A DTA spells out the taxing rights between Singapore and her treaty partner on the different types of income arising from cross-border economic activities between the two jurisdictions. The DTA also provides for reduction or exemption of tax on certain types of income.
Only Singapore tax residents and tax residents of the treaty partner can enjoy the benefits of a DTA.
When your company earns foreign income from a treaty partner, you may wish to claim the benefits under the DTA that entitles a company not to pay tax or to pay tax at a reduced rate in the foreign jurisdiction.
For Double Taxation Agreements, here is a list of the latest DTA with countries:
Sometimes, when you may receive foreign income in Singapore, you may be taxed on the income. In the case where the benefit under the DTA is not an exemption of tax, but a reduction of tax rate, the Singapore company will also suffer tax in the foreign jurisdiction.
In this way, the same income is subjected to taxation twice. The DTA provides relief for this double taxation by allowing the Singapore company to claim a credit of the foreign tax suffered against its Singapore tax payable on the same income.
Such credit is known as a Double Tax Relief.