RESPONDEK & FAN

ATTORNEYS AT LAW

E-MAIL MESSAGE

TO: ARRI Asia Pte Ltd

ATTN: Ms. Tara Mi /Senior Legal Counsel Asia-Pacific
DATE: 28. March 2024
PAGES: 16 (sixteen)
REF: Costs aspects of proposed Equipment Lease under Singapore
Tax and Customs Laws

Dear Tara,

With reference to your recent email, I’d like to summarize certain tax aspects of the
costs of a proposed business arrangement under ARRI Asia Pte Ltd:

1. Facts

ARRI operates a corporate office and a service centre including a warehouse in

Singapore as its sole business establishment. The company is registered under the
Goods and Services Tax Act 1993 (GSTA).

ARRI is now considering a business arrangemnent whereby cameras and lenses

manufactured in Germany and elsewhere (but not in Singapore or India), owned by
ARRI Rental Deutschland GmbH, rented to ARRI Asia Pte Ltd and currently stored in
its warehouse in Singapore (Equipment) will be leased to film production companies
in India for use in film productions outside of Singapore on agreed terms (Equipment
Lease). A film production typically lasts between twenty-five and thirty weeks. The
rental rate for a camera would be EUR 13,000 (or equivalent in another currency;
currently SGD 18,945) per week and the rental rate for a lens would be EUR 4,000 (or
equivalent in another currency; currently approximately SGD 5,830) per week. At the
end of the rental period, the Equipment would be returned to the ARRI in Singapore.

In short, an Equipment Lease would involve shipping Equipment from Singapore and
bringing it to India, followed by leasing Equipment to the ARRI customer in India,
followed by shipping Equipment from India and bringing it back to Singapore.

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2. Issues to be addressed

The commercial viability of an Equipment Lease depends on a number of factors. In

particular, there is the question of whether the cross-border temporary leasing of
Equipment will give rise to any tax or customs or excise duty on export or re-import
and, if so, the extent to which any tax or duty can be mitigated. There is also the
question of whether an Equipment Lease is subject to import and export laws. These
issues are analysed below from a Singapore and Indian law perspective, including
bilateral and multilateral (e.g., ASEAN) tax and trade treaties (but not from an Indian
or WTO law perspective) and mainly with a view to costs.
Scope for India:
 income tax/TDS/DTAA [see section 13 below]?
 GST? [including: rate of GST? calculation on the rental fee or else?]
 customs duties? [rate? calculation? see also section 11 below]
 any other import/export regulations in India? [see section 12 below]
Please note if for any of the aspects it plays a role whether (a) the equipment is owned
by ARRI Asia Pte Ltd or by ARRI Rental Deutschland GmbH and whether (b) the
delivery point with the lessee is set in Singapore or in India.

3. Executive Summary
This section provides a summary of the detailed explanations below.

3.1 Goods and Services Tax in Singapore

In Singapore, an Equipment Lease would be a supply of services subject to Goods and
Services Tax (GST) of 9 per cent. However, the effective GST rate payable may be
nil if an Equipment Lease would be a zero-rated international service. This will be the
case if it can be argued (to the satisfaction of the relevant authorities) that an
Equipment Lease is an ancillary service with a necessary connection to film
productions carried out entirely outside Singapore, which are themselves a cultural,
artistic, sporting, educational or entertainment service.
GST at 9 per cent would also be payable on any importation of goods in connection
with an Equipment Lease (especially the return of Equipment from outside Singapore
to ARRI in Singapore at the end of an Equipment Lease rental period) as if it were
customs or excise duty, and as if all goods imported into Singapore were dutiable and
subject to customs or excise duty.

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However, ARRI would be entitled to relief from the payment of GST if it can be
shown (to the satisfaction of the relevant authorities) that ARRI is an importer within
the meaning of the law and meets the requirements of one or more of the relevant
provisions of the Schedule to the Goods and Services Tax (Imports Relief) Order.

3.2 Goods and Services Tax in India

Supply of goods and services from Singapore to India will be considered as Inter-state
supply in terms of Sections 7 (2) & 7 (4) of the Integrated Goods & Services Act,
2017 (“IGST Act”) subject to 18 per cent of IGST. Nonetheless, vide Notification No.
72/17-Cus. dated 16.08.2017 issued by the Central Government, the custom duty on
Machinery, equipment or tools, falling under Chapter 90 [Tariff item 9007-
Cinematographic cameras and projectors, whether or not incorporating sound
recording or reproducing apparatus] of the Customs Tariff Act, 1975 has been
exempted to the whole of the IGST leviable on those goods subject to the certain
limitations and conditions.

