In Singapore, taxes are imposed on income earned or accrued in Singapore, as well as foreign-sourced income remitted into Singapore. While remitted foreign-sourced income is provided with a foreign tax credit to offset the taxes payable in Singapore, the Government has received feedback that companies find the tax credit system administratively cumbersome. With more companies globalising and earning a bigger share of their income from overseas operations, simplifying the tax treatment of foreign-sourced income would boost our attractiveness as a business hub.
The Government has therefore introduced the foreign-sourced tax exemption regime to simplify but mirror the foreign tax credit system. Under this regime, foreign branch profits, service income and dividends are exempt from tax upon remittance into Singapore, if conditions are met. All other sources of foreign income continue to be subject to the foreign tax credit system. Please refer to
IRAS website for more details.
In Budget 2011, Minister for Finance announced the introduction of foreign tax credit pooling if the following conditions are met:
i. the specified foreign income had been subjected to tax in the foreign jurisdiction from which the income is received;
ii. the headline tax rate 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
iii. the foreign income is subject to tax in Singapore and the taxpayer is entitled to claim for foreign tax credit under the Income Tax Act.
Section 13(8)
In Budget 2003, the DPM/Minister for Finance announced that foreign-sourced dividends, branch profits and service income (collectively "specified foreign-sourced income") derived by any person resident in Singapore will be exempted from tax. This is known as the foreign-sourced income tax exemption regime and under this regime, the specified foreign income is exempt from tax if the following conditions are met:
i. the specified foreign-sourced income has been subjected to tax in the foreign jurisdiction from which the income is received; and
ii. the headline tax rate of the foreign jurisdiction from which the specified foreign-sourced income is received is at least 15%.
Please refer to the e-tax guides found at IRAS website for more details.
Section 13(12) Exemption
Where the above conditions cannot be met, application for tax exemption under section 13(12) of the Income Tax Act can be made to the IRAS/Ministry of Finance for consideration.
Applications should be made using the following form:
In Budget 2009, Minister for Finance announced to temporarily expand the scope of the Foreign-Sourced Income Exemption scheme to cover all foreign-sourced income and lift the existing conditions that are currently required for specified foreign-sourced income to be exempted from tax when remitted to Singapore. All foreign-sourced incomes which have been earned before 22 January 2009 will be exempted from tax when they are remitted during the period from 22 January 2009 to 21 January 2010 (both dates inclusive).