How to avoid double taxation?

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Double taxation is a tax principal that requires you to pay double tax for same income.

When your income is taxed at both corporate level and personal level, it is called double taxation.

In addition, in international trade and investment, double taxation occurs because both countries in which we trade collect income tax.

Now that you know about double taxation, we will continue to explain DTAs.

· To avoid double taxation, an agreement must be signed between two or more trading countries.

· This agreement is called the Avoidance of Double Taxation Agreement (DTA).

· DTAs also need to be signed to reduce double taxation when trading between Singapore and other countries.

We would also like to explain the purpose and contents of the DTA.

· DTAs spell out the taxing rights between Singapore and her treaty partners depending on the type of income of cross-border businesses.

· The DTA also provides for reduction or exemption of tax on certain types of income.

· Only Singapore tax residents and her treaty partners will be able to enjoy the benefits of the DTA.

· To find out more about treaty partners, refer to the List of Avoidance of Double Taxation Agreements.

Singapore Tax Residents

If you receive foreign income from your treaty partner, you can claim DTA benefits to avoid taxes or get a tax reduction in foreign jurisdiction.

Certificate of Residence (COR)

To be eligible for DTA, you need to submit proofs that your company is a Singapore tax resident to the Foreign Jurisdiction. To learn more about the application process, please refer to the Applying for COR / Tax Reclaim Form.

Double Tax Relief (DTR)

· If you earn foreign income in Singapore, you will need to pay income tax.

· The benefits of the DTA are that the income tax rate is reduced, not completely exempt. So Singapore companies will suffer tax in other countries as well.

· If the same income tax is subject to tax twice, DTA reduces double taxation by allowing Singapore companies to claim foreign tax credit.

· This credit is called DTR and if you want to know more, you can search through Foreign tax credit.

Tax Resident of treaty partners

· Your treaty partners can also enjoy DTA benefits when they earn income in Singapore.

· In order to receive this benefit, they must submit to the IRAS (completed Certificate of Residence from Non-Residents) that you are a treaty partner.

By now, we hope you have a clear understanding of DTA.

If you need helps with DTAs, or if you want to know more, Stratecx is always ready to help you.

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