DOWNLOAD PDF CONTRACTS OF EXEMPTION FROM TAXATION

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1 Chapter 1 : Exemption Certificates for Federal Government Purchases Sales Tax Support If the prime contractor gives an exemption certificate claiming the exemption under sec. (60), Wis. Stats., and the contract does not qualify for the exemption, the prime contractor must collect/remit tax on the sales price of the taxable products and services sold to the customer. What are the critical tax considerations? As most companies in the financial services industry in Nigeria are beginning to explore the opportunities of investing in the developing and lucrative derivatives markets, it is vital that investing parties understand the related tax implications in order to avoid conceding the benefits of derivatives due to poor or improper tax planning Derivative markets are an integral part of the financial system. They play an increasingly important role in contemporary financial markets. According to Wikipedia, derivatives are defined as contracts whose returns are linked to, or derived from, the performance of some underlying asset, such as stocks, bonds, currencies, or commodities. In their purest form, derivatives include forward contracts, futures, swaps, and options. In contrast with a stock issued by a company and purchased by an investor, a derivative contract is a private agreement between a buyer and a seller, which specifies how the value of the contract evolves over time. In recent times, this form of financial instrument is becoming increasingly popular in the Nigerian financial market; hence, the need to understand the tax implications. There is a whole array of instruments called derivatives, but the majority constitutes variations on three basic instruments: For tax purposes, it is essential to understand these derivatives and the underlying assets. In a forward contract, the credit worthiness of both parties is critical to the performance of the contract. A future contract is similar in intent to a forward contract but with few basic differences. A future contract has standard terms and it is usually traded on organised exchanges. It specifies trading a particular quantity of the underlying asset at a particular price and time. Although, the contract can be settled at expiration in the physical asset, it is more often settled in cash through the exchange. The benefits in question depend on the type of financial instruments involved. For example, in the case of a swap involving two bonds, the benefits in question can be the periodic interest coupon payments associated with such bonds. There are no specific rules for taxing derivative transactions in Nigeria, The general rules of taxation therefore becomes applicable. The general rule is that capital gains are ordinarily to be considered under the provisions of CGTA while trading profits or losses falls under the provisions of CITA. Under CITA, where it can be established that a company is trading in the underlying assets of a derivative, such as shares, as its core business and income is derived from such transactions, then the company would be liable to company income tax CIT on the profits derived from the transaction. Chargeable assets have been defined as fixed assets, debts, options, incorporeal assets and currency other than the Nigerian currency. The location of the underlying assets in a derivative contract has an impact on the taxation of the derivative transaction. However, CGTA gives indication to determine where some assets are located e. Therefore, the logical test of location of a derivative could be where the rights and obligations relating to the sale of such derivative are attributed. Where the rights and obligations relating to the sale of a derivative are tied to Nigeria, it is arguable that the derivative is in Nigeria. The gains from the transactions will therefore be expected to be taxable in Nigeria. Where the rights and obligations relating to the sale are tied to a country outside Nigeria, it may be argued that the derivative is situated outside Nigeria. As a result, there will be no taxable gain arising from the sale of the derivative provided the proceeds from such sale are not brought into Nigeria. Conversely, it may also be argued that the derivatives should take the status of the underlying assets. Where the sale of the underlying assets in a derivative is exempt from tax, the gain from the derivative transaction should also be exempted. For instance, under CGTA, gains realised from the disposal of Nigerian shares by a company is exempt from Nigerian tax except where such gain is brought into or received in Nigeria. Therefore, where the underlying assets of a derivative contract are shares, any gain derived from the sale of the derivative instrument may be exempt from tax due to the tax exemption of the underlying asset under CGTA. Also, there may be incidence of value added tax VAT where the derivative is considered to be goods or services. Therefore, any premium paid by a company for the right in an option is not liable to VAT as there is no exchange of taxable goods or services. As most companies in the financial Page 1

2 services industry in Nigeria are beginning to explore the opportunities of investing in the developing and lucrative derivatives markets, it is vital that investing parties understand the related tax implications in order to avoid conceding the benefits of derivatives due to poor or improper tax planning. Page 2

