New double tax convention between Singapore and France: when does the withholding tax apply to French companies for services performed in Singapore?

A foreign company providing services - including consulting services, software or web development services, cloud services, etc. to a company based in Singapore (i.e. a Singapore company or a foreign company with a permanent establishment in Singapore) is in principle subject to a withholding tax of 15% in Singapore. (1)

This withholding tax applies if the service is performed by the foreign company in Singapore. If the service is performed outside of Singapore, and the resulting work product is then sent to Singapore or made available to a Singapore company, then no withholding tax applies.

The withholding tax may be reduced, or even avoided if there is a tax treaty between Singapore and the country of the company providing services.

Singapore has signed several such double taxation avoidance conventions with foreign countries, including France.

A new convention for the avoidance of double taxation between Singapore and France entered into force on 1st June 2016, replacing the previous convention dated 9 September 1974. (2)

For example, for French IT companies providing services to Singapore companies, the application of the double taxation avoidance convention means that, provided that the French service company does not have a permanent establishment in Singapore (as defined in article 5 of the Convention), then the full revenue earned and invoiced by the French service company will be taxed in France and Singapore shall not tax this revenue. The Singapore company paying fees to the French company will not have to apply withholding tax, provided these conditions are met. (3)

Singapore is an important trading partner for France and a growing number of French companies choose Singapore, often as a hub and a gateway to the ASEAN market, to develop their activity into Asia. The renewal of this double tax convention between the two countries should be an incentive for bilateral business relationships to further develop and thrive.

For any specific questions about tax, withholding tax, VAT or GST, we recommend to consult a tax lawyer.


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Note: in this short article, we focus on service companies and withholding tax. However, the Convention encompasses many more tax issues, not addressed here.

(1) The applicable rate depends on the service provided and nature of payment. For more details, check the Inland Revenue Authority of Singapore at www.iras.gov.sg

(2) Convention between the Government of the Republic of Singapore and the Government of the French Republic for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, concluded on 15 January 2015 and entered into force on 1st June 2016. The previous convention was concluded on 9 September 1974 and entered into force on 1st August 1975.

(3) See article 7 §1 of the Convention (“Business Profits”)


Bénédicte DELEPORTE
Avocat

Deleporte Wentz Avocat
www.dwavocat.com

June 2016

Drone use regulation: legal perspectives from France and Singapore

 

In January 2014, an 18 year-old used a drone (or unmanned aircraft system - UAS) equipped with a GoPro camera to fly over and record a video of the city of Nancy, in eastern France. He then posted his video on the internet. The video received more than 400,000 views! Unfortunately, this young man didn’t realize that the use of a drone with a camera over a populated area is regulated in France.

The video was identified by the authorities, who contacted the young man. The regional department of civil aviation (Direction régionale de l’aviation civile - DRAC) notified the rules applicable to the use of a UAS and required him to get all necessary authorizations. The young man was then subpoenaed before the criminal court for endangering third parties’ lives.(1)

A few weeks before in the US, Amazon had announced its drone delivery project, engaging a battle on flight regulation and safety with the Federal Aviation Administration (FAA).(2)

Earlier this month in Singapore, SingPost announced the first 2km test flight using an unmanned aircraft to deliver mail and a small parcel to an identified recipient.(3)

Although the drone market is developing fast not only in Europe, but in many other regions in the world, there are still few drone-specific laws regulating their use and the level of skills requested to operate these aircrafts. Issues with public safety and privacy are also surfacing with the increasing use of drones. France was the first country to issue a regulatory framework for the use of civilian drones in 2012. Singapore enacted its own drones regulation in May this year.

In this article, we review the issues of public safety and privacy, followed by the French and new Singapore UAS regulations.


1. The development of drone use: public safety and privacy concerns

Drones are commonly defined as aircrafts without on-board pilots that are operated by remote control or with a smartphone.

There are many types of drones, from lightweight devices of a few hundred grams with limited flight radius and battery life, usually used for recreational activities, to larger, professional, aircrafts which can weigh up to a few hundred kilos and are able to fly long distances at high altitudes (several hundred meters).

Drones can be equipped with photo or video cameras, temperature or air sensors, or be used to launch pesticides or other types of loads.

Unmanned aircrafts have been used for many years for a wide variety of purposes, including for public safety (surveillance of demonstrations in public areas, firefighting, securing areas after industrial accidents - such as the Fukushima nuclear disaster -, monitoring infrastructures and buildings, filming or for recreational purposes). New uses are also emerging, such as parcel or medication delivery in emergency situations or to remote areas, or simply to cut costs.

The use of civil drones has soared in recent years, with a whole new market open to consumers. However, their use raises a number of legal issues in areas such as public safety and privacy.

    - Public safety : uncontrolled use of drones can interfere with other categories of aircrafts, such as ultralights, helicopters and airplanes at take-off and landing. No actual accidents have been reported so far, but several drones have been reported flying around airports, in restricted areas, in the past months.

