Singapore Double Taxation Agreement


You’ll end up paying double tax when you’re liable to pay tax in two countries with respect to the same income. You will be taxed by the country of source (where the income was generated) plus by the country of residence (where the income was received). In order to ease you from the double taxation burden, the Singapore government renders different kinds of tax reliefs based on tax laws and the tax treaties signed by Singapore with other countries.

What is Double Tax Relief?

It is a tax relief that comes under an Avoidance of DTA (Double Taxation Agreement). It will be provided as a tax credit in order to lower double taxation. With this tax relief, as a Singapore tax resident, you can make a credit claim for the tax you’ve paid in the foreign jurisdiction versus the Singapore tax you need to pay on the same income.

You’ll qualify for Double Tax Relief when you paid foreign tax in correspondence to the provisions of DTA & is capped at the lower of the foreign tax you’ve paid & the Singapore tax you would be liable to pay on the same income.

If your firm is being managed and controlled in Singapore, your company will be treated as a “tax resident” of Singapore.

Avoidance of Double Taxation Agreements

A Double Taxation Agreement is presumed between Singapore & a treaty partner who is from a different jurisdiction. This agreement aims at mitigating the double taxation of income that you’ve earned in a particular jurisdiction but as a resident you come under another jurisdiction.

Double Tax Deduction for Internationalisation Scheme

As a business when you meet certain qualifying criteria, without any approval you can claim double tax deduction automatically on any eligible expense you have incurred between 1 April 2012 and 31 March 2020.

An expenditure cap of S$100,000 and S$150,000 per Year of Assessment will be applicable for eligible expenses you’ve incurred from 1 April 2012 to 2018 YA and from 2019 YA to 31 March 2020, respectively.

How to qualify for DTD?

Your company can claim for DTD on eligible expenditure your business has incurred via the following 4 eligible activities up to a specific expenditure cap. To make this claim, you need not seek approval from the Singapore Tourism Board (STB) or Enterprise Singapore.

  • Overseas trips or missions with respect to business development.
  • Overseas investment trips or study missions.
  • Participation in authorised local trade fairs.
  • Participation in overseas trade fairs.

Note: As a business owner, always ensure to retain all your business-related documents with respect to expenditure and the purpose of the expense. Any expense you’ve incurred which exceeds the mentioned expenditure cap will need an approval from STB or Enterprise Singapore.

Who Can Claim a Double Tax Relief?

If you’re a Singapore Tax Resident:

When your income is earned via a foreign country, you may be liable to pay tax in that foreign country. Nevertheless, you may still claim for the benefits of Double Taxation Agreement which might qualify you for a decreased tax rate or you might not have to pay tax in that foreign country.

You will qualify for these kinds of tax benefits if an Avoidance of DTA has been signed between Singapore and the foreign country (in this case the country is also referred to as a treaty country) via which you earn your income. In order to be eligible for tax benefits, you will need to submit COR (the Certificate of Residency) to the tax authority of the foreign country in order to confirm that you’re a tax resident of Singapore.

Note: The benefits of a Double Taxation Agreement is open only to the tax residents of Singapore and the corresponding treaty country.

If you’re a Tax Resident of a Foreign (treaty) Country:

You might be saved from paying tax twice on the same income provided your treaty country has signed a tax treaty with Singapore.

The Double Taxation Agreement article with respect to 'Dependent Personal Services' renders the source rules for the income you earn via your employment. The “country of source” corresponds to where the employment is used and services are rendered. The “country of source” sanctions tax exemption with an aim to facilitate short-term employment and also to make the movement of proficient personnel hassle free.

Conditions applicable for most of the tax treaties:
  • Your presence in the source country should not be more than a specified term (most often treaties do not approve a term which exceeds 183 days). However, it is recommended that you check the tax treaty in specific to know about the approved time period in detail.
  • You need to provide services for, or on a person’s behalf considering he or she is a resident who belongs to the country he or she is residing at.
  • Your compensation should not be derived either from a permanent organisation, or a fixed base your employment provider has in the country of source.

In case you qualify for tax treaty exemption, you will need to submit your COR (Certificate of Residence) and Tax Treaty Exemption claim to IRAS.

When you Want to Avoid Double Taxation as a Company:

When your company earns foreign income, it is possible that the foreign income might be subjected to tax twice. Foreign income will be taxed once in the foreign jurisdiction and it will be taxed again when the income is transmitted into Singapore. As a business owner, you can make an FTC claim for the tax payment you’ve made in a foreign jurisdiction versus the Singapore tax you need to pay on the same income. You can avoid paying tax twice in two ways:

Unilateral Tax Credit (UTC)

If the foreign jurisdiction from which you derive your income does not have a Double Taxation Agreement with Singapore, a UTC will be granted. This has been in effect since the Year of Assessment 2009.

Double Tax Relief (DTR)

Under the Double Taxation Agreement, if your business does not get an exemption of tax and instead gets a reduction on the payable tax amount, your business will still pay tax twice. Hence, DTA provides such businesses with a Double Tax Relief wherein you can claim a credit for the tax you have paid in the foreign jurisdiction for the same income.

What are the qualifying conditions you need to meet as a company to claim FTC?
  • Your business must be a Singapore tax resident for the respective basis year.
  • You have paid tax or it is payable for the same income source in the foreign jurisdiction.
  • Your income should be taxable in Singapore.