3 Chapter 2 : Sales Tax Exemption Certificates - Contract Administration - The Wifcon Forums and Blogs This exemption has been expanded to certain construction contracts first entered into or extended, modified, or renewed on December 1, ("construction contract exemption"). This article summarizes the tax treatment of the exemption. For example, the U. Federal and many state tax systems allow a deduction of a specified dollar amount for each of several categories of "personal exemptions". Similar amounts may be called "personal allowances". Some systems may provide thresholds at which such exemptions or allowances are phased out or removed. The exclusions may be restricted to entities having various characteristics. The exclusions may be inherent in definitions or restrictions outside the tax law itself. Different approaches may be used within a jurisdiction or especially within sub-jurisdictions. Some jurisdictions grant an overall exemption from taxation to organizations meeting certain definitions. The United Kingdom, for example, provides an exemption from rates property taxes, and income taxes for entities governed by the Charities Law. This overall exemption may be somewhat limited by limited scope for taxation by the jurisdiction. Some jurisdictions may levy only a single type of tax,exemption from only a particular tax. The United States exempts certain organizations from Federal income taxes, [3] but not from various excise or most employment taxes. Such organizations may include religious organizations temples, mosques, churches, etc. Qualification requires that the organization be created and operated for one of a long list of tax exempt purposes, [6] which includes more than 28 types of organizations and also requires, for most types of organizations, that the organization apply for tax exempt status with the Internal Revenue Service, [7] or be a religious or apostolic organization. For multi-tier jurisdictions, this exemption generally extends to lower tier units and across units. For example, state and local governments are not subject to Federal, state, or local income taxes in the U. Other not-for-profit entities[ edit ] Some jurisdictions provide tax exemption for other particular types of organizations not meeting any of the above categories. Reciprocal exemptions[ edit ] Some jurisdictions allow tax exemption for organizations exempt from tax in certain other jurisdictions. For example, most U. In addition, most such states and localities exempt from sales taxes goods used directly in the production of other goods i. Exempt individuals[ edit ] Certain classes of persons may be granted a full or partial tax exemption within a system. Common exemptions are for veterans, [17] clergymen [18] or taxpayers with children who can take "dependency exemption" for each qualifying dependent who has lived with the taxpayer. The dependent can be a natural child, step-child, step-sibling, half-sibling, adopted child, eligible foster child, or grandchild, and is usually under age 19, a full-time student under age 24, or have special needs. For example, a property tax exemption may be provided to certain classes of veterans earning less than a particular income level. Exempt income[ edit ] Most income tax systems exclude certain classes of income from the taxable income base. Such exclusions may be referred to as exclusions or exemptions. Income earned outside the taxing jurisdiction. Such exclusions or exemptions can be quite specific [27] or very general. These exemptions may be limited to specific industries. As an example, India provides SEZs where exporters of goods or providers of services to foreign customers may be exempt from income taxes and customs duties. These exemptions vary highly from jurisdiction to jurisdiction, and definitions of what property qualifies for exemption can be voluminous. Property used in manufacture of other goods which goods may ultimately be taxable Property used by a tax exempt or other parties for a charitable or other not for profit purpose Property considered a necessity of life, often exempted from sales taxes in the United States Personal residence of the taxpayer, [29] often subject to specific monetary limitations Conditions imposed on exemptions[ edit ] Exemption from tax often requires that certain conditions be met. Multi-tier jurisdictions[ edit ] Many countries that impose tax have subdivisions or subsidiary jurisdictions that also impose tax. This feature is not unique to federal systems, like the U. Cross-border agreements[ edit ] Jurisdictions may enter into agreements with other jurisdictions that provide for reciprocal tax exemption. Such provisions are common in an income tax treaty. These reciprocal tax exemptions typically call for each contracting jurisdiction to exempt certain income of a resident of the other contracting jurisdiction. Multi-jurisdictional agreements for tax exemption also exist. UK tax free personal allowances vary. The exemption from Federal income tax is longstanding. This exemption formed part of the Page 3

4 Revenue Act of The Act was the first broadly applicable U. Since ratification of the Sixteenth Amendment to the United States Constitution in, the exemption for charitable, religious, and educational organizations has been included in all subsequent Federal income tax law. Certain of these taxes apply primarily to tax exempt organizations. Note that income from certain types of services, such as services as a minister, may be exempt from the definition of income for these taxes. Note, also, that employees of certain nonprofit and governmental organizations are eligible to participate in different sorts of deferred compensation plans than employees of other organizations. Some states incorporate or make reference to Federal definitions for parts of their tax laws. Page 4

