Op-Ed Commentary: Chris Devonshire-Ellis
Jul. 4 – Singapore has been entering into bilateral investment treaties (BITs) with other countries since the mid-1970s and continues to use such treaties today. Although many of these earlier treaties have now been superseded by more complicated and sophisticated trade agreements such as double taxation agreements (DTAs) and other bilateral mechanisms, BITs remain important for Singapore and its smaller trading partners, and particularly so for investors from emerging nations with relatively immature tax laws and regulatory environments. Singapore’s BITs also serve to underpin the bilateral investment conditions between Singapore and other developing nations that have not yet negotiated DTA agreements with the country.
The purpose of a BIT between two countries is reciprocal encouragement, promotion and protection of investments in each other’s territories by companies based in either country. These treaties typically cover the following areas:
- Scope and definition of investment;
- Admission and establishment;
- National treatment;
- Most-favored-nation treatment;
- Fair and equitable treatment;
- Compensation in the event of expropriation or damage to the investment;
- Guarantees of free transfers of funds; and
- Dispute settlement mechanisms, both state-state and investor-state.
Singapore has 18 BITs in place, and continues to use them in its bilateral relationships. For example, while the BIT signed between Singapore and France for example was ratified way back in 1976, others still continue to be put into position. The BIT agreement between Singapore and neighboring Indonesia was concluded as recently as 2005.
While BIT agreements as a general rule of thumb may be now purely a matter of academic or historical interest among more developed nations with a wealth of DTA and other agreements under their belts, for some of the emerging nations with a relatively new tax code and investment regulatory environment, BIT provide a useful starting mechanism for understanding the legal, tax and dispute resolution mechanisms for investors into Singapore. As such, BITs are a useful starting point to clarify legal and tax treatments under bilaterally agreed conditions and should be understood as a bilateral document of first resort when understanding the investment environment, and protection mechanisms that Singapore offers its many trading partners. These tend to be of particular importance for understanding the rights of companies investing from or into emerging markets throughout Asia, Africa, Latin America and the Middle East.
Singapore has the following BITs in place:
- Cambodia
- China
- Czech Republic
- Egypt
- France
- Germany
- Hungary
- Indonesia
- Jordan
- Mauritius
- Mongolia
- Netherlands
- Pakistan
- Peru
- Sri Lanka
- Switzerland
- United Kingdom
- Vietnam
These BIT documents may be downloaded in full, on a complimentary basis, from the ASEAN Briefing Tax Treaty Library.
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Chris Devonshire-Ellis is the founding partner of Dezan Shira & Associates. Established in 1992, the firm provides foreign direct investment advice into Asia on behalf of companies around the world, including SMEs from emerging markets within Africa, the Middle East, Latin America and emerging Asia. Please email asia@dezshira.com for assistance or visit the firm’s website at www.dezshira.com for more information.
ASEAN Briefing contains details of double tax agreements, free trade agreements, and bilateral investment treaties between ASEAN, its members, and other countries around the world. ASEAN Briefing is a library source for researching tax and trade treaties, and is an essential guide for cross border tax planning. The site also includes news and treaty updates on ASEAN, China, India, the United States and Europe.
