Singapore losing ground to Hong Kong in cutthroat tax competitiveness race

Tax treaties here need a quick upgrade.

Hong Kong is rapidly catching up with Singapore’s comprehensive tax treaty network, which could threaten the republic’s international competitiveness.

According to EY, Singapore’s network of over 70 tax treaties in force has played a key role in attracting multinational companies to establish their headquarters in the country.

However, regional rival Hong Kong is fast closing the gap, having negotiated tax treaties with more than 30 countries over the past decade.

In its 2015 Budget wishlist, EY stated that many of Hong Kong’s tax treaties provide favourable reduced treaty rates and capital gains tax exemption while some of Singapore’s tax treaties which were secured some years ago need to be updated to ensure the treaty benefits remain attractive and relevant in current economic times.

“Singapore needs to refresh its tax treaties by renegotiating the benefits of existing treaties. Otherwise, it risks losing its edge as a hub for headquarters to Hong Kong. The US and Latin American countries are key markets missing from Singapore’s tax treaty network. Singapore businesses that seek to expand to the US would benefit from a tax treaty with negotiated lower withholding tax for royalties, dividends and interest, as well as access to Mutual Agreement Procedures,” said Chung-Sim Siew Moon, Head of Tax Services, Ernst & Young Solutions LLP