The Inland Revenue Authority of Singapore has announced the entry into force of the amending protocol to the 2004 income and capital tax treaty with Germany on 29 March 2021. Changes made by the protocol include the following:

• Article 5 (Permanent Establishment) is amended to extend the time period test after which a construction PE is deemed constituted from 6 months to 12 months;
• Article 10 (Dividends) is amended to reduce the general withholding tax rate from 15% to 10% (the 5% rate for 10% holding is maintained) and to add that a 15% rate applies if the company paying the dividend is a real estate investment company or trust, as the case may be;
• Article 11 (Interest) is amended to reduce the general withholding tax rate from 8% to 0%;
• Article 12 (Royalties) is amended to reduce the general withholding tax rate from 8% to 5% and to exclude the use of, or the right to use, industrial, commercial, or scientific equipment from the scope of royalties;
• Article 13 (Capital Gains) is amended with the addition of the provision that gains derived by a resident of a Contracting State from the alienation of shares, participations, or other rights representing more than 50% of the vote, value or capital stock in a company which is a resident of the other Contracting State may be taxed in that other Contracting State if the alienator had held directly or indirectly such shares, participations, or other rights for a period of less than 12 months preceding such alienation;
• Article 18 (Pensions, Annuities, and Similar Payments) is amended with new provisions regarding the taxing rights of Germany and Singapore for certain withdrawals, pension and similar remuneration, or annuity;
• Article 22 (Remittance Clause) is amended with updated provisions on cases where the limitation does not apply - the Article limits the application of an exemption or reduction of tax under the treaty to the amount of income remitted to or received in a Contracting State in cases where income is subject to tax in that State by reference to the amount remitted to or received in that State and not by reference to the full amount thereof;
• Article 24 (Avoidance of Double Taxation in the State of Residence) is amended with additional provisions that Singapore will exempt certain income that is exempt under the Singapore Income Tax Act, while the general credit method provisions for the elimination of double taxation by Singapore are maintained;
• Article 26 (Mutual Agreement Procedure) is amended with the addition of arbitration provisions, which provide that where the competent authorities are unable to resolve a MAP case within three years from the date all required information has been provided to both competent authorities, then any unresolved issues arising from the case may be submitted to arbitration if the person that presented the case so requests;
• Article 27 (Exchange of Information) is replaced in line with OECD standards for information exchange; and
• Article 29 (Application of the Agreement in Special Cases) is amended with the addition of a principal purpose test, including that a benefit under the treaty shall not be granted in respect of an item of income or capital if it is reasonable to conclude, having regard to all relevant facts and circumstances, that obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in that benefit, unless it is established that granting that benefit in these circumstances would be in accordance with the object and purpose of the relevant provisions of the treaty.

The protocol generally applies from 1 January 2022. The new Article 27 (Exchange of Information), however, applies in respect of requests made on or after the date of entry into force concerning information that relates to any taxable period or any chargeable event in accordance with the law of the requesting Contracting State.