Note: You cannot claim FTC if your business is in a loss position.

For businesses with Permanent Establishments (PE) overseas:

If your company is permanently established under a foreign jurisdiction and you derive your income from that permanent establishment, then your company’s income will usually be taxed overseas as well. Your company will be granted FTC, only if the same income is subjected to tax in Singapore also.

For businesses deriving passive income:

If your business is deriving passive income overseas such as dividend or interest, the tax on such income will usually be applicable in the foreign jurisdiction in the year of receipt. The same income will be taxed in Singapore only when the income is transmitted to Singapore. For such income, FTC will be granted by the IRAS when the income is subjected to tax in Singapore.

How to calculate FTC

When you’re claiming for Double Tax Relief as a company, the FTC amount you can claim will depend on a few terms and conditions as mentioned in the Double Taxation Agreement with the respective treaty partner.

As a business when you’re claiming DTR, FTC will be calculated as the lower amount of the following:

  • The actual foreign tax amount you have paid or
  • The Singapore tax amount that is attributable to the income derived from a foreign country (net of expenses).
Calculating Singapore tax that is attributable to foreign income:

The FTC amount that a business will be granted is calculated on a “source-by-source & country-by-country” basis. But, businesses have the option to elect the FTC Pooling System under which foreign income that is derived from various sources can be pooled together and do not have to be calculated based on the parameters mentioned earlier.

How to claim FTC

You can claim for FTC when you file the income tax return for your company with the IRAS. Note, that if you are claiming FTC, you will have to file Form C and not Form C-S.

You need not submit supporting documents with respect to your FTC claim when you’re submitting your Form C. Nevertheless, you need to retain and be ready with the following set of information and documents:

  • Jurisdiction under which you paid your foreign tax.
  • Nature of the derived income.
  • Explanation of the services you’ve provided and you need to mention if the income was derived from a PE under the foreign jurisdiction and your basis for claiming when applicable.
  • The payer’s name.
  • The date of withholding tax voucher or receipt.
  • Your gross income amount, the tax amount that was withheld in a foreign currency and the withholding tax rate (you must also mention the corresponding amount in Singapore dollar).
  • If you wish to claim a double tax relief, you may be requested to include the Article of DTA which is relevant to your claim wherein the tax was withheld.
  • The withholding tax voucher or receipt.

When you’re a self-employed Singapore tax resident:

Upon meeting certain eligibility criteria, you can claim FTC (Foreign Tax Credit) when you’ve been taxed twice on the same income (income that was taxed both in Singapore as well as the foreign country).

Qualifying conditions include:

  • You need to be a tax resident in Singapore for the concerned basis year.
  • Either you’ve paid tax or you need to pay tax on the same income in the treaty country.
  • Your income is assessable for tax in Singapore.
FTC Pooling System

As a Singapore tax resident you can also opt for the “FTC pooling system” when you’re making an FTC claim on income for which you’ve paid foreign tax.

What qualifies you for FTC Pooling System?
  • You should have already paid the foreign income tax on the income you’ve received from the foreign country.
  • The headline corporate tax rate (the highest tax rate) pertaining to the foreign country from where your income was procured is a minimum of 15% at the time of you getting your foreign income in Singapore.
  • Your income is taxable in Singapore and you qualify to make an FTC claim under ITA.

In case you do not comply with the eligibility criteria or you (or your company) decide to not opt for the FTC pooling system, the existing FTC terms and conditions will be applicable.

Note: To find out the DTR rate you qualify for as a company, you can use this link.

How to Claim Double Taxation Exemption

For a Non-resident Professional:

When you want to claim for tax exemption under the Avoidance of DTA as a non-resident professional you need to keep a tab on the following points:

  • You can verify if you qualify for a tax treaty exemption or not with the help of the tax treaty calculator.
  • When the final outcome in the calculator displays that you’re eligible for tax treaty exemption, you need to fill “IR586” online. Also note, you need to submit IR586 to IRAS only if IRAS has asked for it for verification purposes. At this point, payment of withholding tax will not be needed.
  • When the final verdict in the calculator shows that you do not qualify for tax treaty exemption, you need to e-file your tax return and ensure that you’ve made a payment of withholding tax within the due date to IRAS. If you fail to pay the withholding tax within the stipulated due date, you’ll be liable to pay to penalties.

For a Non-resident Company:

To claim tax exemption/relief under the Avoidance of DTA you need to complete the following steps:

  • With the help of the “Double Taxation Relief Tax Rate Calculator”, you can check if your non-resident company is entitled to Double Taxation Relief or Exemption. Also, you can find out the tax rate that is applicable under the Double Taxation Agreement.
  • When you’re e-filing your return, select the option "Double Taxation Relief" (DTR).
  • You will need to submit your actual COR (Certificate of Residence) pertaining to the years during which you claimed for DTR. The number of years for which you claimed for DTR will correspond to the payment period as mentioned during your e-filing.
  • COR needs to be authorised by the foreign tax authority in reference to the non-resident. IRAS should receive the Certificate of Residence within the due date.

Note: In case you fail to submit the COR within the due date, a Demand Note might be sent to you asking you to pay a late payment fee plus the balance of the withholding tax.

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