The purpose of this article is to provide clarifications on taxation of foreign-sourced income for Singapore companies. Note that the information provided is for general purpose only and not meant to replace professional tax advice.
In order to determine whether the income is subject to taxation in Singapore, we need to find answers to the following questions:
1. Does the income qualify as foreign-sourced income?
2. Was the foreign-sourced income "received" in Singapore?
3. Was the foreign-sourced income "received" in Singapore subject to taxation overseas?
Singapore is often cited as the leading example of countries that continues to reduce corporate income tax rates and introduce various tax incentives to attract and keep global investments. Singapore has a single-tier territorial based flat-rate corporate income tax system. Effective tax rates as one of the lowest in the world and the general “business friendliness” of Singapore are the two important factors contributing to the economic growth and foreign investment into the city-state.
Singapore is a strong advocate of small and medium enterprises. As such, it implemented various measures to encourage more private limited start-up companies.
The dividend income (profit after tax) of a company can be disposed of in any manner that the company sees fit.
To attract more investments, Singapore provides tax exemption on capital gains provided that these earnings are not derived solely from investments trading.
The exemptions and tax privileges accorded in the first three years of operations cannot be carried over to subsequent years, even when a company is not able to claim such benefits.
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