3.2.1 Conditions and limitations for exemption of IGST:

a) the goods have been taken on lease by the importer for use after import;

b) the importer makes a declaration at the time of import that the goods are being
imported temporarily for execution of a contract;

c) the import of such machinery, equipment or tools is covered under item (b) of
clause 1 or item (f) of clause 5 of schedule II of the CGST Act;

d) the said goods are re-exported within three months of the date of such import or
within such extended period not exceeding 18 months from the date of said
import, as the Assistant Commissioner of Customs or the Dy. Commissioner of
Customs, as the case may be, may allow;

e) where the Assistant Commissioner of Customs or the Deputy Commissioner of

Customs, as the case may be, grants extension of the aforesaid period for re-
export, the importer shall pay the difference between the duty payable under

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the relevant clause of extent of exemption and the duty already paid at the time
of their import; and

f) the importer executes a bond, with a bank guarantee, undertaking –

 to pay integrated tax leviable under sub-section (1) of section 5 of the IGST
Act on supply of service covered by items 1(b) or 5(f) of Schedule II of the
Central Goods & Services Act (CGST) Act;
 to re-export the said goods within three months of the date of import or within
the aforesaid extended period;
 to produce the goods before the Assistant Commissioner of Customs or the
Deputy Commissioner of Customs for identification before re-export;
 to pay the balance of Customs duty, along with interest, at the rate fixed by
notification issued under section 28AA of the Customs Act, 1962, for the
period starting from the date of import of the said goods and ending with the
date on which the duty is paid in full, if the re-export does not take place within
the stipulated period: and
 to pay on demand an amount equal to the integrated tax along with applicable
interest payable of the said goods but for the exemption under this notification
in the event of violation of any of the above conditions.

3.2.2 Liability to pay IGST:

As per Section 5 (3) of the IGST Act, the tax shall be paid on reverse charge
basis (RCM) by the recipient of such goods or services or both on
recommendations of the GST Council, by notification specify such categories.
All the provisions of IGST Act shall apply to such recipient as if such recipient
is liable for paying the tax in relation to the supply of such goods or services or
both.
Notification No. 10/2017- Integrated Tax (Rate) dated 28.06.2017 specifies the
goods and services on which IGST shall be paid on reverse charge basis
wherein it has been apprised by the Council that any service supplied by any
person who is located in a non-taxable territory to any person located in a
taxable territory other than non-taxable online recipient, the recipient shall be
liable to pay IGST i.e. person located in the taxable territory.

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3.32 Customs or Excise Duty in Singapore and India

In Singapore, the Equipment would not be subject to customs or excise duties, but the
Equipment may only be imported, exported or transhipped in accordance with a
permit issued by the Director-General of Customs.
To the extent that the Equipment falls within certain categories of cameras (other than
television cameras) and parts and accessories thereof, it may be imported duty-free
from Singapore into India. [Please check but presume that SGP is very professional.]
[Explained below]
To the extent that an Equipment Lease falls within certain categories of photographic
services (other than aerial photography, satellite photography and satellite-enabled
photography), it will generally receive treatment no less favourable than that outlined
as India’s ‘horizontal commitments’. [What are those?] [Horizontal commitments-
CECA]

In India, according to Section 3 of the Customs Tariff Act, 1975, any article which is
imported into India shall, in addition, be liable to a duty (additional duty) equal to the
excise duty for the time being leviable on a like article if produced or manufactured in
India and if such excise duty on a like article is leviable at any percentage of its value,
the additional duty to which the imported article shall be so liable shall be calculated
at that percentage of the value of the imported article. In furtherance to this, import of
goods in India also attracts an additional levy of “Social Welfare Surcharge”. The said
surcharge is imposed on aggregate of Customs Duty levied at the time of imports.
As per Tariff Item 9007 of Chapter 90 of the First Schedule of the Custom Tariff Act,
the duty on Cinematographic Cameras and Projectors, whether or not incorporating
sound recording or reproducing apparatus, is levied at the rate of 10 per cent unit.
3.3.1 Exemption:
Notification No. 72/17-Cus. dated 16.08.2017 issued by the Central
Government exempts Tariff Item 9007 of Chapter 90 [Cinematographic
Cameras and Projectors, whether or not incorporating sound recording or
reproducing apparatus] from payment of so much custom duty leviable thereon
under First Schedule to the Customs Tariff Act, 1975. Since the lease period in
the present scenario as aforementioned will last between 25 to 30 weeks, which
is approximately 7 (seven) months, the following exemption will apply:

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“(iii) goods which are re-exported after six months, but within nine months, of
the date of import, so much of the duty of customs as is in excess of the amount
calculated at the rate of twenty-five per cent of the aggregate of the duties of
customs, which would be leviable under the Customs Act, 1962 read with any
notification for the time being in force in respect of the duty so chargeable.”
It is pertinent to note that the amount of custom duty exemption increases with
the duration of the lease but not exceeding 18 months.

