosts a significant number of Greek companies across various sectors, including information technology, energy, chemicals, construction, and infrastructure. These Greek firms have contributed their expertise and technological capabilities to Singapore's economy, forging successful partnerships with local enterprises.

The deep integration of businesses between Singapore and Greece is facilitated by relevant legal instruments that enhance cooperation. As a member of the European Union, Greece shares numerous international agreements with Singapore, including the EU-Singapore Free Trade Agreement, EU-Singapore Investment Protection Agreement, and EU-Singapore Partnership and Cooperation Agreement. Among these agreements, the Greece-Singapore Double Tax Treaty stands out as a vital mechanism for fostering cooperation in the tax domain, which will be the focus of our further discussion in this article.

understanding key points of Singapore-Greece DTA

What is the Greece-Singapore Double Tax Treaty?

The Greece-Singapore Double Taxation Agreement (DTA) is a bilateral agreement established between the two nations with the following objectives:

Preventing Double Taxation: The DTA aims to safeguard residents of both countries against double taxation, ensuring that the same income is not taxed twice by both states.
Ensuring Certainty: It provides certainty of treatment for cross-border trade and investment activities, offering clarity and predictability to taxpayers.
Preventing Tax Discrimination: The agreement seeks to prevent excessive foreign taxation and discriminatory practices against business interests abroad.

Key Details of the Greece-Singapore DTAA

Signing and Effective Date: Signed on 30 May 2019, the DTA between Singapore and Greece became effective on 1 January 2023.
Access to Full Text: The complete text of the Greece-Singapore DTA is available at IRAS website.

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Scope of Greece-Singapore DTAA

The Greece-Singapore Double Taxation Agreement (DTA) applies to residents of both contracting states, encompassing legal entities and individuals who reside in Greece, Singapore, or both countries.

The DTA comprehensively covers all taxes on income and capital imposed by the relevant tax authorities. These include taxes levied on total income, total capital, or specific elements of income or capital. Such taxes encompass gains from the disposal of movable or immovable property, as well as taxes related to capital appreciation.

In the case of Greece, the treaty pertains to "Hellenic tax," specifically:

Income and capital taxes related to natural persons.
Income and capital taxes related to legal persons.

For Singapore, the DTA pertains to the "Singapore tax," specifically:

Income tax.

Additionally, the agreement extends to any taxes that may be introduced subsequently, either in addition to or in substitution of existing taxes.

Key Provisions of the Greece-Singapore DTA

Residency-Based Taxation

The Greece-Singapore Double Taxation Agreement follows a residency-based taxation system. This means that individuals and corporate entities are considered residents for tax purposes in one of the two contracting states. Taxes are then charged only by the country of residence, rather than the country where the income originates.

In the case of individuals, residency is determined based on citizenship. If citizenship does not apply, residency is determined by factors such as where the individual conducts most of their activities, where they reside, or where they hold a resident permit. In cases where an individual holds citizenship in both countries, their fiscal residency will be determined by the country where they have the closest ties. Income taxes are then paid to that country, and the individual can benefit from the provisions of the double tax treaty in that jurisdiction.

The tax residency of corporate entities is determined by the location of their "effective management." This typically refers to the place where the Board of Directors conducts its meetings.

In situations where none of the aforementioned criteria can establish residency definitively, tax authorities from both countries will collaborate to reach a mutual agreement on the fiscal residency of a specific individual or company. However, such instances are rare.

Taxation of Income

According to the treaty, dividends, royalties, and interest are subject to taxation in the country of the recipient's residency (income tax) and in the country where the company paying the dividends is based (withholding tax). To prevent double taxation, residents of the contracting states may utilize a tax credit scheme. Moreover, the DTA outlines reduced withholding tax rates on dividends, interest, and royalties. The following table illustrates these rates:

Income	Regular withholding tax in Greece	Regular withholding tax in Singapore	Treaty tax rate
Dividends	5%	Singapore does not impose withholding tax	5% if the recipient is a company that owns at least 25 percent of shares of the paying company; and 10% percent in all other cases. Indeed, considering the current tax rates in both countries, this relief does not apply at present.
Royalties	20%	10%	7.5%
Interest	15%	15%	7.5%

It's important to note that currently, Singapore does not impose taxes on capital gains, therefore, such gains are taxable only in Greece.As a general principle, profits from the sale of any property are subject to taxation only in the state where the seller is a resident.