5 Chapter 3 : Ohio Construction Contract Exemption Certicate - SalesTaxHandbook Download a blank fillable Sales And Use Tax Construction Contract Exemption Certificate in PDF format just by clicking the "DOWNLOAD PDF" button. Other than as noted below the use of a specific form is not mandatory when claiming an exemption. So long as the consumer provides the vendor or seller with all data elements required for a valid exemption certificate, the vendor may accept the certificate and be relieved of the obligation to collect the tax. Note also that exemption certificates may be presented in either paper or electronic form. Paper certificates require, as one of the data elements, a signature from the consumer. No signature is required on electronic certificates. For more information on the proper use of exemption certificates in specific situations, see Rules,, and of the Ohio Administrative Code. General Exemption Certificate Forms 1. This exemption certificate is used to claim exemption or exception on a single purchase. This certificate is used to make a continuing claim of exemption or exception on purchases from the same vendor or seller. Motor Vehicle Exemption Certificate Forms 3. This certificate is used to claim exemption on the purchase of a motor vehicle, off-highway motorcycle or all-purpose vehicle. It must be presented to the Clerk of Courts when applying for title to the motor vehicle, off-highway motorcycle or all-purpose vehicle. This certificate is used when a motor vehicle, off-highway motorcycle or all-purpose vehicle is to be delivered to the purchaser outside the State of Ohio pursuant to the terms of the sales agreement. It must be presented by the dealer making the interstate commerce sale to the Clerk of Courts when applying for title to the motor vehicle, off-highway motorcycle or all purpose vehicle. This certificate is to be used by a purchaser that is not a resident of Ohio that will immediately remove the vehicle purchased from this state and permanently title the motor vehicle, off-highway motorcycle or all-purpose vehicle in another state. Watercraft Exemption Certificates 6. This certificate is used to claim exemption on the purchase of a watercraft, outboard motor or personal watercraft when the watercraft, outboard motor or personal watercraft is required to be titled in this state. It must be presented to the Clerk of Courts when applying for title to the watercraft, outboard motor or personal watercraft. This certificate is used when a watercraft, outboard motor or personal watercraft is to be delivered to the purchaser outside the State of Ohio pursuant to the terms of the sales agreement. It must be presented by the dealer making the interstate commerce sale to the Clerk of Courts when applying for title to the watercraft, outboard motor or personal watercraft. Certificates for Construction Contracts 8. Construction Contract Exemption Certificate. This certificate may be used when making purchases of materials to be incorporated into real property as part of an exempt construction contract. The contractor should retain the original of this certificate in the records of the exempt contract and provide copies to any supplies from whom purchases of construction materials are made. A contractor that provides a Construction Contract Exemption Certificate signed by the contractee is protected from liability if it is later determined that the contract did not qualify for exemption. In such a case, the contractee will assume the liability for any unpaid taxes. Unlike the Construction Contract Exemption Certificate, it is signed only by the contractor or subcontractor that is making the purchases of materials. Unlike the Construction Contract Exemption Certificate, this certificate protects only the vendor or seller and provides no protection to the contractor on audit. Multiple Points of Use Multiple Points of Use Exemption Certificate. This certificate may be used as a multiple points of use form, pursuant to section All of the above forms are available on the Ohio Department of Taxation website: By its terms, this certificate may be used only for claiming an exemption based on resale or on the incorporation of the item purchased into a product for sale. The instructions on the form indicate the limitations Ohio, and other states that accept this certificate, place on its use. This Certificate may be used in place of the forms numbered 1, 2, 3, 6, 9, or 10 in this Information Release. It may also be used to notify vendors or sellers of direct payment authority, of a claim of multiple points of use or, pursuant to section This form may be obtained on the website of the Streamlined Sales Tax Project: Page 5

6 Chapter 4 : DOR Construction Contract Exemption The Streamlined Sales Tax Agreement, a multi-state agreement providing for the simplification of the nation's varying sales tax laws. These states include: Indiana, Iowa, North Dakota, South Dakota, Tennessee, and Wyoming. In accordance with the Agreement, the procedure for obtaining an exemption. This article supersedes the article titled Lump-Sum Contract Exemption vs. Construction Contract Exemption dated February 7, Some contractors sell both real property improvements not taxable and tangible personal property taxable. An exemption applies for certain contracts entered into October 1,, through November 30,, in which the contractor sells both real property improvements and tangible personal property for one price "lump sum contract exemption". This exemption has been expanded to certain construction contracts first entered into or extended, modified, or renewed on December 1, "construction contract exemption". This article summarizes the tax treatment of the new exemption. The construction contract exemption first applies to contracts entered into or extended, modified, or renewed on December 1, Calculating the 10 Percent Threshold for a Construction Contract The construction contract exemption applies if the total sales price of all "products" is less than 10 percent of the total amount of the construction contract including change orders or additional work billed. This calculation is made without regard for any exemptions that may be provided by the customer e. The calculation does not include real property construction activities. If 90 percent or more of the total contract price relates to real property