3.3.2 Temporary Admission (ATA) Carnet Import:

In accordance to Notification No. 4/2018- Customs dated 18th January, 2018
notified by Central Board of Excise and Customs, the goods listed in the
Schedule within the notification are exempted from the whole of duty of
customs and integrated tax leviable, the scope has been expanded under this
notification to cover professional equipment meant for TV/film shoot,
press/media coverage, sporting events, testing & calibration etc. subject to a
few conditions. However, the said goods shall be exported within a period of 2
months from the date of importation which may be extended for a further
period not exceeding another 2 months.

3.43 Import and Export Laws in India***

There may be Indian import and export laws with which an Equipment Lease would
have to comply. [This needs to be checked] [There is Import-Export Code in force.
However, it is upon the importer to follow the code and obtain an import license
accordingly.]

3.54 Income Tax in India***TDS? DTAA? (DTAA explained under Point 13)

Indian income tax law applies, but ARRI will not be subject to Indian tax on profits
from an Equipment Lease if it does not have a permanent establishment in India. [This
needs to be examined thoroughly under both Indian domestic laws and applicable
DTAAs]

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As per Section 9 (1) (vi) of the Income Tax Act, 1961 (“Income Tax Act”), royalty
payable in the following cases will be deemed to accrue or arise in India:
a) the Government; or
b) a person who is a resident, except where the royalty is payable in respect of any
right, property or information used or services utilised for the purposes of a
business or profession carried on by such person outside India or for the
purposes of making or earning any income from any source outside India; or
c) a person who is a non-resident, where the royalty is payable in respect of any
right, property or information used or services utilised for the purposes of a
business or profession carried on by such person in India or for the purposes of
making or earning any income from any source in India.

The word ‘royalty’ has been defined under the Income Tax Act, 1961 as a
consideration (including any lump sum consideration but excluding any
consideration which would be the income of the recipient chargeable under the
head (“Capital gains”) for- (iv-a) the use or right to use, any industrial, commercial
or scientific equipment but not including the amounts referred to in section 44-BB.
It is evident from the above that the rent paid by the Indian party for use of the
Camera will be considered as Royalty under the Income Tax Act and will deemed
to be the income accrued or arisen in India. Hence, it will be taxable in India under
section 9 of the Income Tax Act.

3.65 Singapore Goods and Services Tax***relationship with 3.1?

In Singapore, a tax relevant to an Equipment Lease is GST within the meaning of

Section 7 GSTA.
As such, GST is chargeable under the provisions of the Goods and Services Tax Act
1993 on the supply of goods and services (including anything treated as such a supply)
and on the importation of goods.

4. Equipment Lease Comprises a Taxable Supply of Services

Section 8 GSTA defines the scope of the GST in both objective and subjective terms.
As a general rule, Section 8(1) GSTA provides that GST is chargeable on every
supply of goods or services made in Singapore if it is a taxable supply made by a

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taxable person in the course or furtherance of a business carried on by the taxable

person.

4.1 ARRI a Taxable Person

Pursuant to Section 8(2) GSTA, a person is a taxable person for the purposes of this
Act while the person is or is required to be registered under this Act.
As ARRI is registered under the Act, ARRI is a taxable person.

4.2 Equipment Lease a Taxable Supply of Services in Singapore

Pursuant to Section 8(2A)(a), 10(1) GSTA, a taxable supply is a supply of goods or

services made in Singapore other than an exempt supply, and the Second Schedule
applies to determine what is, or is treated as, a supply of goods or a supply of services.

Under paragraph (1)(b) of the Second Schedule, the transfer of possession of goods is
a supply of services unless it is made under an agreement for the sale of the goods or
under agreements which expressly provide for the transfer of property at a future date.
Since an Equipment Lease would involve only the transfer of possession of goods,
namely Equipment, and not its sale or future transfer of property, an Equipment Lease
would be a supply of services (rather than a supply of goods).

Under Section 13(4), (5) GSTA, a supply of services is generally treated as being
made in Singapore if the supplier belongs in Singapore, and as being made in another
country (other than Singapore), if the supplier belongs in that other country, but the
Minister for Finance may by regulations provide a different rule for determining
where a supply of services is made. As no such different rule has been made to date,
the relevant criterion is the country where ARRI, as the supplier, belongs. According
to Section 15(1), (3) GSTA, in the case of a supply of services, this is the country in
which the supplier has a business establishment or some other fixed establishment,
unless the supplier has such an establishment elsewhere; or, if the supplier has such
establishments in more than one country, the supplier’s establishment in the country
which is most directly concerned with the supply. As ARRI is established and
domiciled in Singapore, it therefore belongs in Singapore, and an Equipment Lease
would be made in Singapore.

