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Taxation of Interest

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Taxation of Interest

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As a service provider and tax advisor we face daily requests for information concerning taxation of interest. Although each case is individual we have specialist knowledge in enable us to answer clients efficiently and effectively. Below is an outline regarding the taxation of interest in Singapore along with a case study to demonstrate how in practice these principles are implemented.

Taxation of Interest in Singapore can be summarized as follows:

  • Interest is income received in return for the use of capital
  • Interest income is considered to be Singapore- sourced if payer is a Singapore tax resident or income is deemed sourced in Singapore
  • Accrued interest income is subject to tax. Reinvested interest income is also subject to Singapore tax
  • Foreign- source income not remitted to Singapore is exempt
  • Remitted income can still be exempt from Singapore tax if
    • Subject to tax at least of 15% or
    • If exempted from tax due to tax incentives in the foreign jurisdiction

The below example describes the taxation of Interest from a Singapore Company with a subsidiary in Hong Kong.

A Singapore Company has a subsidiary in Hong Kong. The Hong Kong subsidiary claims tax exempt profit due to the territorial taxation principle. This profit is exempt as a headline tax rate in Hong Kong. The tax rate is 16.5% (more than 15%).

Deemed Singapore interest income is defined as the following s 12 (6) ITA:

  • Interest payments are born, directly or indirectly, by a Singapore tax resident
  • The payment is deductible against any income accrued in or derived from Singapore
  • If loan is originated from income derived or deemed derived from Singapore

To find out more about tax planning solutions in Singapore contact us:

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