How Singapore Tax System Dealt With Remittance Of Foreign-sourced Income

By Author: Wu Chin Kwang
Total Articles: 1
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According to the Singapore Income Tax Act (SITA), personal income earned from international business is taxable in Singapore once it is transmitted into Singapore. The exception is of course, if one qualifies for tax exemption. Foreign-sourced dividend, branch profit and service income are just some instances that may, under certain circumstances, fill the bill for a tax exemption under the Foreign-Sourced Income Exemption (FSIE) regime.
Foreign Tax Credits or FTC for short is attainable for any foreign tax paid on the foreign-sourced income where it is taxable for Singapore tax. Foreign Tax Credits is provided to lessen the load of the affected residents in the case of any double-taxation. The Foreign Tax Credits permitted under sections 50, 50A and 50B of Singapore Income Tax Act for resident corporate taxpayers is capped at the lower of the Singapore tax payable at the moment. On each stream of foreign-source income and the foreign tax paid, any excess foreign tax paid is disregarded. Which means the tax payable for each resident is regardless of the source it was derived from.

Which further elaborates how with ...
... the present evaluation approach for Foreign Tax Credits, any amount of excess foreign tax paid according to Singapore tax payable is not applicable for negation of the Singapore tax payable on another foreign sourced income from the same country. Take for example if a resident was to be taxed for his dividend from China, it will not be of any relevance to his tax payable for his interest from China. Likewise, an excess of foreign tax paid over the Singapore tax payable on foreign-sourced income received from a foreign country is not available for offset against the Singapore tax payable on the same type of income received from other foreign country. In this case it would be comparable to a resident receiving both interest from China and also Malaysia.

During the Singapore Tax Budget 2011, a new Foreign Tax Credits pooling system was introduced and is to take effect from the year of assessment (YA) 2012. The new system was put forward by the minister for finance in an effort to urge resident corporate taxpayers to remit their foreign sourced income into Singapore Tax.

Given the improved Foreign Tax Credits pooling arrangement, it is expected that resident taxpayers would be able to cut back on their Singapore tax payable as there is now more leeway granted when computing the Foreign Tax Credits. This golden opportunity for reduction is especially pertinent for Singapore corporate taxpayers who are globalizing, since they are earning a greater part of their profits abroad.

Eric Eio
Partner of Paul Hype Page & Co
Website: http://www.businessatsingapore.com/cms/Home
Email: eric-eio@php.cpa.com.sg

Paul Hype Page & Co, a Full Practicing Member of Institute of Certified Public Accountants of Singapore (ICPAS) and also registered as a Public Accounting Firm with Accounting and Corporate Regulatory Authority (ACRA). We offer consultancy services relating to Singapore Company Incorporation, Accounting, Taxation, Immigration and related compliance services.