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Under Section 22(1) GSTA, a supply of services is an exempt supply if it is of a

description or a class for the time being specified in Part 1 of the Fourth Schedule.
This Part refers to the categories of financial services, investment precious metals or
land and does not list a lease or anything involving a lease as an exempt supply.
Therefore, an Equipment Lease would not be an exempt supply.

It follows from the above that an Equipment Lease would be a taxable supply of
services.
5. Equipment Lease in the Course or Furtherance of a Business Carried
on by a Taxable Person

As an Equipment Lease would be a new business venture of ARRI, it would be in the

course or furtherance of a business carried on by ARRI as a taxable person.

5.1 Interim Result

It follows that GST would be chargeable on an Equipment Lease.

5.2 Equipment Lease Comprises a Taxable Importation of Goods

In addition to the general scope, Section 8(4) GSTA provides that GST is charged,
levied and payable on any importation of goods (other than an exempt import) as if it
were customs duty or excise duty and as if all goods imported into Singapore were
dutiable and liable to customs duty or excise duty.

5.2.1 Importation of Goods

The Goods and Services Tax Act 1993 does not define what constitutes an
“importation of goods”, but Section 26(1), (3)(a) GSTA declares the Customs
Act 1960 (CA) to apply to imported goods, with such exceptions, modifications and
adaptations as the Minister may by order prescribe in relation to any tax chargeable on
the importation of goods as it applies in relation to any customs duty or excise duty;
and in relation to any goods in respect of which tax is chargeable on the importation

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thereof or would be so chargeable if the importation were not an exempt import, as it

applies to goods in respect of which customs duty or excise duty is chargeable.
Certain exceptions, modifications and adaptations have been prescribed by the Goods
and Services Tax (Application of Legislation Relating to Customs and Excise Duties)
Order, but they do not apply to Part 1 of the Customs Act 1960, which comprises
sections 1 to 3 CA.

In short, this means that there is generally an importation of goods under the Goods
and Services Tax Act 1993 if it is an importation of goods under the Customs
Act 1960.

Under section 3(1) CA, ‘goods’ includes all kinds of movable property, so it includes
the Equipment. According to the same provision, ‘import’ means to bring or cause to
be brought into Singapore and its territorial waters by any means from any place
including a free trade zone; except that goods bona fide in transit, including goods
which have been taken into any free trade zone from outside the customs territory or
transhipped, are not, for the purpose of the levy of customs duties or excise duties,
deemed to be imported unless they are or become uncustomed goods.

As a consequence, the return of Equipment from outside Singapore to ARRI in

Singapore at the end of the rental period of an Equipment Lease would be an
importation of goods.

5.3 No Exempt Import

Under Section 22(1A) GSTA, an importation of goods is an exempt import if it is of a

description or of a class for the time being specified in Part 2 of the Fourth Schedule.
This Part relates to investment precious metals and does not list anything other than
the importation of investment precious metals as an exempt import.
Therefore, any reimportation of goods in connection with an Equipment Lease would
not be an exempt import.

5.4 Interim Result

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It follows that GST would also be chargeable on any importation of goods in

connection with an Equipment Lease (especially the return of Equipment outside
Singapore to ARRI in Singapore at the end of the rental period of an Equipment
Lease), as if it were customs or excise duty, and as if all goods imported into
Singapore were dutiable and subject to customs or excise duty.

6. GST Rate

Broadly speaking there are two different rates of GST in Singapore, the standard rate
and the reduced rates for supplies under relief.

6.1 Standard Rate for Supply of Services

Pursuant to Section 16(cb), (d), (e) GSTA, from and including 1 January 2024, GST
will generally be charged at the rate of 9 per cent on the supply of services by
reference to the value of the supply as determined under the Act; and on the
importation of goods by reference to the value of the goods as determined under the
Act.

6.2 Zero-Rating for International (Ancillary) Cultural, Artistic,

Sporting, Educational or Entertainment Services Performed Wholly
outside Singapore

Under Section 21(1), (2) GSTA, subject to this Section and Sections 21A, 21B and
21C GSTA (which relate to the supply of certain tools or machinery used in the
manufacture of goods or of certain prototypes, the sale or hiring out of goods to
approved taxable persons in the shipping or maritime industry, and the grant or
assignment of a lease or licence to use land), a supply of services is zero-rated only if
the services are international services. Where a taxable person supplies a zero-rated
service, whether or not tax would be chargeable on the supply but for this section, no
tax is charged on the supply; but it is otherwise treated as a taxable supply and,
accordingly, the rate at which tax is treated as charged on the supply is nil.

