The Second Protocol amending the Agreement between Singapore and Cambodia for the Avoidance of Double Taxation (DTA) entered into force on 6 March 2026, the Ministry of Finance has confirmed . Signed on 2 November 2023, this protocol introduces critical changes that demand immediate attention from businesses operating in both jurisdictions .
Key Amendments
The protocol introduces a new Article 28 (Entitlement of Benefits) incorporating the Principal Purpose Test (PPT) and amends the DTA’s preamble to align with OECD Base Erosion and Profit Shifting (BEPS) standards . This represents Singapore’s commitment to preventing treaty abuse under BEPS Action 6 .
Practical Implications for Taxpayers
The PPT denies treaty benefits if obtaining those benefits was one of the principal purposes of any arrangement or transaction, unless granting them would be consistent with the object and purpose of the DTA .
Tax professionals should note that the Singapore-Cambodia investment corridor faces heightened scrutiny. As one regional tax expert observed, the PPT serves as a “litmus test for investment structures,” requiring investors to demonstrate that DTA usage is not primarily for tax benefits .
Substance Requirements Intensify
Investors must now establish substantive economic ties in Singapore. Key criteria include having key management personnel in Singapore and demonstrating that control and decision-making processes occur within the country . “The era of the shelf company in Singapore for tax planning has been over for some time,” cautioned a DFDL Cambodia partner. “Investors need to embed real substance into their Singaporean operations” .
Compliance Considerations
The protocol complements Singapore’s expanded taxation of foreign-sourced disposable gains from January 2024, which now taxes previously exempt gains where entities lack economic substance in Singapore . Concurrently, Cambodia’s General Department of Taxation has established 2025 market interest rates for related-party loans at 8.45% for USD-denominated loans, relevant for transfer pricing documentation .
Effective Date
The Income Tax (Singapore — Cambodia) (Avoidance of Double Taxation Agreement) Order 2026 gives effect to these modifications, overriding any inconsistent written law . Taxpayers should urgently review existing structures to ensure compliance with the enhanced substance requirements and prepare documentation supporting commercial rationales for cross-border arrangements.
Source: MOF website, 6 March 2026.