Current Law
Under the law, income tax is levied on income accruing in or derived from Singapore (generally referred to as income sourced in Singapore ), or on foreign sourced income received or deemed received in Singapore from outside Singapore .
However, foreign sourced dividends, branch profits and service income received or deemed received into Singapore by a resident company on or after 1 June 2003 or received by any individual resident in Singapore through a partnership in Singapore on or after 1 June 2004 shall be exempt from Singapore income tax, subject to the following conditions being satisfied.
(I) In the year the specified foreign income is received in Singapore , the headline tax rate (i.e. highest corporate tax rate) of the foreign jurisdiction must be at least 15%;
(II) The specified foreign income has been subject to tax in the foreign jurisdiction from which it has been received. For foreign-sourced dividend income, this includes the income tax paid by the dividend paying company on its income out of which the dividend is paid; and
(III) The IRAS is satisfied that the tax exemption would be beneficial to the person resident in Singapore.
Where these conditions are not or cannot be satisfied, the above foreign income will be subject to income tax when remitted to Singapore . Other foreign sourced income (such as foreign interest) are similarly subject to income tax as and when they are remitted to Singapore .
Individuals (except where the above foreign sourced income are received by resident partners of a partnership in Singapore ) currently enjoy tax exemption on all foreign-sourced income received in Singapore on or after 1 January 2004.
One Year Amnesty from 22 January 2009 to 21 January 2010
Given the current bleak economic conditions and to help ease the credit tightness by enabling Singapore resident companies to repatriate funds from their overseas investments and operations to meet business financing needs in Singapore without attracting further income tax, the Minister for Finance has proposed a one-year tax exemption on the remittance of all foreign sourced income by resident companies and resident partners of partnerships in Singapore .
The one-year tax exemption covers the remittance of all foreign sourced income earned or accrued outside Singapore on or before 21 January 2009 that is remitted to Singapore during 22 January 2009 to 21 January 2010 (both dates inclusive). Accordingly, the conditions required to be satisfied for the foreign sourced income to be exempt from tax when remitted will be lifted during this one-year amnesty period.
Singapore companies that have foreign sourced income earned or accrued on or before 21 January 2009 but maintained in offshore accounts in order not to attract income tax in Singapore would now be able to remit their foreign income free of Singapore tax during this one-year amnesty period.
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