IRAS has clarified in Advance Ruling Summary No. 1/2026 that foreign-sourced dividends repatriated by a Singapore branch to its overseas parent become the parent’s income and are no longer available for remittance by the branch, provided specific conditions under the Income Tax Act are met.

RF Report

The Inland Revenue Authority of Singapore (IRAS) has issued Advance Ruling Summary No. 1/2026 on 2 January 2026, clarifying how foreign-sourced dividends received by a Singapore branch of an overseas company are treated for tax purposes.

The ruling addressed whether repatriating branch profits to the head office using foreign-sourced dividends would make those dividends permanently unavailable for subsequent remittance by the branch. IRAS confirmed that once the Singapore branch (“SG Branch”) transfers profits derived from foreign dividends to its parent company (“Company A”) outside Singapore, the dividends become the parent company’s income and are no longer available for remittance by the branch.

The ruling applies under the following conditions:

  • The dividends from foreign companies (Company C and Company D) are classified as foreign-sourced income of SG Branch for Singapore tax purposes.
  • The dividends remain outside Singapore and are not remitted, transmitted, or brought into Singapore from the time they accrue to SG Branch until repatriation to Company A.
  • The funds are not used to settle debts related to Singapore trade or business, purchase movable property brought into Singapore, or otherwise constitute foreign-sourced income that had already been remitted to Singapore.
  • The transaction is not a tax avoidance scheme under Section 33 of the Income Tax Act.

In the case outlined, Company A plans to use repatriated funds mainly for dividends and share buybacks in its home country, with a portion invested in a Singapore-incorporated subsidiary, Company B. IRAS confirmed that such use by the head office does not constitute taxable receipt of foreign income in Singapore.

The decision reinforces the legal distinction between a Singapore branch and its head office under Section 10(25) of the Income Tax Act 1947. IRAS emphasised that the ruling is binding only for the applicant and the specified transaction, and taxpayers should exercise caution in applying the guidance to other situations.