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SINGAPOREAN BUSINESSES EXEMPT FROM INCOME TAX ON FORWARD FOREIGN EXCHANGE TRANSACTIONS
In an interpretation dated 8 April 2003, the Ministry of Finance (MOF) stated that when a Singapore enterprise with no permanent estab-lishment in Taiwan conducts forward foreign exchange transactions in Taiwan for the purpose of hedging business risk, its income from such transactions is eligible for exemption from business income tax under Article 7 of the Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income between the ROC and the Republic of Singapore. Article 7 provides that business profits of an enterprise of one territory shall be taxable only in that territory, unless the enterprise carries on business in the other terri-tory through a permanent establishment situated there.
An enterprise that is eligible for this tax exemp-tion should apply for approval of the exemption to the tax collection authority in the locality where the payer of the income is situated, sub-mitting a resident certificate issued by the Inland Revenue Authority of Singapore and documents relating to the income (such as transaction con-tracts), in accordance with Article 11 of the MOF's Guidelines for the Application of Double Taxation Agreements. On granting approval, the tax collection authority will notify the payer that it is not required to withhold tax on the income If the payer has already withheld tax before ap-proval is granted, the tax so withheld may be reclaimed within five years from the payment date.