What foreign-sourced income are exempted?
Under Section 13(9) of the Income Tax Act, exemptions under the FSIE scheme are applicable to the following specific categories of foreign sourced income:
- * Foreign sourced dividend – for the purposes of the tax exemption, a dividend is a foreign-sourced dividend if it is paid by a non-Singapore tax resident company. This treatment also applies to foreign dividend, which may be the income of a trade or business carried on in Singapore by a specified resident taxpayer (e.g. dividends received by a bank tax resident in Singapore). In addition, there is no shareholding requirement to enjoy the tax exemption.
- * Foreign branch profits – profits generated by business operation of a Singapore company registered as a branch in a foreign country. It excludes non-trade or non-business income of the foreign branch.
- * Foreign sourced service income – income generated by a resident taxpayer for services provided through a fixed place of operation in a foreign country. This may mean a place of management, an office, or a certain amount of floor space at the disposal of the specified resident taxpayer.
But, importantly, the exemptions apply only when the headline corporate tax rate in the foreign country from which the income is received is at least 15%, and the income had already been subjected to tax in that particular country.
The third and last qualifying condition to enjoy tax exemption on foreign sourced income is when the Comptroller of Income Tax is satisfied that the exemption would be beneficial to the specified resident taxpayers.
Do note, in cases where tax exemption is deemed not beneficial to the resident taxpayers, they can still claim tax relief against double taxation using Section 50 & 50A of the ITA, which has the below provisions:
- * Unilateral Tax Credit for income remitted from countries with which Singapore does not have a Double Taxation Agreement (DTA)
- * Double Tax Relief for income remitted from countries with which Singapore has a DTA.
Read moRead more about the Tax Exemptions of Foreign-Sourced Income in Singapore at Singapore Company Incorporation.
