SINGAPORE – According to the Inland Revenue Authority of Singapore (IRAS), a Singapore tax resident can enjoy tax exemption on specified foreign income that is remitted into Singapore. This tax ruling has been in effect since June 1st, 2003.
Prior to June 1st, 2003, resident taxpayers would be taxed on all foreign-sourced income received in Singapore. They could also be taxed on the same foreign income in the countries of origin. To enhance Singapore’s attractiveness as a business hub and to boost its services export, it was decided that tax exemption may be granted on certain foreign-sourced income.
The three categories of foreign income permissible for exemption are:
- Foreign-sourced dividends;
- Foreign branch profits; and
- Foreign-sourced service income.
These taxpayers must also meet certain qualifying conditions to obtain tax exemption. Cited under Section 13(9) of the Income Tax Act, foreign income will only be exempt from taxation if all three of the following conditions are met:
- “The income is subject to tax of a similar character to income tax (by whatever name called) under the law of the territory from which the income is received;
- At the time the income is received in Singapore by the person resident in Singapore, the highest rate of tax of a similar character to income tax (by whatever name called) levied under the law of the territory from which the income is received on any gains or profits from any trade or business carried on by any company in that territory at that time is not less than 15 percent; and
- The Comptroller [of Income Tax] is satisfied that the tax exemption would be beneficial to the person resident in Singapore.”