A drone flying over a crowded area may crash down and injure people in the public. And one cannot ignore the possibility of using drones for illegal or terrorist activities. In 2014, drones were detected flying over nuclear plants and military facilities in France and over the presidential Elysée palace in Paris. In January 2015, a drone landed on the lawn in front of the White House in Washington DC.

Although these areas are no-flight zones, the operators are seldom identified and it is hard to know whether these incidents were merely provocative, or test cases for future attacks.

Patrick Ky, Executive director of the European Aviation Safety Agency (AESA) has expressed concerns regarding the use of drones in Europe and the increasing number of incidents. After collating the comments of a public consultation closed a few days ago, AESA should publish a “technical opinion” by the end of 2015. This document should then be used as preliminary work for a future regulation of drones under 25kgs (currently, AESA is only comptent for aircrafts above 150kgs).(4)

    - Privacy : drones can be used to invade one’s privacy if equipped with high performance cameras or video recorders, challenging the right to privacy and personal data protection.

Right to privacy
French law has a strict regulation regarding the right to privacy, whether one is an “anonymous” person or a celebrity. In theory, the publication of photographs taken with a photo camera placed on a drone is subject to the prior consent of the person concerned. However, consent is usually impossible to collect when using a drone.

The right to privacy is waived when people are in a public setting (e.g. attending a concert, a tennis or a football game) and when the photograph or the video doesn’t focus on a single person, but is a global photograph of the public, is not degrading and is within the scope of the right to inform the public. Unless these general principles are applied, the person appearing on a photograph or a video made via a drone may sue the aircraft operator (or the company employing the operator) for violating his/her right to privacy.

So far, Singapore has no laws regulating the use of drones invading people’s personal spaces (such as a drone video-recording a person in his/her garden or at a private party without that person’s knowledge).

Personal data regulation
The act of taking a photograph or a video of a given person is deemed personal data collection under French and European personal data regulation. Under French law, personal data treatments, i.e. the collection of data relating to a natural person, who is either identified or identifiable, must be filed with the French data commission (“Commission de l’informatique et des libertés” or CNIL). Such data treatment is subject to the French data protection law (Loi informatique et libertés).(5)

Drone use was unforeseen when the French data protection law was first enacted in 1978, and again with the European directive of 1995. Applying these legal requirements to the use of drones is therefore quite problematic. However, the European data protection authorities are starting to tackle this issue: the French CNIL has been working on the issue of drones and privacy since 2012 and last June the European G29 working group issued a list of recommendations on this topic.(6)

The recent Singapore Personal Data Protection Act doesn’t provide any drone-specific provisions either.(7) The Personal Data Protection Act requires the subject’s consent before taking photographs or a video for commercial use. However, this applies to private space only and not public space.

The use of drones for civil purposes is not prohibited but is beginning to be regulated.


2. French law and the use of civil drones in the airspace

France was the first country to issue specific regulation for the use of unmanned aircrafts. Two administrative orders (“arrêtés”) were published on 11 April 2012 relating respectively to the design, use and capacity required to operate such devices, and to the use of the airspace by unmanned aircrafts.(8)

These two complementary texts have a common purpose: to guarantee public safety. They classify unmanned aircrafts in different categories, define the types of authorized activities, and provide rules regarding the use of the airspace based on the different purposes for operating unmanned aircrafts.

Although these rules don’t solve all the legal issues raised by the use of drones, they provide a useful framework for the companies designing and distributing new aircraft models and for users to operate the drones within the legal boundaries.

Civil drones are classified (categories A to G) according to weight, type of propulsion, limitations, and types of activities contemplated. The resulting obligations depend upon the proposed use of the drone: speed, altitude (in-sight flights or out-of-sight flights), zones flown over and purpose.

Only category A aircrafts, i.e. drones weighing less than 25kgs, with a single propulsion system, without a camera and only flying in-sight are exempted from the airworthiness document and are therefore authorized to fly without any restrictions regarding the capacity of their operator.

All other unmanned aircraft categories are subject to a preliminary authorization issued by the Minister in charge of civil aviation, and to the following requirements: the installation of specific devices to allow the operator to monitor the altitude of the aircraft and a fail-crash system for forced landing, a minimum skill level of the operator and the possession of specific documents (user and maintenance manuals, airworthiness document, etc.).

Finally, the operator of an unmanned aircraft is responsible for implementing all necessary safety procedures to ensure third party safety and for complying with all applicable regulations.

Using a drone outside of these legal boundaries is subject to criminal penalties set forth in the French Code of transport, the Code of civil aviation and the Criminal code. For example, using an unmanned aircraft without the required airworthiness documents or with expired documents, or if the drone does not comply with the technical airworthiness document or with the general safety rules is subject to one year prison term and/or a fine of €75,000.(9)


3. The new Singapore Unmanned Aircraft Act

Drones are also becoming very popular in Singapore and the same concerns regarding public safety and privacy are being raised. Several incidents involving drones were reported in the past 12 months, including drones crashing on the MRT (metro) tracks and drones seen flying over prohibited or restricted zones.