construction activities including services to real property, the construction contract exemption applies. To purchase products without tax from the subcontractor, the prime contractor must provide an exemption certificate to the subcontractor. The prime contractor provides the subcontractor with an exemption certificate claiming the exemption under sec. The liability for tax depends, in part, on whether the prime contractor gives an exemption certificate for its purchases. If the prime contractor gives an exemption certificate claiming resale, and the contract qualifies for exemption under sec. The subcontractor is still liable for tax on its purchase of materials used in real property construction activities. The subcontractor may not claim a refund on its purchase of materials used in real property construction activities. Exception for contracts entered into with entities that are exempt from tax under sec. Taxable products and services sold by a contractor as a part of a lump sum contract, or a construction contract with an exempt entity, that are not consumed in a real property construction activity may be purchased by the contractor or subcontractor without tax, for resale. However, materials and supplies that are consumed in a real property construction activity under a lump sum contract or a construction contract with any customer, including an exempt entity, may not be purchased by the contractor or subcontractor without tax unless an exemption applies e. Page 6

7 Chapter 5 : Fillable Sales And Use Tax Construction Contract Exemption Certificate printable pdf download Download a blank fillable Form Ee - Streamlined Sales And Use Tax Agreement - Certificate Of Exemption in PDF format just by clicking the "DOWNLOAD PDF" button. This exemption proceeds from the U. Constitution, which prohibits states and their subdivisions from taxing the federal government. The great majority of states also exempt sales to themselves and their political subdivisions, apparently recognizing that shifting money back and forth from one hand to the other would not be particularly productive. California, which does tax sales to itself and its subdivisions, is a notable exception. A smaller majority of states exempts sales to nonprofit and public benefit agencies, although the agencies exempted are by no means consistent from state to state. Since in most states contractors are considered consumers of the materials they install, the tax burden usually falls on the contractors rather than their customers. In such cases, the exempt status of a customer will not flow through to the contractor. States that tax contractors as consumers of materials used to fulfill contracts with exempt entities include: Arizona, Arkansas, California, Florida, Georgia, Idaho, Kentucky, Louisiana except for a few specific charities, Maryland except for designated nonprofit agencies, Michigan, Mississippi, Nevada, North Carolina, North Dakota, Pennsylvania with limited exceptions for certain building machinery and equipment, South Carolina with a limited exclusion for property transferred to the federal government, South Dakota, Tennessee, Virginia, Washington, West Virginia capital projects only, Wisconsin except for materials specifically designated as tangible personal property after installation, and Wyoming. Several states do allow contractors to buy materials without tax when they intend to incorporate those materials into realty owned by exempt agencies. The contractor must then provide copies of the document to its vendors. In a few states, the contractor self-issues the applicable exemption certificates to its vendors. States with exemptions for materials installed under contracts with exempt entities include: In Alabama, Arizona for federal contracts only, Minnesota, and Nebraska, exemptions for materials installed on realty owned by exempt entities are permitted through the use of state-specified agency agreements. Under such an agreement, the contractor is permitted to buy materials as the agent of its exempt customer, causing title to the materials to pass to the customer at the time of purchase. The vendor is then regarded as selling directly to the exempt agency rather than to the contractor and accordingly is relieved of responsibility for collecting the tax. A few states not only refuse to recognize agency agreements but also hold installing contractors responsible for tax on construction materials even if their exempt customers have purchased them directly. In states that tax construction services such as installation and repairs to realty, the providing contractor is considered the retailer of such services rather than the consumer. Arizona, Hawaii, and New Mexico are exceptions, since their taxes apply to gross construction proceeds without distinguishing between materials and services. When such exemptions appear applicable, the relevant statutes, regulations, and state pronouncements should be thoroughly reviewed. Dan Davis and Jesse McClellan are not currently accepting new comments nor questions. Page 7

