Service income refers to income from professional, technical, consultancy or other services provided by a specified resident in the course of its trade, profession or business.
When will the service income be considered foreign-sourced or Singapore-sourced?
The service income is considered foreign-sourced if the services are provided through a fixed place of operation in a foreign country. A fixed place of operation refers to a place of management, an office or some floor space where the taxpayer or its employees provide the services.
The service income is considered Singapore-sourced and taxable if:
• The services are not provided through a fixed place of operation in the foreign country and;
• One is carrying on a trade, business or profession of providing such a service in Singapore.
If you have been taxed twice on the same foreign income, once in the foreign country and a second time when the foreign income is remitted to Singapore, you may claim foreign tax credit, subject to conditions.
Tax Exemption of Foreign-Sourced Income
Under the foreign-source income exemption scheme (FSIE), the following groups of resident taxpayers will enjoy tax exemption of foreign income:
||‘Specified resident taxpayers’:
Resident persons other than individuals; and
Resident individuals receiving the specified foreign income through a partnership in Singapore
|From 1 Jan 2004, all foreign-sourced income received in Singapore by resident individuals, except those received through a Singapore partnership, will be exempt from tax where the Comptroller is satisfied that the exemption will be beneficial to them.
From 1 June 2003, specified resident taxpayers who receive
- Foreign-sourced dividend
- Foreign branch profits
- Foreign-sourced service income
would be given tax exemption if they meet these qualifying conditions:
1. The foreign income is taxed in the foreign country from which it was remitted to Singapore;
2. 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;
3. The tax exemption would be beneficial to the specified resident taxpayers in Singapore.
How to Claim Tax Exemption
To enjoy the tax exemption, you have to provide the following information in your Income Tax Return:
• Nature and amount of foreign income received;
• Country from which the income is received;
• Headline tax rate of the foreign country; and
• Amount of foreign tax paid in that country.
For more information, please refer to the e-Tax Guide ‘Tax Exemption for Foreign-Sourced Income' (159KB).