Income Tax (Singapore — Mexico) (Avoidance of Double Taxation Agreement) (Modifications to Implement Multilateral Instrument) Order 2023

This Income Tax (Singapore — Mexico) (Avoidance of Double Taxation Agreement) (Modifications to Implement Multilateral Instrument) Order 2023 was published on Singapore Statutes Online, the official government platform for publicizing legal documents. The order modifies the original tax agreement signed between the two nations to adopt provisions to transpose the „Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting [of (large) multinational firms]“ which was agreed upon in Paris in 2016. The order thereby makes four key changes to the existing tax agreement which was implemented via the Income Tax (Singapore — Mexico) (Avoidance of Double Taxation Agreement) Order 1995:
(1) a modification of the preamble to include in the purpose statement „without creating opportunities for non‑taxation or reduced taxation through tax evasion or avoidance (including through treaty‑shopping arrangements aimed at obtaining reliefs provided in this Agreement for the indirect benefit of residents of third jurisdictions)“;
(2) the modification of a provision for granting taxation relief, if two companies are associated with each other, each is located in one of the jurisdictions mentioned in the agreement, and one would be subject to profit accrual for the benefit of the other (revised Article 9);
(3) the modification of a provision relating to the „mutual agreement procedure“ (Article 25) to state that „Any agreement reached shall be implemented notwithstanding any time limits in the domestic law of the Contracting States”; and
(4) the addition of new Article 27A to set out a provision for the prevention of a treaty abuse. Specifically, the Article states that the double taxation income tax relief shall not be granted in cases where the sole purpose of an entity or person was / is to take advantage of such tax relief for purposes of saving taxes (unless such action is in accordance with the objective of the agreement).
Additionally, the order removes two separate provisions in the „interest income“ article (article 11) and the „royalties“ article (article 12) as regards the disapplication of both articles, if the sole purpose was / is to take advantage of the tax relief for purposes of saving taxes, as these provisions are now stipulated in new Article 27A.