8 Chapter 6 : Derivatives: What are the critical tax considerations? (b) When purchases are not made by the Government itself, but by a prime contractor or by a subcontractor under a prime contract, the right to an exemption of the transaction from a sales or use tax may not rest on the Government's immunity from direct taxation by States and localities. WAC Tangible personal property warranties and service contracts. For additional information on computer software maintenance agreements see WAC, Taxation of computer software. This rule contains examples that identify a number of facts and then state a conclusion. The examples should be used only as a general guide. The tax results of other situations must be determined after a review of all of the facts and circumstances. For the purpose of this rule, the following terms will apply: Unless otherwise stated, "agreement" means "service contract," "warranty," or "mixed agreement" as those terms are defined. An insurance rider is an attachment to an insurance policy that modifies the conditions of the policy by expanding or restricting its benefits or excluding certain conditions from the coverage. A mixed agreement is an agreement that contains provisions of both warranty and service contracts. A service contract, sometimes referred to as a maintenance agreement or even an extended warranty, provides for the repairing, cleaning, altering, or improving of tangible personal property, generally for the purpose of continued satisfactory operation. These services may be performed on a regular or irregular basis. Even though a service contract may be referred to by some other name, it is the coverage that determines whether the contract is a service contract or extended warranty. A warranty, sometimes referred to as a guarantee, is an agreement which provides for the replacement or repair of tangible personal property at no additional charge or at a reduced charge for tangible personal property, labor, or both, or to compensate for the replacement or repair of tangible personal property, based upon the happening of some unforeseen occurrence, e. Unless otherwise stated, the term warranty includes both a warranty and an extended warranty. If a seller is acting as agent or broker for another party, such as the actual warrantor, the seller is still liable for collecting the retail sales tax from the buyer and remitting it to the department. In this case, the seller as an agent or broker of the warrantor normally receives a commission. See subsection 5 of this rule for "Sales by third parties. There is no deduction allowed for the commission paid to the agent or broker. The reseller permit documents the wholesale nature of any sale as provided in WAC, Reseller permits. Reseller permits replaced resale certificates effective January 1, The automobile dealer extends coverage for an additional two years, as a bonus to the customer. When the automobile dealer purchases the two-year agreement from a warranty provider, with the intent to sell the agreement along with the sale of the vehicle to the customer, the purchase of the extended warranty by the automobile dealer is for resale. A home improvement store store sells a lawnmower to a customer. The customer decides to purchase an agreement from the store for the lawnmower. As the store is reselling the agreement, the store may purchase it at wholesale from the manufacturer with the use of a reseller permit. Both the sales of the lawnmower and agreement to the customer are taxable retail sales. The store makes no intervening use of the extended warranties, and does not charge customers for the warranties. The warranty purchases by the store are wholesale purchases as long as the store provides a copy of its reseller permit to the manufacturer. The store is not the consumer of the warranties as the warranties are provided to customers as a condition of purchase of the lawnmowers. When an agreement is purchased by a manufacturer, wholesaler, or retailer to be included in the sale of tangible personal property, the purchase of the agreement can be made at wholesale with the use of a reseller permit. In this instance, the manufacturer, wholesaler, or retailer is not the consumer of the warranty. If a vehicle wholesaler sells a vehicle to a retailer and includes an agreement with the sale, the sale of the vehicle with agreement is a wholesale sale. The retailer must provide the wholesaler with a reseller permit. If a manufacturer, wholesaler, or retailer purchases an agreement, without knowing whether it will be sold or given as an incentive with the sale of tangible personal property, the agreement can be purchased at wholesale with the use of a reseller permit. If there is intervening use of the agreement by the manufacturer, wholesaler, or retailer, deferred sales or use tax will be due. In some cases, a customer is required to pay an amount for services or parts not fully covered under an agreement. The dealer insures itself with an insurance carrier, and Page 8

9 under the policy claims are paid on the retail value of the repairs. The tax liability to the dealer and subcontractor is as follows: The sale of an agreement by a retailer is not exempt simply because the sale of the tangible personal property to which it applies is exempt. Generally, for the sale of the agreement to be exempt, there must be a provision in statute exempting all services or products covered by the agreement. If all such obligations are not exempt, the sale of the agreement to the consumer is subject to retail sales tax. Since a service contract is a contract for the repairing, cleaning, altering, or improving of the tangible personal property covered by the contract, the sale of a service contract by the retailer may be exempt from retail sales tax if there is a statutory exemption for all activities covered by the contract. Company A sells machinery that qualifies for exemption under RCW The sale of the vehicle is exempt from retail sales tax, but the sale of the service contract is subject to retail sales tax as there is no statutory exemption for the repair activities covered by the service contract. The sale of a warranty by a retailer is exempt only if a specific statutory exemption is available. See WAC for computer software warranties. Warranties purchased and received outside of Washington are subject to use tax when put to use in Washington. The sale to a consumer of a mixed agreement for tangible personal property, which by definition contains provisions of both a warranty and a service contract, is a "bundled transaction. Refer to RCW Consideration received by a third party as a commission, for selling an agreement for the actual warrantor, is generally subject to tax under the service and