Scope of Tax Exemption
A Singapore tax resident company can enjoy tax exemption on its specified foreign income that is remitted into Singapore on or after 1st Jun 2003.
The three categories of specified foreign income are:
- Foreign-sourced dividend
- Foreign branch profits
- Foreign-sourced service income
Qualifying Conditions for Tax Exemption
Under Section 13(9) of the Income Tax Act, tax exemption will be granted if all of the three conditions below are met:
- The highest corporate tax rate (headline tax rate) of the foreign country from which the income is received is at least 15% at the time the foreign income is received in Singapore;
- The foreign income had been subjected to tax in the foreign country from which they were received (known as the "subject to tax" condition). The rate at which the foreign income was taxed can be different from the headline tax rate; and
- The Comptroller is satisfied that the tax exemption would be beneficial to the person resident in Singapore.
To enjoy the tax exemption, you have to provide the following information in your Income Tax Return (Form C):
- Nature and amount of income received;
- Country from which the income is received;
- Headline tax rate of the foreign country; and
- Confirmation that foreign tax has been paid in the country from which the income was received. This is to satisfy that the "subject to tax" condition is met.
If you are filing Form C-S instead of Form C, the above information is to be included in the company’s tax computation and supporting schedules, and submitted to IRAS upon request.
The Comptroller will, however, regard the “subject to tax” condition as having met if the income is exempt from tax in the foreign country due to tax incentive granted for substantive business activities carried out in that country. This tax concession is applicable from 30 Jul 2004. To avail to the "subject to tax" concession, you need not submit any supporting documents together with your Income Tax Return (Form C/ Form C-S). However, you should maintain the following documents and submit them to IRAS upon request:
- A declaration that the foreign country has exempted the foreign income from tax because of substantive business activities carried on by the company in that country; and
- A copy of the tax incentive certificate/ approval letter issued by the foreign country. In the case of a foreign-sourced dividend, a dividend voucher (if available) stating that the dividend is exempt from tax due to the granting of a tax incentive to the payer company for carrying out substantive business activities in that foreign country will be sufficient.
For details on the foreign-sourced income exemption, please read the e-Tax Guides listed below.
Tax Exemption for Foreign-Sourced Income (Received from 22 Jan 2009 to 21 Jan 2010)
There is an expansion of scope in the exemption of foreign-sourced income to help companies tap on financing from their overseas investment and operations to meet their business financing needs in Singapore.
As announced in the 2009 Budget Statement, tax exemption will be granted on all foreign-sourced income accrued on or before 21 Jan 2009
to a resident company and which is received or deemed received in Singapore from 22 Jan 2009 to 21 Jan 2010
(both dates inclusive).
For the purpose of the tax exemption on foreign-sourced income remitted to Singapore during the said period, the "subject to tax" and "foreign headline tax rate" conditions specified in Section 13(9) of the Income Tax Act will be temporarily lifted.
To enjoy the tax exemption, you are required to make a declaration in your Income Tax Return (Form C) by giving the nature and amount of the foreign-sourced income that was remitted to Singapore. You are also required to complete the Declaration Form for Foreign-Sourced Income Received in Singapore From 22 Jan 2009 to 21 Jan 2010 (60KB)
for submission to IRAS. Although you have to state the use of the foreign income in the declaration form, the usage of such foreign income will not affect the claim for tax exemption.
For details, please refer to the e-Tax Guide, Temporary Liberalisation of Income Tax Exemption for Foreign-Sourced Income Received in Singapore From 22 Jan 2009 to 21 Jan 2010 (171KB).
Expenses incurred in respect of Foreign-Sourced Income received in Singapore
All expenses incurred in respect of foreign-sourced income received in Singapore which qualifies for tax exemption shall be deducted against such foreign-sourced income, and will not be available for deduction against any other taxable income.