Administrative Practice:

Method of Computing Singapore Tax Attributable to Foreign Income (Net of Expenses)

Worked Example
Company ABC Pte Ltd derived the following income during accounting year 2012 (i.e. Year
of Assessment (YA) 2013):
Service Income – Local $300,000
Service Income – Foreign Country X $50,000
Total Service Income $350,000

The foreign tax paid on service income from foreign country X is $7,500.

Company ABC Pte Ltd would like to make the following claims against its total service
income of $350,000:
Claim for deductible expenses and capital allowances $15,000
Claim for approved donations $1,000

Assuming Company ABC Pte Ltd is entitled to claim for foreign tax credit on the service
income of $50,000 from foreign country X, the company’s tax computation and calculation of
foreign tax credit for YA 2013 are shown below:

Tax Computation for YA 2013

$
Service income - Local 300,000
Service income - Foreign Country X 50,000 (A)
Total service Income 350,000 (B)
Less: Deductible expenses and capital allowances (15,000)
335,000
Less: Approved donations (1,000)
Chargeable income (before exempt amount) 334,000
Less: Partial tax exemption (152,500)
Chargeable income (after exempt amount) 181,500 (C)

Tax payable @ 17% 30,855.00

Less: Foreign tax credit (4,407.86) #
26,447.14
Less: Corporate income tax rebate (30% x $26,447.14) (7,934.14)
Net tax payable 18,513.00

#
Calculation of Foreign Tax Credit
$
Singapore tax payable on service income from foreign country X
(A) / (B) x (C) x 17% 4,407.86

Foreign tax paid in foreign country X 7,500.00

Foreign tax credit = lower of Singapore tax payable or foreign tax paid 4,407.86