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

This Income Tax (Singapore — Vietnam) (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 double tax agreement (DTA) 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 three key changes to the existing tax agreement which was implemented via the Income Tax (Singapore — Vietnam) (Avoidance of Double Taxation Agreement) Order 1994:
(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 relating to the „mutual agreement procedure“ (Article 26) to state that „Any agreement reached shall be implemented notwithstanding any time limits in the domestic law of the Contracting States” and the replacement of paragraph 3 in same context to state that
the authorities of the contracting jurisdictions will strive to mutually address any issues or uncertainties regarding the interpretation or implementation of the agreement and may engage in consultations to mitigate double taxation in situations currently not covered by the agreement; and
(3) the addition of new Article 28A 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).