However, there are exceptions to this rule:

Gains obtained by an individual residing in State A from the sale of immovable property located in State B are also subject to taxation in State B.
Gains from the sale of movable property forming part of the business assets of a Permanent Establishment in State A of a company based in State B, including gains from the sale of such a PE, are also subject to taxation in State A.
Gains from the sale of ships or aircraft operated in international traffic are subject to taxation in the state where they are registered.
Gains obtained by a resident of State A from the sale of shares or comparable interests deriving more than 50% of their value from immovable property located in State B are also subject to taxation in State B.

If an enterprise operates abroad through a Permanent Establishment (PE), the profits attributable to that PE are subject to taxation in the foreign state. The PE is treated as a distinct entity for tax purposes and encompasses fixed places of business such as management offices, branches, factories, workshops, mines, or construction projects lasting more than 12 months.

However, certain activities do not constitute a PE, including:

The use of facilities solely for storage, display, or delivery of goods belonging to the enterprise.
Maintenance of a stock of goods solely for storage, display, or delivery.
Maintenance of a stock of goods or processing by another enterprise.
Maintaining a fixed place of business solely for purchasing goods, collecting or supplying information, advertising, or similar activities.

Two enterprises are considered to be Associated Enterprises where:

An enterprise based in State A directly or indirectly participates in the management, control, or capital of an enterprise based in State B.
The same individuals directly or indirectly participate in the management, control, or capital of enterprises in both State A and State B.
The commercial relations between these enterprises differ from those of independent entities, indicating transactions that are not conducted at arm's length.

In such instances, any profits that would have accrued to one enterprise but did not due to the above conditions may be attributed to that enterprise and taxed accordingly.

Salaries, wages, and similar payments received by a resident of State A for work performed in State B may be subject to taxation in State A and State B.

However, the income is taxable only in State A if the recipient:

Spends less than 183 days in State B during the tax year,
Receives payment from an employer not based in State B, and
Does not receive payment from a Permanent Establishment (PE) of the employer in State B.

In cases of double taxation, the individual can claim a tax credit in their country of residence.

Avoidance of Double Taxation under Singapore-Greece DTA

The primary objective of any Double Taxation Agreement is to alleviate the tax burden on individuals and businesses by eliminating the risk of being taxed twice on the same income. The cornerstone of achieving this goal is the provision of a foreign tax credit.

The foreign tax credit serves as a mechanism to offset income tax paid in the country where the income was generated. For instance, if you paid S$1000 in taxes to Greece and are obligated to pay S$1500 on the same income in Singapore, the foreign tax credit will amount to S$1000. Consequently, you would only need to pay S$500 in taxes to Singapore, resulting in a reduction of your overall tax liability.

Greece-Singapore DTA - At a Glance

The Greece-Singapore double taxation avoidance agreement specifically states where different types of income are subject to tax. Essentially, the place of taxation determines the rate of tax applicable to each type of income as follows:

Type of income or payment

Where it is taxed

Income from immovable property

Taxed in the state where the property is situated

Profits from business

Taxed in the state where a company is managed and controlled — typically, the country of the company's Board of Directors meetings

Profits from shipping and air transport

Taxed in the state where a company is managed and controlled

Dividends

May be taxed in the state where the recipient resides and in the state where dividends arise

Interest

May be taxed in the state where the recipient resides and in the state where interest arises

Royalties

May be taxed in the state where the recipient resides and in the state where royalties arise

Capital gains

Taxed in the state where the seller is a resident.

Professional services

Taxed in the state where the person is a resident and in certain cases in the state where the work is performed

Salaries and wages

Taxed in the worker’s state of residency and in certain cases in the state where the work is performed

Directors’ fees

Taxed in the state where the company (paying the directors’ fees) resides

Income of artists and sportspersons

Taxed in the state where activities are performed

Pensions

Taxed in the state where the recipient resides

Government payments

Taxed in the state that pays the remuneration

Payments to students and trainees

Tax exempted

Permanent Establishment profits

Taxed in the state where it carries on business activities, but only in the amount attributable to that PE.

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Conclusion

In conclusion, the Greece-Singapore Double Tax Treaty stands as a crucial instrument for individuals and businesses engaged in cross-border activities between Greece and Singapore. By delineating clear rules on taxation, preventing double taxation, and providing avenues for tax mitigation, the treaty fosters an environment conducive to bilateral trade and investment.

For those seeking seamless company incorporation services in Singapore, CorporateServices.com offers tailored solutions for navigating the complexities of establishing and managing businesses in the region. With expertise in company registration, compliance, and ongoing support, our company ensures a smooth and efficient process, empowering businesses to thrive in the dynamic economies of Greece and Singapore. Contact us today to learn more about our comprehensive range of services and how we can assist you in achieving your business goals in Singapore.