Please note that agreements that are signed but not ratified do not have the force of law. We will update this page as soon as the agreement has been ratified. Methods of reducing double taxation are provided for either by a country`s national tax legislation or by the tax treaty. The methods available in Singapore are as follows: double taxation can be avoided if foreign income is exempt from domestic tax. The exemption may be granted on all or part of the foreign income. Exemption of dividends from foreign sources, branch profits and income from services – Section 13(8) of the Singapore Income Tax Act A Singapore-based company may benefit from tax exemptions for its dividends from foreign sources, profits from foreign branches and foreign service income transferred to Singapore if the following conditions are met: To protect against abuse of the contractual advantage The updated DBA also introduces anti-prevention provisions in line with recent updates to the OECD Model under the Multilateral Instrument (MLI). Under this system, a U.S.-based person or business must pay taxes on all of their income, regardless of where that income was generated. Such a tax system leads to double taxation. However, Singapore, along with many other countries, follows the territorial tax system, which should only tax income generated in the country. This protects individuals and businesses based in Singapore from double taxation. Singapore has one of the world`s most extensive double taxation treaty (DBA) networks, attracting international companies from a wide range of conventional and nuanced sectors. In this way, the same income is taxed twice. The DBA facilitates this double taxation by allowing the Singaporean company to claim a deduction of foreign tax from its Singapore tax, which must be paid on the same income.
It is therefore unlikely that a Singapore-based company will ever suffer from double taxation. This is an important reason to set up your business in Singapore….