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Singapore: Domestic Corporate Taxation

Withholding Taxes on Outgoing Dividends

In Singapore there are no withholding taxes levied on dividends. Instead dividends are taxed at the standard rate, with a tax credit being given for any corporate tax levied on the profits out of which dividends are paid. Where there is a shortfall between the tax credit and the standard rate charge the shortfall must be made up by the company paying the dividend and not by the shareholder receiving it.

Where a dividend is paid out by a Singaporean company to a foreign parent corporation no further taxes will be levied in the following circumstances:

  • No Shortfall: Dividends will not suffer any further Singaporean taxes on remittance to a foreign jurisdiction if corporate income tax has already been levied on the profits out of which the dividends are being paid.
  • Double Taxation Treaty: If the dividends are flowing to a jurisdiction with which Singapore has a double taxation treaty then the Singaporean company is exempted from the need to make up any shortfall arising.
  • Concessionary Tax Regime: If the dividends are flowing from a Singaporean company which is subject to a concessionary tax regime then the resident company is exempted from the need to make up any shortfall in so far as the shortfall relates to the concessionary tax regime. 
  • Foreign Source Profits: If the dividends are from income earned and taxed abroad prior to being remitted to Singapore (e.g. the foreign branch profits of a Singaporean resident company) then even if there is a shortfall no tax is payable on the shortfall when the Singaporean company remits dividends to its foreign parent corporation.
  • Foreign Tax Credits: Where the dividends have flowed from a foreign subsidiary to a Singaporean holding company and the foreign tax credits exceed the Singaporean corporate income tax liability no further taxes are payable in Singapore on dividends remitted to the foreign parent corporation.

(N.B. Tax Sparing Provisions: Most of Singapore's tax treaties contain tax sparing provisions, meaning that the foreign parent corporation of the Singapore subsidiary treats income received from its Singapore subsidiary as if the full amount of corporate income tax had been paid in Singapore even though the subsidiary was subject to a number of favorable fiscal concessions which meant it paid little (usually 10%) or no corporate income tax. As previously mentioned, the USA will not sign a full tax treaty with Singapore principally because of its refusal to accept tax-sparing credits).

 

 

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