Lowtax Network

Back To Top

Your Lowtax Account

Singapore: Domestic Corporate Taxation

Corporate Income Tax on Dividend Income Received

The amount of corporate income tax payable on dividend income received by a Singaporean holding company from a foreign subsidiary depends on whether or not the dividend remittances come from a subsidiary resident in a jurisdiction with which Singapore has signed a double taxation treaty:

  • Double Taxation Treaty: If the dividend remittances come from a jurisdiction with which Singapore has signed a double taxation treaty they receive the following fiscal treatment:
    • Exemption Method: Depending on the terms of the double taxation treaty the dividends may be completely exempted from an assessment to corporate income tax in Singapore. Exemption is only granted in respect of certain categories of income. 
    • Credit Method: If the dividend income is not fully exempted from corporate income tax under the terms of the double taxation treaty then corporate income tax is payable in Singapore but the amount is reduced or eliminated altogether through tax credits. Singaporean corporate income tax is payable on the full value of the foreign profits out of which the dividends were paid. Against this Singaporean corporate income tax liability must be credited the full value of the tax paid in the foreign jurisdiction. If the foreign tax credit exceeds the Singapore tax liability then no further corporate income tax is payable in Singapore on the value of the dividends remitted. Where a double taxation treaty has been signed the tax credit is composed of the full value of all the withholding taxes and corporate income taxes paid in the foreign jurisdiction on the dividends remitted. The result is that for all intents and purposes dividend income is often tax-free in the hands of the Singaporean holding company.
  • No Double Taxation Treaty: When the dividends are remitted from a jurisdiction with which Singapore has not signed a double taxation treaty tax credits are only available if the Singaporean holding company owns at least 25% of the shares of the foreign corporation. Furthermore the tax credits only include the corporate income tax paid in the foreign jurisdiction. Thus the amount of corporate income tax payable on dividends received by a Singaporean holding company from a foreign subsidiary depends largely on whether or not the subsidiary is resident in a jurisdiction with which Singapore has signed a double taxation treaty. (N.B. from the 2009 tax year, a unilateral tax credit will be allowed in respect of all foreign-sourced income received from non-treaty countries).

 

 

Back to Singapore Index »