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Section 21(3) GSTA lists various categories of cases in which a supply of services is
treated as an international supply of services. Among others, under subparagraph (i), a
supply of services will be treated as a supply of international services if the services or
supply are cultural, artistic, sporting, educational or entertainment services performed
wholly outside Singapore, or services ancillary to such services, unless, at the time of
the supply of such services, there is no necessary connection between the place where
the services are physically performed and the location of the customer of the services
(as defined in paragraph 2 of the Seventh Schedule).

Therefore an Equipment Lease would be a zero-rated international service if it can be

argued (to the satisfaction of the relevant authorities) that it is an ancillary service with
a necessary connection to film productions performed wholly outside Singapore,
which are themselves a cultural, artistic, sporting, educational or entertainment
service, with a necessary connection between the place where the services are
physically performed and the location of ARRI’s customer of the services. In this case
the rate at which GST would be treated as charged on an Equipment Lease would be
nil.
ARRI is therefore advised to seek confirmation from the Ministry of Finance as to
whether it would classify an Equipment Lease as a zero-rated international service as
described.

If you wish us to assist in this respect, please advise.

7. Relief from GST Chargeable on the Importation of Goods

Under Section 24(1) GSTA, the Minister for Finance may by order provide for the
grant of relief from all or any part of GST chargeable on the importation of goods or
the subsequent supply of imported goods, subject to such conditions (including
conditions prohibiting or restricting the disposal of or dealing with the goods) as may
be imposed by or under the order, if and to the extent that the relief appears to the
Minister to be necessary or expedient. In exercise of this power, the Minister for
Finance has made the Goods and Services Tax (Imports Relief) Order (IRO).

Pursuant to no. 4 IRO, the organisations or persons specified in the second column of
the Schedule are granted relief from payment of GST on the importation of goods
specified in the third column, subject to the conditions specified in the fourth column,

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the submission of the document, certificate or permit specified in the fifth column in
such form and manner as may be prescribed by the Director-General of Customs
appointed under the Customs Act 1960, the furnishing of such security in such amount
as the Director-General may require, and any further condition as the Director-General
may impose for the protection of the revenue.

The Schedule to the Goods and Services Tax (Imports Relief) Order contains the
following three provisions which provide relief from the payment of GST and which
may be relevant to an Equipment Lease.

Pursuant no. 16 of the Schedule, relief is granted to an importer of goods

manufactured, assembled or produced in Singapore which have been exported and are
subsequently re-imported. The importer must satisfy a senior officer of customs that
the goods were manufactured, assembled or produced in Singapore; the goods must
not have undergone any processing or manipulation outside Singapore since their
exportation; and, in the case of re-import by a non-taxable person, the tax must have
been previously paid and not refunded. An Inward Permit is required.

Pursuant to no. 19 of the Schedule, relief is granted to an importer on the re-

importation of goods which have been supplied in or imported into Singapore before
their export. The exportation and re-importation of the goods must be registered by the
proper officer of customs at the time of export and re-import respectively; the goods
must be identified to the satisfaction of the proper officer of customs; and, in the case
of re-import by a non-taxable person, the tax must have been previously paid and not
refunded. An Inward Permit is required.

Pursuant to no. 43 of the Schedule, relief is granted to an importer in respect of all

goods imported and warehoused or deposited at one or more of the following places:
(i) a Government warehouse; (ii) a licensed warehouse; (iii) a customs office or
customs station; (iv) any other place approved by the Director-General in writing
under Section 52(1) of the Customs Act 1960; and while so warehoused or deposited
are not dealt with or used except as allowed by the Director-General; are removed
from the customs territory at the end of the period of warehousing or deposit; and are
accounted for to the satisfaction of any proper officer of customs. An Outward Permit
is required.

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It follows that the reimportation of goods at the end of an Equipment Lease would
enjoy relief from the payment of GST if it can be argued (to the satisfaction of the
relevant authorities) that ARRI is an importer within the meaning of no. 4 IRO and
meets the requirements of one or more of the above provisions of the Schedule to the
Goods and Services Tax (Imports Relief) Order.

According to section 3(1) CA, ‘importer’ includes and applies to any owner or other
person for the time being possessed of or beneficially interested in any goods at and
from the time of importation thereof until the goods are duly removed from customs
control.

Where applicable, ARRI is advised to seek confirmation from the Ministry of Finance
and the Director-General of Customs as to whether it qualifies as an importer and to
comply with no. 4 IRO read with the relevant provision(s) of the Schedule and any
other lawful requirements and conditions imposed by the Director-General of
Customs.

If we could be of assistance in this respect, please advise.

