Companies Receiving Foreign Income

This section explains the tax obligations, exemptions and concessions enjoyed by companies receiving foreign income including foreign-sourced dividends, branch profits and service income.

 

Foreign Income

Foreign income refers to income derived from outside Singapore. Generally, such income is taxable in Singapore when remitted to and received in Singapore. In many cases, such income is taxed twice - once in the foreign jurisdiction and a second time in Singapore. However, there are tax benefits available to alleviate the double taxation suffered.

Tax Breaks on Foreign Income

Companies that are Singapore tax residents can enjoy tax breaks on foreign income as follows:

  1. Upfront exemption or reduction in tax imposed on the foreign income, when foreign income is derived in a jurisdiction that has an Avoidance of Double Taxation Agreement (DTA) with Singapore;
  2. Tax exemption of specified foreign income such as foreign-sourced dividends, branch profits and service income; and
  3. Foreign tax credit for the taxes paid in the foreign jurisdiction against the Singapore tax payable on the same income.

How to Enjoy Tax Breaks on Foreign Income

Claiming DTA Benefits

To claim or enjoy DTA benefits, the Singapore-resident company must show the treaty partner that it is tax-resident in Singapore. To do this, the company can:

  1. Apply for a Certificate of Residence (COR)

    This is a letter certifying that a company is a tax resident in Singapore for the purpose of claiming tax benefits under the Avoidance of Double Taxation Agreements (DTAs).
  2. Seek IRAS' endorsement of a tax reclaim form

    In some cases , the foreign treaty partner will require the company to submit a tax reclaim form issued by that jurisdiction together with or in place of a COR.  

Tax Exemption of Certain Foreign-Sourced Income

To enhance Singapore's attractiveness as a business hub and to boost Singapore's services export, tax exemption may be given to certain foreign-sourced income, such as foreign-sourced dividends, branch profits and service income.

Foreign-sourced income is foreign income that does not arise from a trade or business carried on in Singapore.

For more details, please refer to Tax Exemption of Foreign-Sourced Income.

Foreign Tax Credit

Companies may claim foreign tax credit for tax paid in a foreign jurisdiction against the Singapore tax payable on the same income.

For more details, please refer to Foreign Tax Credit.

What is a DTA

A DTA is an agreement concluded between Singapore and another jurisdiction (a treaty partner) which aims to relieve double taxation of income that is earned in one jurisdiction by a resident of the other jurisdiction.

For more details, please refer to Avoidance of Double Taxation Agreements (DTAs).

View the List of Avoidance of Double Tax Agreements.

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