Saudi investments in Bangladesh and Singapore are expected to increase in the near future as a result of two new double tax treaties that have entered into force between Saudi Arabia and the two countries, Deloitte Middle East said. In the case of the Saudi Arabia-Bangladesh tax treaty, provisions regarding withholding tax apply to payments made as from Jan. 1, 2012, and provisions regarding all other taxes apply to fiscal years that commence on or after Jan. 1, 2012. Under the new treaty, interest is subject to a maximum withholding tax rate of 7.5 percent, while dividend and royalty payments are subject to a maximum withholding tax rate of 10 percent. In the case of the tax treaty between Saudi Arabia and Singapore, the provisions regarding all taxes will apply to the fiscal years that commence on or after Jan.1, 2012. The new double tax agreement will have effect on Singapore tax chargeable for Year of Assessment 2013. Under the treaty interest and dividends should be subject to a maximum withholding tax rate of 5 percent, while royalty payments should be subject to a withholding tax rate of maximum 8 percent. Deloitte Middle East's managing director for International Tax Services, Ali Kazimi, said: “Our forecast for increased Saudi investments and similarly for increased Bangladeshi and Singaporean investments in Saudi Arabia is based on the fact that the new tax treaties between the respective countries provide reduced withholding tax rates on dividends, interest and royalties, and potentially exempt government investments from tax.” The treaty's highlights include income from investments of the government of a contracting state (including the Saudi Arabian Monetary Agency in the case of Saudi Arabia, the Bangladesh Bank in the case of Bangladesh and wholly owned state/public entities) in the other contracting state and income derived from such investments (including gains derived from their alienation) being exempt from taxation in the other state. Similarly, under the Saudi Arabia-Singapore treaty, income from dividends and royalties which is derived by the government of a contracting state (including the Saudi Arabian Monetary Agency and the Public Investment Fund in the case of the Kingdom of Saudi Arabia, the Monetary Authority of Singapore and the Government of Singapore Investment Corporation Pte Ltd in the case of Singapore and wholly owned state/public entities) in the other contracting state as well as any income derived from alienation of shares, debt claims or rights should be exempt from taxation in the other contracting state. In addition the treaties provide clear timelines for triggering a permanent establishment, especially with respect to services provided on the ground in a contracting state. Deloitte Middle East has been recently awarded a Tier 1 Tax advisor status for the GCC region for the third consecutive year (International Tax Review World Tax 2010, 2011 and 2012 Rankings).