8. Interim Result

An Equipment Lease as a supply of services would be subject to GST at 9 per cent.

GST at 9 per cent would also be chargeable on any importation of goods in connection
with an Equipment Lease (especially the return of Equipment from outside Singapore
to ARRI in Singapore at the end of an Equipment Lease rental period), as if it were
customs or excise duty, and as if all goods imported into Singapore were dutiable and
subject to customs or excise duty. However, the effective GST rate payable may be nil
if an Equipment Lease would be a zero-rated international service. This will be the
case if it can be argued (to the satisfaction of the relevant authorities) that an
Equipment Lease is an ancillary service with a necessary connection to film
productions carried out entirely outside Singapore, which are themselves a cultural,
artistic, sporting, educational or entertainment service.

Separately, GST of 9 per cent would be chargeable on the reimportation of goods at

the end of an Equipment Lease. However, ARRI would enjoy relief from the payment
of GST if it can be shown (to the satisfaction of the relevant authorities) that ARRI is

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an importer within the meaning of no. 4 IRO and meets the requirements of one or
more of the relevant provisions of the Schedule to the Goods and Services Tax
(Imports Relief) Order.

9. Singapore Customs or Excise Duty

From a customs or excise point of view, an Equipment Lease must comply with the
Customs Act 1960.

9.1 No Customs or Excise Duty on Goods Imported in Connection with

Equipment Lease

Section 10(1) CA provides that on all goods imported into the customs territory or
manufactured in Singapore, there shall be charged, levied and paid to the
Director-General such customs duties and excise duties as the Minister for Finance
may, by order in the Gazette, prescribe. Such prescriptions are made by the Customs
(Duties) Order (CDO).

Pursuant to no. 2(1) CDO, the customs duties or excise duties to be levied and paid
under the Customs Act 1960 on goods imported into or manufactured in Singapore
shall, subject to the provisions of this Order, be at the rates set out in the First
Schedule.

Chapter 90 of the First Schedule deals with optical, photographic, cinematographic,

measuring, checking, precision, medical or surgical instruments and apparatus, and
parts and accessories thereof, which includes the Equipment. Chapter 90 does not
impose any customs duty or excise duty on these goods.

9.2 Interim Result

It follows that the Equipment would not be subject to customs or excise duties under
the Customs Act 1960.

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10. Singapore Regulation of Imports and Exports

The Regulation of Imports and Exports Act 1995 (RIEA) governs whether an
Equipment Lease complies with Singapore’s import and export laws.

10.1 Equipment Lease Requires Import and Export Permit

Under Section 3(1) RIEA, the Minister for Trade and Industry may make regulations
for the registration, regulation and control of all or any class of goods imported into,
exported from, transhipped in or in transit through Singapore. The Regulation of
Imports and Exports Regulations are such regulations (RIER).

Pursuant to no. 3(1) RIER, a person intending to import, export, or tranship goods
into, out of, or in Singapore normally requires a permit issued by the Director-General
of Customs, unless the goods fall within certain exemptions set out in no. 3(2), (2A),
(3), and (4) RIER. These exemptions include personal effects during residence
transfers, parcel post items, diplomatic correspondence, goods handled by certain
entities like the joint defence force or the Ministry of Foreign Affairs, used motor
vehicles, trade samples, gifts below SGD400, certain items like human remains or
transplant materials, and air transport of goods under SGD400 for imports and
SGD1,000 for exports or transhipments, if not controlled. In short, commercial goods
such as the Equipment do not qualify for any of these exemptions.

No. 3(6) RIER makes it an offence to import into, export out of or tranship in
Singapore goods without the required permit. An application for a permit to import,
export or tranship any goods shall be made in accordance with no. 4 RIER.
The fact that ARRI operates a warehouse in Singapore suggests that it already has
such a permit. If not, ARRI is advised to apply for one.

10.2 Interim Result

As a result, the Equipment may only be imported, exported or transhipped in

Singapore with a permit issued by the Director-General of Customs.

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11. Equipment Lease in India***[Please check]

As far as the tariff treatment of Equipment in India is concerned, an Equipment Lease

would take place in the ASEAN-India Free Trade Area and would be covered by two
free trade agreements, the ASEAN-India Trade in Goods Agreement and the
ASEAN-India Trade in Services Agreement. However, only the former is currently
in force. Between India and Singapore, the countries where an Equipment Lease
would take place, there is a more specific agreement, the India-Singapore
Comprehensive Economic Co-operation Agreement (CECA), article 2.5 of which
provides that neither Party shall adopt or maintain any non-tariff measures on the
importation of any goods of the other Party or on the exportation of any goods
destined for the territory of the other Party except in accordance with other provisions
of this Agreement or with its WTO rights and obligations.

