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Deloitte: investments expected to increase following new double tax treaties with Bangladesh and Singapore

Saudi Arabia continues its drive to enhance investment landscape

1 February 2012 - According to Deloitte Middle East, 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 respective nations.

In the case of the Saudi Arabia-Bangladesh tax treaty, provisions regarding withholding tax apply to payments made as from 1 January 2012, and provisions regarding all other taxes apply to fiscal years that commence on or after 1 January 2012. Under the new treaty, interest is subject to a maximum withholding tax rate of 7.5%, while dividend and royalty payments are subject to a maximum withholding tax rate of 10%.

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 January 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%, while royalty payments should be subject to a withholding tax rate of maximum 8%.

Deloitte Middle East's managing director for International Tax Services, Ali Kazimi, commented: "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 highlights of the treaty include income from investments of the government of a contracting state (including the Saudi Arabian Monetary Agency in the case of the Kingdom 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).

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About Deloitte:
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte's approximately 182,000 professionals are committed to becoming the standard of excellence. Deloitte's professionals are unified by a collaborative culture that fosters integrity, outstanding value to markets and clients, commitment to each other, and strength from cultural diversity. They enjoy an environment of continuous learning, challenging experiences, and enriching career opportunities. Deloitte's professionals are dedicated to strengthening corporate responsibility, building public trust, and making a positive impact in their communities

About Deloitte & Touche (M.E.):
Deloitte & Touche (M.E.) is a member firm of Deloitte Touche Tohmatsu Limited (DTTL) and is the first Arab professional services firm established in the Middle East region with uninterrupted presence for over 85 years. Deloitte is among the region's leading professional services firms, providing audit, tax, consulting, and financial advisory services through 26 offices in 15 countries with over 2,500 partners, directors and staff. It is a Tier 1 Tax advisor in the GCC region (International Tax Review World Tax 2010, 2011 and 2012 Rankings) and was recognized as the 2010 Best Consulting Firm of the Year in the Complinet GCC Compliance Awards. In 2011, the firm received the Middle East Training & Development Excellence Award by the Institute of Chartered Accountants in England and Wales (ICAEW).

© Press Release 2012