Singapore enacted the Unmanned Aircraft (Public Safety and Security) Act 2015 in May, with an aim to clarify the rules regarding drone use. The unmanned aircraft act amended the existing Air Navigation and Public Order Acts.

Permits are required for drones used for professional or commercial purposes, usually equipped with a photo or a video camera, as well as for drones weighing more than 7kgs and drones to be flown over sensitive or restricted areas (“protected areas”).

Unmanned aircrafts used for recreational or private purposes and weighing less than 7kgs are exempted.

Two types of permits, an operator permit and an activity permit, are required for operating drones weighing more than 7kgs, for any purpose (private or professional), and for operating drones for commercial purposes regardless of the weight. An activity permit is required to operate an unmanned aircraft in a restricted area, or within 5kms of a military base.

A list of security-sensitive areas (special outdoors events, certain public facilities and government buildings, the Istana Presidential palace, military bases, etc.) is to be published.

Permits are issued by the Civil Aviation Authority of Singapore (CAAS).

Using a drone illegally in Singapore is subject to a fine of S$20,000 and/or one year prison term. However, if the drone carries dangerous materials (such as weapons or hazardous chemicals), the operator or the owner is subject to a fine of S$100,000 and/or five years prison term.

     Despite the growing interest of both the public and businesses in using drones for recreational purposes but also for more and more diverse commercial purposes, such as short distance delivery, there is no European or international concerted approach on drone use regulation (and on the related issues of privacy and personal data protection). A number of countries (including the United States and Japan) are beginning to regulate the use of drones, limiting or prohibiting their use. We may see a first effort at producing regional rules with the latest position of the European Aviation Safety Agency on this matter, and increased pressure from the commercial airline pilots.

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(1) “Poursuivi en justice pour avoir filmé Nancy avec un drone”, published on 13 February 2014 in le Figaro (http://etudiant.lefigaro.fr)

(2) “Amazon unveils futuristic plan: Delivery by drone”, published on 1st December 2013 on cbsnews.com

(3) “Mail sent to Pulau Ubin by drone in world-first SingPost trial”, published on 8 October 2015 on Channel NewsAsia (www.channelnewsasia.com)

(4) “Les drones volent n'importe où, n'importe comment en Europe" (AESA), published on 9 October 2015 in La Tribune (www.latribune.fr)

(5) French data protection law n°78-17 of 6 January 1978 referred to as “Loi informatique et libertés”. The law was amended in 2004 when the 1995 European directive on personal data protection was transposed into French law. The national data protection laws will be replaced by the future European data protection regulation, which should become effective by the end of 2015 and enforceable within 2 years thereafter.

(6) Article 29 Data Protection Working Party, Opinion 01/2015 on Privacy and Data Protection Issues relating to the Utilisation of Drones, 16 June 2015 (WP 231).

(7) Singapore Personal Data Protection Act (2012) ; see also the Personal Data Protection Commission of Singapore website, at www.pdpc.gov.sg

(8) Administrative order of 11 April 2012 regarding the use of the airspace by unmanned aircrafts (“Arrêté relatif à l’utilisation de l’espace aérien par les aéronefs qui circulent sans personne à bord”)  ; Administrative order of 11 April 2012 regarding the design of unmanned aircrafts, to the conditions of their use and to the required capacities of their operators (“Arrêté du 11 avril 2012 relatif à la conception des aéronefs civils qui circulent sans aucune personne à bord, aux conditions de leur emploi et sur les capacités requises des personnes qui les utilisent”) ; Articles R.133-1-2 and D.131-1 to D.133-10 of the French Code of civil aviation.

(9) Article L.6232-4 of the French Code of transport.


Bénédicte DELEPORTE
Avocat

Deleporte Wentz Avocat
www.dwavocat.com

October 2015

Deleporte Wentz Avocat opens an office in Singapore

Deleporte Wentz Avocat, founded in Paris in 2007, is a boutique law firm focused on technology law - software, internet, e-commerce, data privacy, digital media, intellectual property. We advise companies on their IT projects, from startups to multinational corporations, in French and European laws through our network of independent firms located across Europe. 

This expansion towards South-East Asia gives us the opportunity to help our clients developing in this region, but also to advise Asian companies to extend their business activities in France and Europe.

Singapore, a city-state of 5.5 million people, located at the Southern tip of the Malay peninsula, is the economic hub of South-East Asia and ASEAN, and a premier financial, business and technology center.

Singapore is also a perfect hub for companies wishing to extend their business activities across the region, toward very dynamic countries such as Indonesia, Malaysia, Thailand, Vietnam or the Philippines.

Deleporte Wentz Avocat is therefore developing a network with local law firms in these countries to advise our clients in local law (especially company and business law).

For any questions or pending IT projects, don't hesitate to contact us.