01 Apr 2015
This is the final piece of a three-part series.
In Article 2, published in IS Chartered Accountant, February 2015, we had concluded that if a specified foreign income qualifies for tax exemption under the foreign-sourced income tax exemption (FSIE) regime, and also for the foreign tax credit under the pooling system (PS), generally, tax exemption under the FSIE regime is more tax beneficial unless:
1) Prior to the inclusion of the specified foreign income, there is already an excess of pooled Singapore tax payable (STP) over the pooled foreign tax paid (FTP) in respect of the other foreign income, and
2) There will be an excess of the FTP over the STP in respect of the specified foreign income if it is not tax exempted.
In this article, we consider the various possible scenarios between these two extremes by determining whether the overall taxable position can be further improved if we were to treat only a portion of the foreign dividend income as being tax exempt and the remaining portion as being taxable.
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