Singapore and Ecuador signed an Agreement for the Avoidance of Double Taxation (DTA) on 27 June 2013.  The provisions of the treaty will have effect from 1 January of the calendar year next following that in which the agreement enters into force.

Under the treaty the definition of a permanent establishment includes a construction, assembly or installation project or related supervisory activities if this activity continues for more than nine months. A permanent establishment is also created if an enterprise performs services in the other contracting state through employees or other personnel engaged for the purpose, if the activities continue on the same or a related project for at least 183 days in any twelve month period commencing or ending in the fiscal year.

In accordance with the treaty, the following withholding taxes will apply:

Dividends: 5%;
Interest: 10%, with an exemption where the beneficial owner of the interest is one of certain specified government bodies or is a financial institution; and
Royalties: 10%.

The payments of dividends, interest and royalties between these two countries may be subject to a lower withholding tax in accordance with the local legislation of each country.

The agreement allows for the elimination of double taxation by a tax credit in Singapore for tax paid in Ecuador, including a credit for underlying tax where a dividend is received by a Singapore company that owns at least 10% of the shares of the company paying the dividend. In Ecuador double taxation is eliminated by exemption of the income from Singapore.

The DTA provides for tax cooperation between both countries through exchange of information in accordance with the internationally agreed standard. The DTA is expected to facilitate greater mutual trade and investments flows and foster greater economic cooperation between Singapore and Ecuador.