Singapore expects economic and trade ties with the Kingdom of Saudi Arabia (KSA) to grow with the new Avoidance of Double Taxation Agreement. In a statement, the Ministry of Trade and Industry (MTI) said Singapore and Saudi Arabian businesses will enjoy a range of new tax reductions or exemptions under the new Avoidance of Double Taxation Agreement. The agreement went into force on July 1. MTI said Singapore companies in real estate, transport, logistics and infrastructure are expected to benefit substantially from the agreement. "From an industry perspective, the reduced taxation rates and elimination of double taxation from trade and cross-border investment activities will increase the attractiveness of doing business between the two countries," said Jonathan King from AEP Investment Management (AEPim), a Singapore-based fund management company owned by Al Rajhi Holding Group. The firm is majority-owned by Saudi Arabia's Al Rajhi Holding Group and it operates several investment strategies that involve cross-flow of capital between the two countries. Overall, Saudi Arabia is Singapore's largest trading partner in the Middle East. Bilateral trade between both countries rose 28 per cent from S$12.8 billion in 2009 to S$16.4 billion last year. This year, bilateral trade surged over 42 percent to S$9.1 billion between January and May. Singapore Minister for Trade and Industry Lim Hng Kiang said recently that the country is committed to free trade and further expansion of foreign trade. Singapore already has existing double taxation agreements in force with the rest of the Gulf Cooperation Council, namely Qatar, United Arab Emirates, Oman, Kuwait and Bahrain. Saudi Minister of Commerce and Industry Abdullah Alireza said recently that "Saudi Arabia is moving away from simply being a gas station of the world toward a sophisticated laboratory of excellence, innovation and knowledge. We know that we have a long way to go. But we have embarked on that path. And we're not looking back." Prior to the new DTA, Singapore and Saudi Arabia companies were subject to double taxation in trade and cross-border investment activities. Now, however, companies in both countries will be able to utilize tax credits on foreign tax paid and dividends remitted to and from the other country, as well as tax relief on foreign income earned in the other country. Companies in both countries will also enjoy full tax exemptions (within originating countries) for profits derived from the operation of aircraft and ships in international traffic; a reduction of withholding tax on dividends, interest and royalties to 5 percent, 5 percent and 8 percent respectively; and a reduction in Saudi Arabia's capital gains tax to 15 percent from 20 percent, subject to shareholding requirements. On the potential benefits of the DTA for businessmen in both countries, Francis Chong, the Director of the Emerging Markets Division within Singapore's Ministry of Trade and Industry, said: “Currently, Singapore companies invest in various sectors in Saudi Arabia, such as real estate, transport, logistics and infrastructure.