other activities tax classification. In this situation, the third-party seller never takes possession of the agreement, and the warrantor maintains liability for the provisions of the agreement. No deduction is allowed for commissions paid to third parties. If the seller of the agreement is licensed under chapter A person obligated under an agreement, including any third-party obligor under an agreement sold to a retailer and provided at no additional charge to the end consumer, may purchase the following from a supplier or service provider at wholesale without incurring retail sales tax, provided the obligor provides the supplier or service provider with a reseller permit: There are tangible personal property agreements that include elements of insurance i. For more information on bundled transactions see RCW When the company replaces items, the company is responsible for paying sales tax on the items purchased and provided as replacements. Identity theft protection is not tangible personal property. It depends on the coverage as to whether the protection plan is an insurance product that is subject to the premiums tax. Most agreements are service contracts and not insurance products, and are covered under chapter If the loan of the equipment is included in the warranty, the customer does not owe use tax on the use of the loaned equipment. Page 9

10 Chapter 7 : Tax exemption - Wikipedia Your contracts' completion status at the end of your tax year, and Your average annual gross receipts. Most construction businesses use two different tax accounting methods; one for their long-term contracts and one overall method for everything else. A mine, oil well, quarry or other place of extraction of natural resources A building or work site or a construction, installation or assembly project And without prejudice to the generality of the foregoing, a person shall be deemed to have a permanent establishment in Singapore if that person: Income from immovable property, such as rental income from real estate, is usually taxed both in the country of source where the property is situated and country of residence of the recipient. According to Singapore DTAs, the country of residence will have to allow a credit for the tax paid in the country of source. Business profits which are not attributable to a PE are not taxable. However, if business profits are generated through a PE, the enterprise is allowed to deduct a reasonable amount of expenses attributable to that PE. Airline or shipping profits derived by an enterprise of one country from the other country are entitled to either full or partial exemption. Normally the country of source would grant full or partial tax exemption or impose a reduced dividend withholding tax rate. Since Singapore adopts a one-tier corporate system it does not levy withholding tax on dividend payments. Whether they are taxable in the recipient country would depend on the domestic tax laws of that country and what the treaty specifies. Interest will be exempted or taxed at a reduced rate in the country in which the interest income arises source country. Royalty income tax treatment varies from complete to partial exemption. An important point to note is that the definition of royalty may vary from treaty to treaty. Professional services income is normally taxed in the country of residence of the individual performing the services. When the individual has a fixed base in Singapore office or clinic his income from the professional services will be taxed in the same manner as his business profits. Professional services cover physicians, lawyers, engineers, architects, dentists, accountants, etc. Some tax treaties provide tax exemption if the individual is present in Singapore for less than days in a tax year and where the services are performed for a resident of the other contracting country. Income from employment will be taxed in Singapore if the employment is exercised in Singapore unless: His employer is a resident of the contracting country c. His remuneration is not borne by a permanent establishment in Singapore of an enterprise of a contracting country. The full domestic tax rate would generally apply. Government service payments â Any salary, wage, pension, or similar rewards for personal services paid by the government of a contracting country to persons performing services in Singapore on behalf of that government are exempt from tax in Singapore and will only be taxed in the contracting country. Remuneration paid to visiting professors or teachers, by a contracting country, for teaching at a Singapore based educational institute is exempt from tax in Singapore. Self-employed persons are liable to Singapore income tax on the full amount of their income which is earned in Singapore, net of any tax-deductible expenses which they might have incurred in order to earn that income The right to tax capital gains arising from the sale of immovable property and gains from sale of shares varies from DTAs signed with different countries. Singapore will give a tax credit in respect of the foreign income based on the lower of Singapore tax payable or foreign tax paid. In addition, foreign-sourced income is also tax exempt in Singapore subject to two conditions â that in the year the income is received in Singapore, the headline tax rate i. The available methods in Singapore are as follows: Tax Credit A tax credit will be given for the foreign tax suffered by a tax payer against his domestic tax imposed on the same income. This is known as the ordinary credit method vis-a-vis the full credit method, where the tax paid in the country of source is allowed as a credit in full. Tax Exemption Double taxation can be avoided when foreign income is exempt from domestic tax. The exemption may be given on the entire or part of the foreign income. Tax Exemption for Foreign-Sourced Dividends, Branch Profits, and Service Income â Section 13 8 of the Singapore Income Tax Act A Singapore tax resident company can enjoy tax exemption on its foreign-sourced dividends, foreign branch profits, and foreign-sourced service income that is remitted into Singapore if the following conditions are met: The rate at which the foreign income was taxed can be different from the Page 10

