Q:
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There are how many types of foreign tax credit?
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A:
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The following types of tax credits that may be claimed are:
1.
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Unilateral tax credit (UTC) – This is for income remitted from countries which Singapore does not have a Double Taxation Agreement (DTA) with; or
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2.
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Double taxation relief (DTR) – This is for income remitted from countries which Singapore has a DTA with.
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Q:
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What is the condition to claim FTC?
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A:
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The company must satisfy all of the following conditions in order to claim FTC:
1.
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The company is a tax resident in Singapore for the relevant basis year;
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2.
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Tax has been paid or is payable on the same income in the foreign jurisdiction; and
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3.
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The income is subject to taxation in Singapore.
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Q:
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What is the tax treatment for Companies with permanent establishments overseas?
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A:
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When a company has a permanent establishment (PE) overseas and the income is derived through that PE, the income will generally be taxed overseas. A FTC would be granted only if the income is also taxed in Singapore.
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Q:
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What is the tax treatment for Companies deriving passive income?
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A:
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Passive income (e.g. interest, dividend) derived from outside Singapore will generally be taxed overseas in the year of receipt. Such income will be taxed in Singapore in the year of remittance; a FTC will be given when the income is taxed in Singapore.
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Q:
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What is the calculation for FTC?
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A:
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For companies claiming DTR, the amount of FTC to be claimed is subject to the specific terms and conditions as specified in the DTA with the relevant treaty partner.
FTC is the lower of:
The actual amount of foreign tax paid; or
The amount of Singapore tax attributable to the foreign income (net of expenses).
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Q:
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What is FTC Pooling System?
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A:
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The FTC pooling system was introduced in Budget 2011 to give businesses greater flexibility FTC claims, to reduce their Singapore taxes payable on remitted foreign income, as well as to simplify tax compliance.
The company must satisfy all of the following conditions to qualify for FTC pooling system:
1.
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Foreign income tax is paid on the income in the foreign jurisdiction from which the income is derived;
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2.
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The highest corporate tax rate (headline tax rate) of the foreign jurisdiction from which the income is derived is at least 15% at the time the foreign income is received in Singapore; and
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3.
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The company is entitled to claim for FTC under the Income Tax Act and there is Singapore tax payable on the income.
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Where the above conditions are not met, or where companies choose not to elect for FTC pooling system, the current FTC rules will apply
FTC under the Pooling System is the lower of:
1.
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the amount of Singapore tax attributable to the foreign income under pooling (net of expenses); or
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2.
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the actual amount of pooled foreign tax paid on the same pool of foreign income.
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