What is the Singapore Tax Policy and the Foreign Income Tax?

What is the Singapore Tax Policy and the Foreign Income Tax?

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During the peak of the pandemic, many work positions turned to a remote working arrangement. With our advancing technology, these adjustments accelerated the rise in remote job opportunities worldwide. As a result, this can naturally lead to a bit confusion when filing tax returns in Singapore (foreign tax income).  

Foreign Companies & Non-Residents in Singapore

Singapore does not tax foreign-sourced income, meaning income earned overseas and not in Singapore. Meaning that, foreign companies with no local base in Singapore can remit their foreign income to a Singaporean bank without being taxed.  

The same principle also applies to non-residents, referring to those who stayed in Singapore for less than 183 days. This encourages foreigners and foreign businesses to utilise Singaporean banks and management firms regardless of where they are rooted.

Local Companies & Residents of Singapore

If you’re a Singapore company or a resident, the rules conditions explained above don’t apply. This is because if your income was received in Singapore, meaning it was remitted, transferred, or brought into Singapore, it would be taxed. However, in cases where foreign income is used to settle business debts held in Singapore, it will also be subjected to tax.

Can I Be Exempt from Singapore Tax?

Even in cases where you are a resident or a local company, there are still instances for you to be exempt from taxation.  

For example, if your income has already been taxed by the foreign jurisdiction where it originated, you no longer need to pay taxes in Singapore. This is known as the “subject to tax rate” condition.

Another situation in which you can be exempt from taxes in Singapore, is when the tax rate in your foreign jurisdiction is or exceeds 15%, you will not be taxed in locally. This is known as the “foreign headline tax rate” condition.  

When in Doubt, Reach Out!

Foreign income that’s not earned or transferred to Singapore is most likely tax-free. However, if you’re a local company or a resident of Singapore, your foreign transferred income to your bank will most likely be taxed.

If you’re unsure about these processes, feel free to reach out and engage with our budget-friendly accounting services! Our experts will walk you through your taxation conditions and keep your finances organised and up to date. Feel free to reach out to us for a complimentary consultation to discuss the specifics of your business, we’ll respond within 24 hours.