WTO rights and obligations are beyond the scope of this legal opinion, but in short,
WTO agreements require most-favoured-nation treatment, that is, equal treatment for
suppliers from all member countries. Exceptions are made for security, public interest
and fiscal reasons. In addition, developing countries receive support for capacity
building and market access liberalisation.

[**Note: CECA- According to Rule 3 (Rules of Origin) of CECA, only those goods
that have at least 40% content value originating from within the exporting country will
be eligible for benefits under CECA. It is mandatory that either the products be wholly
produced or obtained in the territory of the exporting party, in accordance with Article
3.3, or; Products not wholly produced or obtained but the final process of
manufacturing is performed within the territory of the exporting party in accordance to
Article 3.4. In furtherance to this, the products should conform to the consignment
rules as given in Article 3.14.]

11.1 Equipment (Except Television Cameras) Would Enjoy Duty-Free Entry to

India from Singapore

Article 2.3 CECA provides that each Party shall reduce and/or eliminate its customs
duties on originating goods of the other Party in accordance with Annex 2A and
Annex 2B and their respective headnotes.

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Pursuant to nos. 1977 to 1988 and 1994 in the list of India’s tariff concessions in
Annex 2A CECA, objective lenses for cameral projectors or photographic enlargers or
reducers, other objective lenses, optical filters, or other optical elements enjoy, since
1 April 2009, a margin of preference of 100 per cent. According to headnote 3, this
means that such goods are admitted duty-free from Singapore to India. The same
applies according to nos. 1994 to 1998, 2001, 2003 and 2006 of that list to cameras
with a through-the-lens viewfinder (SLR) for roll film of a width not exceeding
35 mm, fixed focus 35 mm cameras, other cameras for roll film of a width of 35 mm,
fixed focus 110 mm cameras or other cameras, and parts and accessories for cameras
and other cinematographic cameras and their parts and accessories.

However, according to no. 2120 in the list of India’s tariff concessions in Annex 2A
CECA, television cameras will only enjoy a 50 per cent margin of preference as of
1 April 2009, meaning Equipment that is a television camera entering India from
Singapore will be subject to the applicable duty rate minus 50 per cent of that rate. We
are unable to say whether India currently imposes a duty on imports of television
cameras and, if so, at what rate.

11.2 Equipment Lease Would Enjoy Treatment No Less Favourable than

Domestic Services (But Tax Law Applies)

According to article 7.3 CECA, with respect to market access through trade in
services (as further defined in article 7.1(r) CECA), each Party shall accord to services
and service suppliers of the other Party treatment no less favourable than that provided
for under the terms, limitations and conditions agreed and specified in its Schedule of
specific commitments.

According to India’s Schedule of specific commitments, there are certain limitations

where trade in services is to take place in Scheduled Areas or Tribal Areas, and
special treatment may be accorded to Scheduled Castes, Scheduled Tribes and weaker
sections of society as provided for in the Constitution of India and various acts of law.
We are not in a position to say exactly what these terms mean and to give legal advice
on them, other than to say that an Equipment Lease may in principle fall under these
restrictions in India’s Schedule of specific commitments.

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In addition, and perhaps more importantly, India’s Schedule of specific commitments

provides that the Income-tax Act, 1961 applies to domestic and foreign service
suppliers. We are not in a position to advise on Indian income-tax law but see below
for the income tax aspect under the Singapore-India double tax treaty.

Apart from these ‘horizontal commitments’, India’s Schedule of specific

commitments does not contain any terms and limitations relevant to an Equipment
Lease. In particular, letter F in the Schedule expressly states that there are none for
photographic services (other than aerial photography, satellite photography and
satellite-enabled photography) as defined in United Nations Statistics Division
classification CPC 875, which includes action photography services, motion picture
processing services not related to the motion picture and television industries and
other photographic services. The Schedule does not include processing services of
motion pictures in connection with the motion picture and television industries as
classified in CPC subclass 96112 (motion picture or video tape production services).
Therefore, if an Equipment Lease is covered by this definition, India will grant the
ARRI treatment no less favourable than that provided for in the horizontal
commitments referred to above.

12. Indian Regulation of Imports and Exports [***Please check]

Apart from technical issues, neither the ASEAN-India Trade in Goods Agreement nor
the India-Singapore Comprehensive Economic Co-operation Agreement cover export
issues.

In particular, they do not grant export privileges comparable to import privileges.

Therefore, there may be Indian import and export laws with which an Equipment
Lease would have to comply. We are not in a position to advise on Indian laws.

12.1 Interim Result

It follows that to the extent that Equipment falls within any of the categories of goods
mentioned (other than television cameras), it may be imported duty-free to India from
Singapore.

