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Ireland signs tax treaties with Kuwait and Singapore

AUTHOR(S): Gerry Thornton
PRACTICE AREA GROUP: Tax
DATE: 01.05.2011

Ireland recently signed new tax treaties with both Kuwait and Singapore, bringing to 62 the number of tax treaties which Ireland has signed.

Immediate Domestic Tax Benefits
These tax treaties will have the force of law once Kuwait and Singapore have completed their ratification procedures.  However, even before ratification, the signing of these tax treaties will ensure that most of Ireland’s key domestic tax reliefs are now available with respect to Kuwait and Singapore.  For example, exemptions from Irish withholding tax can now apply to dividends, interest and patent royalties paid by Irish companies to companies which are tax resident in Kuwait or Singapore (once certain conditions are satisfied).  Irish holding companies can also look to claim Ireland’s substantial shareholders exemption on the disposal of Kuwaiti and Singaporean subsidiary companies.  Finally, dividends of active (trading) profits from these jurisdictions to Ireland can now benefit from the low 12.5% corporation tax rate in Ireland (with a tax credit available for foreign tax paid).

Treaty Benefits
Once in force, the treaties will provide for nil source-country tax on dividends and a maximum of 5% source-country tax on royalties.  Interest payments are exempt from source-country tax under the Kuwait treaty and are subject to 5% source-country tax under the Singapore treaty.  Both treaties expand the traditional definition of permanent establishment to apply to ‘service’ permanent establishments (where services are provided in the source-country other than through a fixed place of business or a dependent agent for a period of six months in any 12 month period).

These new treaties highlight Ireland’s commitment to providing a first class environment international trade and business.

 

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