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IRAS Guides On Foreign Tax Credit Pooling

by Mary Swire, Lowtax.net, Washington
07 January, 2014

The Inland Revenue Authority of Singapore (IRAS) has issued a revised e-tax guide to provide details on the foreign tax credit (FTC) pooling system, which is of relevance if a taxpayer is a Singapore resident receiving foreign income in Singapore.

FTC is granted by allowing the Singapore-resident individual to claim a credit for the tax paid in the foreign country against the Singapore tax that is payable on the same income. The FTC pooling system was introduced in the 2011 Budget to give businesses greater flexibility in their claim of FTCs, reduce their Singapore taxes payable on remitted foreign income, as well as to simplify tax compliance.

Under the FTC pooling system, effective from the 2012 year of assessment (YA), a taxpayer may elect to aggregate the foreign taxes paid on any items of foreign income received. This applies to foreign income which is received in Singapore during the basis period for the YA 2012 and for subsequent YAs.

The system is available if income tax has been paid in the foreign tax jurisdiction from which the income is derived; the headline tax rate of that foreign tax jurisdiction is at least 15 percent at the time the foreign income is received in Singapore; Singapore tax is payable on the taxpayer's foreign income; and the taxpayer is entitled to claim for FTC under Singapore's tax code.

If FTC pooling applies, the amount of FTC granted to a taxpayer will be based on the lower of the total Singapore tax payable on that foreign income and the total foreign taxes paid on the same income.

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