When it comes to newly incorporated companies IRAS, there are a lot of incentives that are provided by the Singaporean government. The government has established tax reduction programs targeted at enterprises, particularly start-ups in Singapore.
Read down below if you would like to know more.
IRAS TAX REGULATIONS FOR SINGAPORE NEWLY INCORPORATED COMPANY
WHAT IS THE CORPORATE INCOME TAX RATE IN SINGAPORE?
The headline corporate tax rate is 17%. Income tax rates in Singapore have constantly decreased in order to make Singapore an appealing investment location, as seen below.
ARE THERE ANY TAX RELIEFS FOR NEWLY INCORPORATED COMPANIES IN SINGAPORE?
- Singapore offers a number of common tax breaks, such as: –
- A new start-up tax exemption plan for newly established businesses.
- A partial tax exemption for all businesses.
- Deduction for expenses made prior to the start of a business.
- Singapore originally implemented the tax exemption system in 2005 with the intention of encouraging entrepreneurship and the local business sector.
- Companies are exempt from paying taxes for the first three years of assessment (YA) following their incorporation: –
- A 75% exemption rate is applied to the first S$100,000 of normal chargeable income, lowering the effective tax rate to 4.25% on the first S$100,000 of chargeable income.
- A 50% exemption rate is applied to the next $100,000, lowering the effective tax rate to 8.5% on the next S$100,000 of chargeable income.
ARE THERE ANY TAX RELIEFS FOR NEWLY INCORPORATED COMPANIES IN SINGAPORE?
If the following requirements are satisfied, a company will be eligible for the New Start-up Tax Exemption (SUTE) Scheme: –
- The company was established in Singapore.
- For that YA, the company is a Singapore tax resident.
- Throughout the base period for that YA, the company’s whole share capital is beneficially owned by no more than 20 shareholders, where: –
- Individuals make up the majority of the stockholders, or
- At least one shareholder is an individual who owns at least 10% of the company’s issued ordinary shares.
The tax exemption, however, does not apply to the following categories of businesses: –
- A business that primarily deals with investment holdings and generates investment revenue.
- A business that creates new real estate for sale and investment.
IS THERE ANY PARTIAL TAX EXEMPTION SCHEME FOR SINGAPOREAN COMPANIES?
Companies who do not qualify for the SUTE in the first three years or in the fourth year will be eligible for the Partial Tax Exemption (PTE) Scheme, as follows: –
- A 75% exemption rate is applied to the first S$100,000 of regular chargeable income, lowering the effective tax rate to 4.25% on the first S$100,000 of the company’s chargeable income.
- A 50% exemption is applied to the next S$190,000 of chargeable income, lowering the effective tax rate to 8.5% on the next S$190,000 of chargeable income.
WHAT ABOUT SINGAPORE TAX EXEMPTIONS FOR FOREIGN SOURCES OF INCOME?
Several forms of foreign-sourced income are tax-free, such as: –
- Dividends from foreign sources.
- Profits from foreign branches.
- Income from foreign services.
To be qualified for this exemption, foreign-sourced income must be remitted to Singapore and must fulfil the following criteria: –
- At the time the foreign income is received in Singapore, the foreign jurisdiction’s headline tax rate is at least 15%.
- The income from international sources was taxed in the foreign jurisdiction.
ARE THERE ANY TAX TREATIES FOR NEWLY INCORPORATED COMPANIES IN SINGAPORE?
Singapore has tax treaties with over 80 countries, and the list is growing each day. The treaties represent Singapore’s ongoing efforts to assist businesses in avoiding double taxation and to stimulate and facilitate cross-border trade and investment possibilities.
Singapore has gone a step further, granting unilateral tax incentives to Singapore companies as of 2009. According to the new policy, all Singapore companies that receive revenue from countries that do not have a double tax treaty with Singapore will be able to claim a tax credit on their foreign-sourced income from such countries.
WHEN IS THE DUE DATE FOR INCOME TAX FILING?
The corporate tax filing deadline for Singapore companies is 30 November (for hard copies) and 15 December (for e-filing)
The company must file a full set of returns, including Form C, audited/unaudited financial statements, and tax computation. Form C is a declaration form used by a company to disclose its income, whereas a tax computation is a statement that shows the adjustments made to a company’s net profit or loss in order to arrive at the amount of income that is chargeable to tax.
WHAT ABOUT THE PERIOD FOR THE INCOME TAX BASIS?
In Singapore, corporate income is calculated on a preceding-year basis. This implies that the base period for any Year of Assessment (YA) is typically the fiscal year ending (FYE) in the year preceding the YA.
For instance, in 2018, you will file a corporate tax return for your company’s fiscal year that concluded between January 1, 2017 and December 31, 2017. Each year, your company’s accounts are prepared up to the fiscal year-end.
DO NEW SINGAPOREAN COMPANIES NEED TO REGISTER FOR GST?
Depending on the financial status of your company, registration for GST might be mandatory for your company. The GST registration can be divided into two types, which are:
- Mandatory registration
- You must register for GST if any of the following requirements apply: –
- In the past 12 months, your company’s sales topped $1 million. This is known as the retroactive basis.
- Your company’s revenue is expected to exceed $1 million in the next 12 months, which is referred to as the prospective basis. Typically, this entails signing commercial agreements or contracts that will create revenue for the next year.
- If your annual revenue exceeds S$1 million, you must submit a GST application to the Inland Revenue Authority of Singapore (IRAS) within 30 days.
- Voluntary registration
- Even though you are not required to do so, you can register for GST voluntarily. If you register willingly, you must complete additional requirements.
- Once registered, you must keep your registration active for at least two years. This implies that you must follow all GST requirements, such as filing your GST return on time and retaining all documentation for at least five years, even if your company ceases operations.
HOW IS GST FILED IN SINGAPORE?
- Companies in Singapore that have registered for GST are required to file GST returns. GST returns must be filed in accordance with the company’s accounting period, which might be: –
- The form must be completed with information on the company’s sales, exports, and purchases from GST-registered companies, as well as the GST collected prior to the end of the accounting period.
- The company will also indicate the amount claimed for the related time. GST returns must be filed no later than one day after the end of the accounting period, and you can do so via the IRAS website.
What are the penalties for late payment or nonpayment of taxes for Singaporean companies?
If full payment is not received by the due date of the NOA, a 5% late payment penalty will be charged on the unpaid tax. An appeal can be made via the IRAS e-filing platform, but it will only be considered if: –
- You have paid the overdue tax in full by the due date specified in the late payment penalty notice.
- No waiver has been granted in the previous two calendar years, or you have paid on time for the previous two years.
In what circumstances is Singapore withholding tax applicable?
Singapore withholding tax is only levied on non-resident companies or individuals for the following reasons: –
- Income derived from sources in Singapore.
- Services provided or work conducted in Singapore.
- Specific forms of payments.
Please keep in mind that under Singapore tax legislation, income includes salary or allowances, as well as lodging, travel, and other expenditures incurred in addition to real service fees.
What about tax treatment of losses in Singapore?
In general, a company in Singapore can deduct allowable expenses from its income for tax reasons –
The loss can be carried forward continuously (subject to certain restrictions), but it must be deducted in the first eligible year when statutory income exists
The loss is deducted on a “preceding-year” basis.
It is vital to remember that the losses can only be used if there is no significant change in the ownership and major activity.