Updates on the New Administrative Concession on Administering the “Subject to Tax” Condition for Foreign-sourced Dividends
You can provide the following documents to substantiate that the underlying tax has been paid on the income out of which the foreign-sourced dividend is paid:
a) Audited accounts of the foreign payer company
Currently, to demonstrate that their foreign-sourced dividend has suffered underlying tax, taxpayers can provide the audited accounts of the foreign payer company for the financial period ending in the year prior to the year the dividend is received in Singapore whereby the accounts show a positive current year tax (excluding deferred tax expense).
The Proof of “Subject to Tax” Condition
From 20 July 2016, as a concession, IRAS is prepared to accept the consolidated accounts of the foreign payer company and its group companies as proof that the “subject to tax” condition has been met, provided that the foreign payer company is:
– a company listed on a stock exchange; and
– an operating company carrying out substantive business activities (investment-holding is excluded). This must be supported by evidence such as description in the consolidated accounts or any official publication showing the principal activities of the foreign payer company to be such (as opposed to the Group).
Under this concession, the consolidated accounts of the foreign payer company and its group companies for the financial period ending in the year prior to the year the dividend is received in Singapore must show a positive current year tax (excluding deferred expense).
For example, if the dividend is received in Singapore on 30 June 2014, the consolidated accounts of the foreign payer and its group companies for the financial year ending in 2013 must show a positive current year tax.
b) Alternative documents accepted
IRAS will also accept the following documents showing that the income of the foreign payer company has been subject to tax (or that it is enjoying tax incentive on its substantive business activities):
– a certification from the bank through which the taxpayer invested into the foreign payer company; or
– a confirmation letter from the foreign payer company that foreign tax has been paid on the income out of which dividends are paid.
If you are unable to secure any proof that tax has been paid on the income of the foreign payer company, the “subject to tax” condition will not be considered as met.
IRAS may review and modify the use of the alternative documents should there be any cases of abuse.
Please visit Tax Exemption of Foreign-Sourced Income for more information.
