Expatriates in Singapore may receive overseas income that has already been taxed in another country. Without relief, this same income could be taxed again in Singapore, resulting in double taxation. To prevent this, Singapore provides a Foreign Tax Credit (FTC).
What is FTC?
The Foreign Tax Credit (FTC) is a system which allows Singapore tax residents to claim a credit for foreign taxes paid on income that is also taxable in Singapore. The FTC is calculated as the lower of the actual amount of foreign tax paid, or the amount of Singapore tax attributable to the foreign income after deducting expenses. This means that when you pay Singapore tax, you can deduct either the foreign tax paid or the Singapore tax on that income, whichever is lower.
The credit can reduce your Singapore tax bill to zero, but it will not result in a refund if the foreign tax paid is higher. Any excess foreign tax paid cannot be used against your other Singapore income.
Do You Qualify?
To qualify for the FTC, you must satisfy the following conditions:
- You are a Singapore tax resident for the relevant Year of Assessment (YA) in which you are taxed on that income;
- You have paid foreign tax on that income; and
- The income is also taxable in Singapore.
How to Claim FTC?
The claim should be made when you file your annual Income Tax Return. You will need to enter the foreign income and foreign tax paid in the relevant sections, and submit supporting documents to IRAS showing that tax was paid in the foreign country.
Income from Multiple Foreign Countries
Singapore also has an FTC Pooling System. This lets you combine foreign taxes from different countries and claim them together, as long as the foreign country’s tax rate is at least 15%.
Conclusion
For expatriates in Singapore, the Foreign Tax Credit system provides relief from double taxation on foreign income. Whether you are receiving employment income, business income, or investment returns from overseas, understanding how to claim FTC can help you minimise your tax burden and ensure compliance with Singapore tax laws.
Contact us today for assistance with tax planning to avoid unexpected liabilities and ensure compliance with Singapore’s tax regulations. We can also assist with tax advisory, expat employment matters and compliance assistance.
Disclaimer: This article provides general information and does not constitute legal advice. Please seek professional advice for your specific situation.
Do reach out to us at Legal Expat if you require professional advice. We have a team of qualified lawyers that can assist you. Email us at: info@legalexpat.sg or drop us a WhatsApp at: +65 8093 4393 if you require assistance.