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It also follows that, to the extent that an Equipment Lease falls within any of the
categories of services mentioned, it will receive treatment no less favourable than that
outlined as India’s ‘horizontal commitments’.

There may be Indian import and export laws with which an Equipment Lease would
have to comply.

13. Singapore-Indian Double Taxation Avoidance Agreement ***[Please

check; start with Indian domestic legislation and then see how it is
influenced by the DTAA and finally how this will be proven (tax
residence certificate?) so that e.g. banks would not insist on
deduction of TDS]

In India, a tax relevant to an Equipment Lease is the tax within the meaning
article 2(1) of the Agreement between the Government of the Republic of Singapore
and the Government of the Republic of India for the Avoidance of Double Taxation
and the Prevention of Fiscal Evasion with Respect to Taxes on Income (DTAA). This
tax is the Indian income-tax including any surcharge thereon (Indian tax).

Article 12 of the DTAA between India and Singapore defines Royalties as payments
of any kind received as a consideration for use of, or right to use any industrial,
commercial or scientific equipment. Royalties arising in a Contracting State and paid
to a resident of other Contracting state may be taxed in that other Contracting state.
However, it is possible to tax the royalties in the Contracting state in which they arise
as per the laws of that Contracting state but in case the recipient is the beneficial
owner of the royalties, the tax deducted at source (TDS) so charged shall not exceed
10 per cent. But the term “beneficial owner” has neither been defined under the
Income Tax Act, 1961, nor under the DTAA.

13.1 Beneficial Owner:

As per Section 90 sub-section (4) & (5) of the Income Tax Act, the assessee is
required to produce a Tax Residency Certificate (TRC) and such other documents as
may be prescribed in order to claim benefit under DTAA. Press release dated March
01, 2013 issued by Ministry of Finance, Government of India clarifies that the TRC
produced by a resident of a contracting state will be accepted as evidence that he is a

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resident of that contracting state. It further stated that “the Income Tax Authorities in
India will not go behind the TRC and question his resident status”.

13.2 No Taxation of Profits without Permanent Establishment

Under article 7(1) DTA, the profits of an enterprise of a Contracting State shall be
taxable only in that State unless the enterprise carries on business in the other
Contracting State through a permanent establishment situated therein. In other words,
the ARRI will not be subjected to Indian tax if it does not carry out the Equipment
Lease through a permanent establishment in India.

Pursuant to article 5(1), (3) DTA, a ‘permanent establishment’ is a fixed place of

business through which the business of the enterprise is wholly or partly carried on,
and a building site or construction, installation or assembly project is a permanent
establishment only if it continues for a period of more than 183 days in any fiscal
year. Pursuant to article 5(4) DTA, an enterprise is deemed to have a permanent
establishment in a Contracting State and to carry on business through that permanent
establishment if it carries on supervisory activities in that Contracting State for a
period of more than 183 days in any fiscal year in connection with a building site or
construction, installation or assembly project which is being undertaken in that
Contracting State. Notwithstanding the foregoing, pursuant to article 5(5) DTA, an
enterprise is deemed to have a permanent establishment in a Contracting State and to
carry on business through that permanent establishment if it provides services or
facilities in that Contracting State for a period of more than 183 days in any fiscal year
in connection with the exploration, exploitation or extraction of mineral oils in that
Contracting State.

Pursuant to article 5(6) DTA an enterprise is also deemed to have a permanent

establishment in a Contracting State if it provides services within a Contracting State
through its employees or personnel, and if activities of that nature continue within that
State for more than ninety days in any fiscal year, or activities are performed for a
related enterprise for more than thirty days in any fiscal year. In addition, according to
article 5(8) DTA, an enterprise is deemed to have a permanent establishment in a
Contracting State if there is a person, other than an independent agent, who acts on
behalf of an enterprise of the other Contracting State and has the authority to enter
into contracts there habitually, unless the person’s activities are limited to purchasing
goods for the enterprise, or where the person does not have the authority to enter into

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contracts but habitually stocks goods in the first-mentioned State and delivers them on
behalf of the enterprise, or where the person habitually obtains orders in the first-
mentioned State wholly or mainly for the enterprise itself or for the enterprise and
other related enterprises.

13.3 2 Interim Result

It follows that ARRI will not have a permanent establishment in India and will
therefore not be subject to Indian tax if it does not have a fixed place of business in
India, does not carry on any of the activities described above in India, or has a
dependent person in India who carries on any of the activities described above on
behalf of ARRI.

Should you have any questions regarding any of the above results, please revert.

Kind regards,
RESPONDEK & FAN PTE LTD Suman Khaitan & Co. Advocates

Dr. Andreas Respondek Suman Jyoti Khaitan

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