11 headline tax rate. To enjoy the tax exemption on the specified foreign income, you need not submit documents such as dividend vouchers, notices of assessment issued by the relevant foreign jurisdiction etc with your income tax returns to substantiate that their specified foreign income qualifies for the exemption. Instead you only need to declare in the appropriate section of your income tax returns that your specified foreign income qualifies for the tax exemption and furnish the following particulars: Nature and amount of income i. Tax Exemptions for Individuals â Section 13 7A of the Singapore Income Tax Act For tax resident individuals in Singapore, all foreign income received in Singapore will be exempt from tax if the Comptroller is satisfied that the tax exemption is beneficial to the individuals. Reduced Tax Rate Under this form of relief, income is taxed at a lower rate and is applicable to the following classes of income: Relief by Deduction In this case, domestic tax is applied on the foreign income after deducting foreign tax suffered. Singapore does not allow a deduction of foreign income tax. However a deduction is given indirectly as under the remittance basis, Singapore would tax the amount of foreign income received i. Tax Sparing Credit Under a DTA, tax credit is usually available in the country of residence only if the income has been taxed in the country of source. Tax sparing credit is a special form of credit whereby the country of residence agrees to give a credit of the tax which would have been paid in the country of source but was not, i. The tax sparing credit provision is usually found in DTAs between a developing country which offers tax incentives to attract foreign investment and a developed country which is capital exporting. The credit is given by the capital-exporting country under its laws to promote investments. Income derived from any professional, consultancy and other services rendered in any territory outside Singapore; Dividends; or Profits derived by an overseas branch of a Singapore resident company. Unilateral tax credit under Section 50A would also apply to foreign sourced royalty from non-treaty countries, provided the royalty is not: Borne directly or indirectly by a person resident in Singapore or a permanent establishment in Singapore; or Deductible against any Singapore sourced income. Withholding Tax DTAs are most commonly used to determine whether it would be possible to obtain either a reduction or exemption of tax on certain types of income. Generally, the following income is subject to withholding tax in Singapore: Page 11

12 Chapter 8 : ASBCA Says Contractor Wasnâ t Exempt From State Tax SmallGovCon â Government C To be tax-exempt under section (c)(3) of the Internal Revenue Code, an organization must be organized and operated exclusively for exempt purposes set forth in section (c)(3), and none of its earnings may inure to any private shareholder or individual. This part prescribes policies and procedures for a using tax clauses in contracts including foreign contracts, b asserting immunity or exemption from taxes, and c obtaining tax refunds. It explains Federal, State, and local taxes on certain supplies and services acquired by executive agencies and the applicability of such taxes to the Federal Government. It is for the general information of Government personnel and does not present the full scope of the tax laws and regulations. Specific tax questions must be resolved by reference to the applicable contract terms and to the pertinent tax laws and regulations. Therefore, when tax questions arise, contracting officers should request assistance from the agency-designated legal counsel. Questions arising in this area should be directed to the agency-designated counsel. Contracting officers should solicit prices on a tax-exclusive basis when it is known that the Government is exempt from these taxes, and on a tax-inclusive basis when no exemption exists. Shipment must occur within 6 months of the time title passes to the Government. When this exemption is to be claimed, the purchase should be made on a tax-exclusive basis. The contracting officer shall furnish the seller an exemption certificate for Supplies for Vessels of War an example is given in 26 CFR The exemption applies whether the vehicle is owned or leased by the United States. This subpart prescribes the policies and procedures regarding the exemption or immunity of Federal Government purchases and property from State and local taxation. Whether any specific purchase or lease is immune, however, is a legal question requiring advice and assistance of the agency-designated counsel. If appropriate, the contracting officer shall provide a Standard Form, U. Tax Exemption Form see Part 53, or other evidence listed in Before any activity contends that a contractor is an agent of the Government, the matter shall be referred to the agency head for review. The referral shall include all pertinent data on which the contention is based, together with a thorough analysis of all relevant legal precedents. It may rest instead on provisions of the particular State or local law involved, or, in some cases, the transaction may not in fact be expressly exempt from the tax. In such cases, the contracting officer shall seek review and advice from the agency-designated counsel on the appropriate course of action. The imposition of State and local taxes may result in special contract considerations including the following: Such special treatment may be appropriate when there is doubt