Juridical double taxation occurs when the same income is subject to taxation twice—first in the jurisdiction where the income is generated and then again in the jurisdiction where it is received.
To alleviate the implications of double taxation, countries enter into DTAs. A DTA partner refers to a jurisdiction that has signed a DTA with Singapore.
The benefits of a DTA are exclusive to tax residents of Singapore and the respective DTA partner.
Benefits under DTAs:
Depending on the provisions outlined in the DTA, individuals may be eligible for exemptions from income tax for personal services, such as those provided by teachers, researchers, artists, athletes, students, trainees, and more.
Since the specific provisions in each DTA can vary, it is advisable to always refer to the relevant DTA’s specific provisions when interpreting and applying it.
Tax residents of DTA partners:
If you are a tax resident of a jurisdiction that has a DTA in place with Singapore, you may be safeguarded against double taxation on the same income in Singapore.
Exemption for short-term Singapore employment income:
The DTA article concerning ‘Dependent Personal Services’ establishes the source rules for income from employment. Typically, the source state is where the services are provided or the employment is conducted. To encourage the mobility of qualified personnel and for short-term employment, the source state provides tax exemption.
The following conditions typically apply in most DTAs:
- Employment is carried out in the Source State for less than a specified period (usually 183 days within a 12-month period).
- The employer is not a resident of the Source State.
- The income is not paid or borne by a permanent establishment or fixed base of the employer in the Source State.
If you qualify for DTA exemption, you should submit a Claim for DTA Exemption and a Certificate of Residence to IRAS (Inland Revenue Authority of Singapore).
Tax residents of Singapore:
When you earn income from another jurisdiction, you may be liable to pay tax in that jurisdiction. However, you can seek DTA benefits that allow a tax resident of Singapore to benefit from a reduced tax rate or tax exemption in that jurisdiction.
To avail of this benefit, you must provide a Certificate of Residency (COR) to the foreign tax authority as proof of your Singapore tax residency.
Applying for Certificate of Residence:
The Certificate of Residence is a document certifying that you are a tax resident in Singapore for the purpose of claiming DTA benefits.