Debated in Parliament on 6 Aug 2024.
Mr Darryl David asked the Prime Minister and Minister for Finance what systems and processes does the Government have to ensure that Singaporeans who have multiple businesses and investments in other countries are liable for all appropriate taxes as stipulated under Singapore's taxation laws.
Internationally, when it comes to taxing income earned overseas by their own residents, jurisdictions can choose to adopt either a worldwide tax system or a territorial tax system, or some variant of these two systems. The key difference between the two is that foreign-sourced income is taxed under a worldwide system but not under a territorial system.
Singapore adopts a territorial, remittance-based income tax system. This means that domestic-sourced income is taxable in Singapore. While foreign-sourced income is taxable when remitted to Singapore, to enhance our attractiveness as a business hub and boost our financial services sector, we have exempted most foreign-sourced income received from tax in order to avoid double taxation for these individuals. For example, a Singaporean businessman does not need to pay tax in Singapore on dividends that he earns from an overseas business that he invested in. This is because such income might already be taxed overseas, depending on the other jurisdiction’s tax regime.
In the event the foreign-sourced income is remitted and taxed in Singapore, Singapore would provide foreign tax credits for the taxes already paid overseas on such income, so as to avoid double taxation.
While the revenue risk of foreign-sourced income is low, given Singapore’s territorial tax regime and the foreign-sourced income exemption for individuals, the Inland Revenue Authority of Singapore (IRAS) carries out regular audits to ensure that taxable overseas income is reported in taxpayers’ tax returns. When selecting cases for audits, IRAS leverages all information available, including information received from other tax administrations.
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