Singapore uses a territorial basis of taxation, which means only income earned in Singapore is subject to tax. However, foreign-sourced income received in Singapore may be taxable under certain conditions.
Foreign-sourced income refers to income that is generated outside of Singapore. It includes foreign dividend, foreign branch profits, and foreign-sourced service income.
Foreign-sourced income is taxed in Singapore when it is remitted or deemed remitted into Singapore and in a year where the headline corporate tax rate of the foreign jurisdiction, from which the income is received, is less than 15%.
However, foreign-sourced income will be tax-exempt if it meets these three conditions:
- The foreign income had been subjected to tax in the foreign jurisdiction from which they were received (known as the “subject to tax” condition). The rate at which the foreign income was taxed can be different from the headline tax rate.
- The highest corporate tax rate (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 (“foreign headline tax rate” condition).
- The Comptroller of Income Tax is satisfied that the tax exemption would be beneficial to the person resident in Singapore.
Do note that each case may vary, and it’s always recommended to consult with a tax professional or advisor to fully understand your tax obligations.