Different Types of Business Taxes in Singapore

  • Post category:Singapore

We discuss the types of taxes that businesses need to pay in Singapore 2024. For a variety of reasons, investors choose Singapore as the location for their business operations. The ease of starting and running a business is an important factor. 

The tax system of Singapore, which is renowned for its favorable corporate and individual tax rates, tax relief programs, lack of a capital gains tax, one-tier tax system, and several double tax treaties, is another important factor.

Types of Taxes That Businesses Need to Pay in Singapore

Singapore’s taxation system uses a territorial and, to a lesser extent, a remittance basis. According to the Income Tax Act 1947 (ITA), unless expressly exempted by the ITA, income that is sourced in Singapore or received in Singapore from outside Singapore is liable to income tax in Singapore.

WHAT ARE THE DIFFERENT CORPORATE TAXES IN SINGAPORE?

Corporate Tax

Singapore’s corporate income tax is territorial in nature, which means that only income originating in or received in Singapore qualifies as taxable income. Companies must file income tax returns for any income they receive or derive from Singapore. Contrary to other nations, like the US, which levies taxes on foreign income, neither individuals nor businesses are taxed on it. Businesses pay a flat tax rate of 17% on their taxable income. 

Singapore further attracts business by providing incentive programs that lower the tax rate for corporations to considerably below 17%. Startup businesses can benefit from corporate tax breaks for the first three years, during which they pay only 50% of the tax on the following $200,000 in chargeable income and 75% of the first $100,000 in chargeable income.

Singapore also has unique tax structures for certain business sectors and industries that lower tax rates and offer unique tax exemptions. These sectors include finance, shipping, leasing, and banking. In many cases, these strategies bring the company’s effective tax rate below 17%.

Refer to the Corporate tax filing in Singapore for more information.

Income Tax for LLP (Limited Liability Partnership)

A Singapore LLP is a type of company that, by definition, requires two or more partners. Partners must be LLP members or bodies corporate or other businesses or be at least 18 years old and residents of Singapore.

LLPs are not subject to entity-level taxation, even though they are regarded as partnerships. Profits from the LLP are instead counted as a partner’s personal income. The personal income tax rate is used, therefore the partners—rather than the partnership—are responsible for paying taxes.

Goods and Services Tax (GST)

The 8% goods and Services Tax applies to all locally produced or imported products and services in Singapore. Financial services, sales revenue, and rental income from residential properties are all exempt from GST. One can register for GST as a sole proprietorship, a partnership, a government agency, a club, or a non-profit organization.

The GST in Singapore is also quite comparable to the VAT, or value-added tax, that is levied in other nations. There are two types of Singapore GST registration: required and optional. If the company satisfies specific criteria, it might also not need to register for GST. It may be advantageous to register voluntarily if a permanent establishment is not compelled to do so.

The World Economic Forum claims that Singapore’s income tax rate is one of the main factors luring entrepreneurs to the city-state. The GST allows for additional reduction of this. Data on tax revenue growth is gathered by the government, allowing it to fully understand the revenues from corporate tax payments and lower personal tax rates.

In the long run, lower individual tax rates become more practical when consumers pay GST on every item they buy. To put it another way, GST is a tool that can assist firms in cutting costs.

Income Tax for Sole Proprietors and Partnerships

The business income is regarded as a percentage of the applicant’s income whether they operate the business as a sole proprietorship or in partnership. Therefore, personal income tax rates will be used. When a consumer pays for a Singapore product or when they get money from an overseas sale in Singapore, income tax rates are applied. This income tax applies to any individual or entity receiving income in Singapore. This includes the pay, enterprises, the interest they earn on different types of deposits, and other kinds of taxable income.

The personal tax rates and tax exemptions would be available to sole proprietors and partners, allowing them to pay less tax and continue operating their enterprises in Singapore. They can also benefit from tax breaks, refunds, and tax relief.

The costs that sole proprietors and business partners incurred to make a profit can be claimed as Allowable Business Expenses. These costs include rental income, office supplies, stationery, and employee compensation, among other things.

Additionally, they can claim “capital allowances” for the costs their companies incur when buying machinery and other equipment. They can also submit claims for Capital Allowances and unutilized losses, which they can roll over to the following fiscal year. When they donate to nonprofits, sole proprietors and company partners can also benefit from tax breaks and refunds.

Property Tax

All properties in Singapore are subject to property tax. This includes vacant lots as well as HDB apartments, factories, warehouses, and office buildings. This is distributed annually before January 31 and is subject to 10% tax. If the applicant fulfills the criteria for the owner-occupier rate, they may qualify for a lower rate.

Property owners can benefit from specific rebates and tax refunds, similar to personal income tax, to keep taxes in check. They can lower the property tax, for instance, if the property has been vacant for at least a month owing to maintenance or an inability to rent it out.

Withholding Tax

Singapore non-resident employees, overseas agents, and business partners of the company are all subject to withholding tax if they work for the company.

The Inland Revenue Authority of Singapore (IRAS) receives this payment. The commissions and fees for international, offshore, and non-resident partners and workers are covered by this withholding tax. The amount of withholding tax is dependent on the kind of payment.

Stamp Duty

Investors pay additional charges while purchasing real estate in Singapore. The Stamp Duty is one of them.

Simply put, stamp duty is the tax on documents related to the lease or purchase of real estate. This should be paid to IRAS.

