Taxation of Foreign Sourced Income in Singapore (2025)

In the context of globalization, many businesses in Singapore have foreign income and are interested in optimizing taxes. The Foreign Source Income Tax Exemption Scheme helps legal businesses reduce their tax burden and avoid double taxation. This article will provide detailed information on the regulations and conditions applicable to foreign-sourced income in Singapore of Enterprises. 

1. What is foreign-sourced income in Singapore?

Foreign-sourced income tax is a tax levied on income that originates outside Singapore but is received by individuals or businesses that are tax resident in Singapore. As a general rule, foreign-sourced income is usually taxed in the country where it is earned before it is remitted to Singapore.

However, to encourage investment and maintain its status as a global financial center, Singapore has introduced the Foreign-Sourced Income Exemption (“FSIE”) Scheme, which helps eligible businesses and individuals avoid double taxation.

2. Types of foreign-sourced income in Singapore

According to the Singapore Revenue Authority (Inland Revenue Authority of Singapore (“IRAS”)), common types of foreign income include:

• Profits from business or trade carried on outside Singapore.
• Foreign-Sourced Dividend: where the recipient is a company or individual residing in Singapore.
• Foreign-Sourced Service Income: A consulting firm in Singapore provides services to a client in the US and receives payments from there.
• Foreign-Sourced Interest: Interest earned from loans or investments in foreign countries.
• Foreign-Sourced Trust and Rental Income: An individual or business in Singapore owns real estate in Australia and earns rental income.

3. How to determine foreign income received in Singapore

Foreign-sourced income is deemed to be received in Singapore if it satisfies one of the following conditions:

• Remittance into Singapore: Any income from abroad that is remitted, deposited or brought into Singapore in any form.
• Used to pay debts or expenses in Singapore: If foreign income is used to pay any debts, expenses or financial obligations in Singapore, it will be deemed to be received in this country.
• Used to purchase movable assets brought into Singapore: Where foreign income is used to purchase movable assets (such as machinery, equipment, vehicles) and such assets are subsequently brought into Singapore.

4. Cases of foreign income subject to tax in Singapore

As an individual or a business with Singapore-related activities, you may be required to pay tax on certain income generated overseas. Below are the types of foreign income that you are required to pay tax on in Singapore:

1. Receiving income through a Singapore business partner: If you receive income from abroad through a partnership based in Singapore, this income will be taxed in Singapore.
2. Income from overseas employment but related to employment in Singapore: If you are employed in Singapore and your job requires you to travel or work overseas, the income from that employment may still be taxable in Singapore.
3. Conducting a business or commercial activity in Singapore and conducting related transactions overseas: If you have a business or commercial activity in Singapore and conduct related business transactions overseas, the income from that transaction may be taxable.
4. Working in Singapore for a foreign company: If you work in Singapore but the company that employs you is a foreign company, your income from this work may be taxable in Singapore.
5. Working overseas on assignment by the Singapore Government: If you are assigned to work overseas on behalf of the Singapore Government, the income from this work may still be taxable in Singapore.

Understanding the tax regulations on foreign income helps you avoid violating tax obligations and have appropriate financial planning when working or doing business in Singapore.

5. Foreign Source Income Tax Exemption (FSIE) Program

The Foreign Sourced Income Exemption Scheme (FSIE) was introduced by the Singapore government to create a conducive environment for businesses operating globally. This scheme helps companies and individuals who are tax residents in Singapore avoid double taxation on income derived from overseas. This enhances Singapore's competitiveness as an international financial centre and attracts foreign investment.

Only businesses and individuals who meet the following three conditions are exempt from tax:

1. “Taxable” condition: Income has been taxed in the source country.
2. Condition “Minimum foreign tax rate 15%”.
3. “Beneficial Tax Exemption” Condition: The tax exemption must be beneficial to the business/individual residing in Singapore.

6. Registration process and administrative procedures

To qualify for the Foreign-Sourced Income Tax Exemption (FSIE) program, businesses and individuals need to take the following steps:

7. How does GLA support Singaporean businesses in declaring foreign-sourced income tax? 

GLA provides comprehensive advice and support to Singaporean businesses in declaring foreign-sourced income tax, including:

1. Guide businesses on tax exemption conditions under FSIE and related regulations of the Inland Revenue Authority of Singapore (IRAS).
2. Assess whether income qualifies for FSIE tax exemption, based on criteria such as the tax rate in the source country and the nature of the income.
3. Support businesses in collecting documents, financial reports, and tax certificates paid abroad to ensure compliance with IRAS regulations.
4. Support and carry out steps to declare foreign income in corporate tax declarations, ensuring complete and accurate information.
5. Business representatives submit tax returns to the Internal Revenue Service of Singapore (IRAS).
6. Assist with audits and provide clarification to IRAS in case IRAS requests further information or audits tax records.

With in-depth experience and understanding of the tax system in Singapore, GLA helps businesses optimize tax obligations and comply with legal regulations.

8. Frequently asked questions on tax rates on foreign-sourced income in Singapore 

Highlights

• The Foreign Sourced Income Exemption (FSIE) Scheme helps businesses in Singapore avoid double taxation and optimize tax costs.
• To qualify for tax exemption, income must meet three main conditions: it must have been taxed abroad, it must have a minimum tax rate of 15%, and the tax exemption must benefit the business.
• Businesses need to keep documents proving the source of income and the amount of tax paid to comply with IRAS regulations.
• If the foreign income has not been remitted into Singapore, the business does not have to declare or pay tax in Singapore.