Is foreign sourced income of a Singapore company taxed in Singapore?
What are provisions of foreign sourced income exemption scheme for a Singapore company?
What are provisions for avoidance of double taxation for a Singapore company?
- Double Tax Relief (DTR) – a credit relief provided under Singapore’s of Double Tax Agreements (DTAs);
- Unilateral Tax Credit (UTC)
The government, in 2011, also introduced a Foreign Tax Credit (FTC) pooling system to give businesses greater flexibility in their FTC claims, reduce the taxes payable on foreign income, and to simplify tax compliance.
When can a Singapore company benefit from FTC or FSIE?
What are conditions under the foreign sourced income exemption scheme?
- The foreign income had been subject to tax in the foreign jurisdiction from which they were received (known as the “subject to tax” condition);
- The highest corporate tax rate (foreign headline tax rate condition) of the foreign jurisdiction from which the income is received is at least 15% at the time the foreign income is received in Singapore; and
- The Comptroller is satisfied that the tax exemption would be beneficial to the person resident in Singapore.
Important points to note for a company to avail itself of foreign sourced income exemption
Also, it is very important to note that IRAS comes down hard on the practice of “treaty shopping”.
What are the common mistakes to avoid while claiming tax exemption for foreign-sourced dividends?
- dividends must meet the “headline tax rate” condition, i.e. the dividends were received from countries less than 15% headline tax rate; and
- dividends must meet the “subject to tax” condition, e.g. the dividends were distributed from a company which is part of a group and the income of the company was found not to be subject to tax
How can a Singapore company claim tax exemption in its foreign-sourced income?
In Singapore, IRAS issues a Certificate of Residence (COR) to companies declaring their tax residency in Singapore.