There are some exceptions to the stamp duty requirement that applies to all residential real estate transactions, including purchases, sales, and rentals.

Be sure to account for the potentially high expense of stamp duty while analyzing the finances. This calculator can be used to determine how much the applicant must pay.

Buyer’s Stamp Duty (BSD)

The applicant must pay BSD, or buyer’s stamp duty, for the legal documents used to make the acquisition of real estate in Singapore. BSD is calculated using the higher purchase price specified in the document to be stamped or the property’s market value.

Between February 20, 2018, to February 14, 2023, the BSD rate for purchasing residential properties is up to 4%. Residential properties will have a top marginal rate of 6% starting on February 15, 2023, while non-residential buildings will have a maximum marginal rate of 5%.

The BSD rates after 15 Feb 2023 are as follows:

Purchase price or market value of the property BSD rates for residential properties BSD rates for non-residential properties
First $180,000 1% 1%
Next $180,000 2% 2%
Next $640,000 3% 3%
Next $500,000 4% 4%
Next $1,500,000 5% 5%
Remaining amount 6%

TABLE SHOWING THE DIFFERENT BUSINESS TAXES PAYABLE IN SINGAPORE

Tax Type Description
Corporate Income Tax Singapore companies are subject to corporate income tax on profits earned in Singapore and abroad. The current corporate tax rate is 17%.
Goods and Services Tax (GST) GST is a consumption tax on the supply of goods and services in Singapore. Businesses that make taxable supplies of goods and services with an annual turnover of more than SGD 1 million must register for and charge GST. The current GST rate is 8%.
Income Tax for LLP (Limited Liability Partnership) LLPs in Singapore are taxed as partnerships, with each partner being taxed on their share of the partnership's income. The current personal income tax rates range from 0% to 22%.
Income Tax for Sole Proprietors and Partnerships Sole proprietors and partnerships in Singapore are also taxed as individuals. The current personal income tax rates range from 0% to 22%.
Withholding Tax Withholding tax is a tax on payments made to non-resident companies for services rendered in Singapore. Businesses that make such payments are required to withhold a certain percentage of the payment and remit it to the tax authority. The withholding tax rate varies depending on the nature of the payment.
Property Tax Property tax is levied on all owners of properties in Singapore, including businesses that own or lease commercial properties. The tax rate varies depending on the type and value of the property.
Stamp Duty Stamp duty is a tax on documents relating to the transfer of property, shares, and other assets. Businesses may need to pay stamp duty when buying or selling property or transferring shares. The duty rate varies depending on the value of the transaction.
Buyer's Stamp Duty Buyer's stamp duty is a tax payable by the buyer of residential or commercial properties in Singapore. The duty rate varies depending on the value of the property and the buyer's nationality.

BENEFITS OF THE SINGAPORE TAX SYSTEM

  • Simple and Efficient Tax System – The Singapore tax system is known for being simple, efficient, and transparent. Tax returns can be filed electronically and tax payments can be made online, making the process faster and more convenient for businesses. The tax authorities also provide clear guidelines on tax obligations and are generally responsive to inquiries and requests for clarification.
  • Wide Network of Double Taxation Agreements (DTAs) – Singapore has a wide network of DTAs with other countries, which helps to prevent double taxation for businesses that have operations in multiple countries. This reduces the overall tax burden on businesses and promotes cross-border trade and investment.
  • Incentives and Grants – Singapore offers various tax incentives and grants to businesses, particularly those in strategic sectors such as biotechnology, clean energy, and financial services. These incentives and grants can help to offset business costs and encourage innovation and growth.
  • Personal Income Tax Rates – Singapore has a progressive personal income tax system, with tax rates ranging from 0% to 22%. The top tax rate applies to individuals with an annual income of SGD 320,000 or more. The low tax rates can be attractive to foreign talent and entrepreneurs looking to work or set up businesses in Singapore. Refer to Personal Taxes in Singapore to know more.

Reach out to us at Relin Consultants for further assistance. 

FAQs

What is corporate income tax in Singapore?

Corporate income tax in Singapore is a tax on the profits earned by a company in Singapore and abroad. The current corporate tax rate is 17%. All companies in Singapore are required to file an annual tax return, regardless of whether they make a profit or not.

What is GST and which businesses are required to pay it?

The goods and Services Tax (GST) is a consumption tax on the supply of goods and services in Singapore. Businesses that make taxable supplies of goods and services with an annual turnover of more than SGD 1 million are required to register for and charge GST. The current GST rate is 8%.

How is income tax calculated for LLPs, sole proprietors, and partnerships in Singapore?

LLPs in Singapore are taxed as partnerships, with each partner being taxed on their share of the partnership’s income. Sole proprietors and partnerships in Singapore are also taxed as individuals. The current personal income tax rates range from 0% to 22%.

What is withholding tax and when is it applicable?

Withholding tax is a tax on payments made to non-resident companies for services rendered in Singapore. Businesses that make such payments are required to withhold a certain percentage of the payment and remit it to the tax authority. The withholding tax rate varies depending on the nature of the payment.

What is property tax and who needs to pay it?

Property tax is levied on all owners of properties in Singapore, including businesses that own or lease commercial properties. The tax rate varies depending on the type and value of the property.

What is stamp duty and when is it applicable?

Stamp duty is a tax on documents relating to the transfer of property, shares, and other assets. Businesses may need to pay stamp duty when buying or selling property or transferring shares. The duty rate varies depending on the value of the transaction.