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Your 5-Minute guide to Singapore's corporate tax system

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Even a savvy business person can get overwhelmed with a new country’s tax regime. You are definitely not alone! Here’s a quick guide to the key features of the Singapore tax system for new companies.

 

 

Among other benefits, one of the key reasons that investors are drawn to setting up their operations here is due to Singapore’s attractive tax regime – low corporate and personal tax rates, generous tax relief measures, absence of capital gains tax, one-tier tax system, and extensive double tax treaties with many countries.

Tax residency

To be a tax resident in Singapore, the company’s control and management has to be exercised in Singapore where the primary business decisions and policies are made during board meetings.

 

Corporate tax rate

Corporate tax rate is capped at 17% based on the company’s chargeable income.

Corporate taxation framework in Singapore

Singapore follows a territorial basis for corporate taxation where tax is imposed on income accrued in or derived in, as well as foreign-sourced income remitted in Singapore.

Dividends

Under Singapore’s one-tier corporate tax system, shareholders will not be taxed on dividends paid by a Singapore resident company.

Carrying forward of unutilised losses and allowances

Unutilised losses and allowances can be carried forward to subsequent years to offset against the income of those years until all trade losses are fully utilised.

Group relief

Group relief allows companies to deduct unutilised capital allowances/trade losses/donations of one company from the assessable income of another company in the same group. To qualify for group relief the companies must fulfil the following criteria:

  • The transferor and claimant must be incorporated in Singapore
  • They must belong to the same group
  • They must have the same financial year end

Capital gains tax

There is no capital gains tax in Singapore. Generally, the gains derived from the sale of a property/investment in Singapore are not subjected to tax as it is a capital gain. However, the gains may be taxable if you frequently buy and sell property/investment.

Find out more about GST in Singapore here

Exemptions/Tax incentives

Start-up tax exemptions

To support entrepreneurship, the tax exemption scheme was introduced by IRAS in 2005.  Start-up companies are eligible for the start-up tax exemption during the first 3 years of YA after incorporation.

 

To qualify for these exemptions:

  • the company must be a tax resident of Singapore
  • the company must not have more than 20 individual shareholders or at least 1 shareholder is holding at least 10% of the issued shares
  • the company must not be a property or investment holding company

From YA 2010 to YA 2019 (Maximum exemption for each YA is $200,000)

Chargeable income % exempted from tax amount exempted
First $100,000 100% $100,000
Next $200,000 50% $100,000

In or after YA 2020  (Maximum exemption for each YA is $125,000)

Chargeable income % exempted from tax amount exempted
First $100,000 75% $75,000
Next $100,000 50% $50,000

Partial tax exemptions

Partial tax exemption are available for companies who do not qualify for startup exemptions or for companies who are beyond the first 3 years of their incorporation.

From YA 2010 to YA 2019 (Maximum exemption for each YA is $152,500)

Chargeable income % exempted from tax amount exempted
First $10,000 75% $7,500
Next $290,000 50% $145,000

In or after YA 2020  (Maximum exemption for each YA is $102,500)

Chargeable income % exempted from tax amount exempted
First $10,000 75% $7,500
Next $190,000 50% $95,000

Corporate income tax (CIT) rebate

To further support the companies, government grants relief on corporate tax payable.

YA CIT rebate* capped at
2019 20% $10,000
2018 40% $15,000
* This rebate does not apply to non-resident company that is subjected to withholding tax.

Regional (RHQ) and International Headquarters (IHQ) award

Companies who meet the requirements to set up a RHQ or IHQ in Singapore would be able to apply for these awards. These awards provide companies concessionary tax rates from 5% to 15% on the incremental income and other tax incentives.

Pioneer Certificate incentive (PC)

For companies who intend to make notable investments and advancement to the economy. Those who qualify for this incentive would be granted a reduced tax rate to 5%.

Development and Expansion Incentive (DEI)

This incentive encourages companies to grow and expand their businesses in Singapore. Companies who qualify for DEI would be eligible for a concessionary tax rate or a corporate tax exemption up to 5 years. 

Avoidance of double taxation agreements

For cross border business, if you have paid taxes in a foreign country, the same income will not be taxed again in Singapore. To avoid double taxation, Singapore enters into extensive DTA with many countries to relieve double taxation of income (to see IRAS’ current list of countries that have a DTA with Singapore, click here).

Withholding tax

Certain payments may be subjected to withholding tax, such as  payments made to non-resident companies, individuals for services rendered in Singapore, and income derived in Singapore. The company must withhold part of the payment and pay it to IRAS. Common types of payments subjected to withholding tax:

  • interest, commission, fee in relation to any loan or indebtedness;
  • royalty, rent or other payments for the use of or right to use any movable property;
  • payments of management fees;
  • payments for the use of or the right to use scientific, technical, industrial or commercial knowledge or information or for the rendering of assistance or service in connection with the application or use of such knowledge or information

Next steps

If you’re looking to get help with your tax set up, get in touch  We offer no-nonsense accounting for companies looking to set themselves up in Singapore.

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