Is Foreign-Sourced Dividend Income Taxable in Singapore?

Singapore is a popular investment holding location for many Multinational Corporations (“MNCs”), contributed by its business friendly environment, wide double taxation agreement network^[1] and favourable taxation system (e.g. low corporate and personal tax rates, no capital gains tax, no controlled foreign corporation rules, no thin capitalisation rules, hardly any exchange control measures, etc.).

We often receive enquiries regarding the taxability of the foreign-sourced investment income which could include dividends when received in Singapore.  This Article provides an overview of the taxability of foreign-sourced dividend income and the tax exemption schemes available to companies who are tax resident in Singapore.

Foreign-sourced dividend income

Singapore adopts a territorial and remittance basis of taxation.  Thus, income received by a Singapore tax resident company from a company outside Singapore will be subject to Singapore tax when it is remitted (or, deemed remitted^[2]) into Singapore unless exempted under the local tax legislation.

Consequently, foreign-sourced dividend income is taxable in Singapore, when it is remitted (or, deemed remitted) into Singapore, unless exempted under Sections 13(8) or 13(12) of the Singapore Income Tax Act (“SITA”).

Singapore Tax resident company

To qualify as a Singapore tax resident company, the management and control of the company must be situated in Singapore. Singapore subsidiaries of foreign companies may or may not be able to satisfy this condition. Foreign MNCs should therefore pay attention to this requirement, including when claiming exemption under Sections 13(8) or 13(12).

Section 13(8) exemption

Most companies will understand the requirements to claim for exemption provided under Section 13(8) which is rather straight forward. Subject to satisfying certain conditions, one of which is that the foreign-sourced dividend income must have suffered foreign tax of at least 15%, a Singapore tax resident company, will be able to enjoy this exemption.

Section 13(12) tax exemption

In the event the conditions under Section 13(8) are not met, for example, the income had not been subject to tax in the country where it is paid, a Singapore tax resident company may still be granted tax exemption on the foreign-sourced dividend income under Section 13(12) if it falls under any  one of the specified scenarios outlined in the Inland Revenue Authority of Singapore’s (“IRAS”) e-Tax Guide for Tax Exemption under Section 13(12) for Specified Scenarios, Real Estate Investment Trusts and Qualifying Offshore Infrastructure Project/Asset (Ninth Edition)” (“the e-Tax Guide”), and the stipulated conditions are fulfilled.

In general, foreign-sourced dividend income received in Singapore may be exempted under Section 13(12) if the said dividend income originates in a foreign country which has a headline tax rate of at least 15%, but no tax has been paid in that country because the foreign sourced dividend is paid out of: -

1. Capital gains which are not subject to tax in that country; or
2. Underlying profits which the dividends are paid are derived from substantive business activities carried out in a country but the profits are not subject to tax in that country due to –

• Tax losses and capital allowances; or
• Tax incentives being granted for substantive business activities carried out in that country.

The Section 13(12) exemption also apply to cases whereby the dividend income flows through one or more levels of intermediate holding companies / countries before it is received in Singapore . In this instance, the company must be able track the source of income which the dividends are paid from and demonstrate that the underlying profits or dividends have been subjected to tax.

Declaration form for Section 13(12)

While a Singapore tax resident company is not required to apply for Section 13(8) tax exemption when it meets a specified scenario under the e-Tax Guide, it is required to submit a declaration form for Section 13(12) no later than the tax return filing due date.

If the Singapore tax resident company is however unable to fall under any of the specified scenarios, it may make application for exemption to the Ministry of Finance for their consideration.  The application must be made before the mentioned foreign income is received in Singapore.

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In summary, Singapore is an attractive location for investment holding, i.e. foreign sourced dividend income received in Singapore will not be subject to tax in Singapore in most cases.  However, it is crucial for companies to understand, comply with the qualifying conditions and timing for submission of declaration / application forms for tax exemption.

Should you have any questions or wish to know more about the issues discussed, feel free to reach out to any of our tax advisory members:

If you would like to speak to our specialists, please contact:

Koh Puay Hoon
Partner & Head of Tax 
[email protected]
T: +65 6594 7820

Cindy Lim
Partner, International Tax
[email protected]
T: +65 6594 7852

William Chua
Partner, International Tax
[email protected]
T: +65 6594 7860

Loke Yew Ken
Director, Tax Advisory
[email protected]
T: +65 6715 1163

Law Wei Lin
Director, Tax Advisory
[email protected]
T: +65 6715 1164