as to the applicability or allocability of the tax, or when the applicability of the tax is being litigated. When the contract price will be substantial, alternative places and terms of delivery should be considered in light of possible tax consequences. The amount of these taxes can vary considerably from jurisdiction to jurisdiction. In United States v. No refund will be made on an application not filed within the time allowed and in such manner as the Commissioner may require. The requirements of the Commissioner are set forth in regulations that provide that, to substantiate a refund claim for sales or use taxes paid on purchases of building materials, supplies, fixtures, or equipment by a contractor, the Government must secure from the contractor certified statements setting forth the cost of the property purchased from each vendor and the amount of sales or use taxes paid. In the event the contractor makes several purchases from the same vendor, the certified statement must indicate the invoice numbers, the inclusive dates of the invoices, the total amount of the invoices, and the sales and use taxes paid. Similar certified statements by subcontractors must be obtained by the general contractor and furnished to the claimant. The contracting officer shall ensure that contractors comply with this requirement and shall obtain the annual refund to which the Government may be entitled. The application for refund must be filed each year before March 31 and in the manner and form required by the Commissioner of Revenue. Evidence needed to establish exemption from State or local taxes depends on the grounds for the exemption claimed, the parties to the transaction, and the requirements of the taxing jurisdiction. Such evidence may include the following: Tax Exemption Form SF If a reasonable basis to sustain a claimed exemption exists, the seller will be furnished evidence of exemption, as follows: Insert the clause at The contracting officer shall insert the clause at If the requirement is for vessel repair to be Page 12

13 performed in North Carolina, the clause shall be used with its Alternate I. In determining what is a service, the intended use, principal objective or ultimate objective of the contracting parties shall not be controlling. Such tangible personal property retains its character as tangible personal property until it is installed as an ingredient or component part of a construction project in New Mexico. However, sales of tangible personal property that will become an ingredient or component part of a construction project to persons engaged in the construction business are sales of tangible personal property. Page 13

14 Chapter 9 : Ohio Department of Taxation > sales_and_use > information_releases > st Contracting officers should solicit prices on a tax-exclusive basis when it is known that the Government is exempt from these taxes, and on a tax-inclusive basis when no exemption exists. (c) Executive agencies shall take maximum advantage of available Federal excise tax exemptions. Lump-Sum Contract Exemption vs. Some contractors sell both real property improvements not taxable and tangible personal property taxable. This article summarizes the tax treatment of the exemption. Lump-Sum Contract Exemption applies to contracts entered into on October 1, through November 30, When a contractor sells both a real property improvement and tangible personal property or taxable services in a single contract, the contract is a lump-sum contract if the contractor quotes one price for all of its various charges labor, services of subcontractors, tangible personal property, items or property under sec. A lump-sum contract may include a contract for which the contractor itemizes its various charges as a part of a schedule of values or similar document. When the lump-sum contract exemption applies: Construction Contract Exemption first applies to contracts entered into or extended, modified, or renewed on December 1, The lump-sum contract exemption for contractors was expanded to include sales and purchases by subcontractors. The construction contract exemption applies as follows: The prime contractor must pay sales or use tax on its purchase of materials and supplies relating to the taxable products and services. In order to purchase taxable products and services without tax from the subcontractor, the prime contractor must provide an exemption certificate to the subcontractor. The prime contractor should write "sec. If no exemption certificate is provided by the "prime contractor" to the subcontractor, the subcontractor must pay tax on its sales of taxable products and services sold to the prime contractor. The prime contractor must pay sales or use tax on its purchase of materials and supplies relating to the real property improvements. For the "Subcontractor" The construction contract exemption applies if either of the following applies: The prime contractor provides the subcontractor with an exemption certificate claiming the exemption under sec. The subcontractor must pay sales or use tax on its purchase of materials and supplies relating to the taxable products and services. The subcontractor must pay sales or use tax on its purchase of materials and supplies relating to the real property improvements. Exception for contracts entered into with entities that are exempt from tax under sec. Taxable products and services sold by a contractor as a part of a lump-sum contract or a construction contract with an exempt entity that are not consumed in a real property construction activity may be purchased by the contractor or subcontractor without tax, for resale. However, materials and supplies that are consumed in a real property construction activity under a lump-sum contract or a construction contract with any customer, including an exempt entity, may not be purchased by the contractor or subcontractor without tax. Page 14