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Singapore
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SINGAPORE CORPORATE TAX SERVICE
Most international investors choose Singapore to set up their operations for various reasons. One of the main reasons is due to the tax benefits available. Singapore has approximately 80 tax treaties signed with other countries to avoid double-income taxation. Singapore’s corporate tax rate is also one of the lowest in the world.
Singapore’s government adopts a territorial tax system, and companies are only taxed on income sourced in Singapore. Income taxes are charged on chargeable income and not on income generated. Chargeable income is income minus all deductible expenses for the assessment period. Non-deductible expenses are added back to profits for income tax computation purposes.
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OVERVIEW OF CURRENT COMPANY TAX RATE SINGAPORE
| Types of Income | Tax Rate |
|---|---|
| Net profit on income generated or received in Singapore | 17% |
| Foreign sourced income not remitted to Singapore* | 0% |
| Capital gains | 0% |
| Dividends distributed post Tax | 0% |
* A company must be a non-resident company to qualify for the same.
Tax residency rule:
A Singapore company tax rate is also determined by the tax residency of the company.
A Singapore company is only considered a tax resident in Singapore if it meets the following criteria.
1. Control and management are exercised in Singapore.
2. Income is produced or generated in Singapore.
3. Income is remitted to Singapore.
Hence, a well-structured Singapore company can be fully tax exempted. (i.e enjoy a 0 percent tax rate).
A company’s tax residency must be assessed annually and it can change from year to year.
TAXABLE INCOME IN SINGAPORE
Based on Singapore corporate tax rules, generally, income generated in Singapore and income remitted to Singapore from a foreign source is taxable.
The following types of income are also deemed taxable in Singapore.
- Gains and profits from any trade or business
- Income generated from an investment such as interest and property rental income
- Royalties, premiums, and any other profits from properties
- Other gains that are considered revenue in nature
NET INCOME VS TAXABLE INCOME IN SINGAPORE
Income for a business is defined as gains or profits from any trade or business, including dividends, interest, rental royalties, premiums, and any other profits from property.
On income that is either earned in or derived from Singapore, or received in Singapore from outside Singapore, corporate tax is assessed under Singapore’s Income Tax Act.
The income that comes from Singapore is Part A. Part B is the income that was received in Singapore but had a source outside of Singapore. But there are some qualified exemptions for Part B, also called Exemptions on Foreign Sourced Income.
The net profit or loss of an organization does not accurately represent its taxable revenue. For example, some of the costs incurred by your business might not be tax deductible, and some of the profits could not be taxable or might be taxed separately as non-trade source income.
Some business income may not be subject to taxation, in accordance with the Singapore Income Tax Act’s regulations.
Examples include universal tax exemptions that apply to all businesses, exempt income for specific industries, such as shipping income earned by a shipping company, foreign-sourced dividends, branch profits and exemptions on qualified foreign-sourced income, etc.
SINGAPORE TAX TREATMENT OF LOSSES
For taxation purposes in Singapore, a business can generally deduct allowed expenses from the income. The loss must be taken into account in the first year where there is statutory income, although it can be carried forward forever (under certain conditions).
The “proceeding year” basis is used for deducting the loss. The losses can only be used if there hasn’t been a significant change in share ownership or principal activity, as applicable.
SINGAPORE CORPORATE INCOME TAX INCENTIVE AVAILABLE FOR NEW STARTUP COMPANIES 2023
Singapore incorporated company with less than 20 shareholders and at least 1 individual shareholder holding more than 10% shareholding is entitled to the tax exemptions scheme for new start-up companies. If your company is eligible and qualified, you will be able to enjoy the following incentives;
75% exemption on the first $100,000 of normal chargeable income*; and
A further 50% exemption on the next $100,000 of normal chargeable income.
Tax Incentives Available For All Tax Resident Companies In 2023
From the financial year 2019 onwards all Singapore companies are entitled to a 75% tax exemption on the first $10,000 of normal chargeable income and a 50% tax exemption on the next $190,000 of normal chargeable income.
Also known as value-added tax in European countries. A Singapore must register for GST if its revenue exceeds S$ 1 million in the previous 12 months or if you expect the company to exceed its revenue in the next 12 months. The GST rate is 8% effective 2023 and is charged on domestic consumption. Generally, products and services sold to foreign customers are exempted from the GST requirements. The Singapore GST Rates are as follows:
| 8% on Standard Rated Supplies | GST is charged on most local sales and services as it will fall under this category. |
| 0% on Zero Rated Supplies | Examples are items such as the sale of a laptop to an overseas customer, where the laptop is shipped to an overseas address. Or services that are classified as international services. |
| 0% on Exempted Supplies | Examples are items where the sale of goods is delivered from overseas (outside Singapore) to another place overseas. |
Development and Expansion Incentive
Tax incentives are available to companies that are expanding into the Singapore market to upgrade their operations. Under the program, all qualifying companies can enjoy a 10% tax rate for 5 years.
Investment allowance
Under an investment allowance scheme, companies can receive up to 100% of a tax credit on the capital expenditures incurred for qualified projects during a tax year. Investment allowances are usually provided for 5 to 8 years, depending on the applicant’s business activities.
Withholding Tax in Singapore
Withholding tax is also applicable for Singapore Companies when it’s making a payment to non-resident companies or individuals for services and work done. Generally, withholding tax will be useful if the income is derived from a Singaporean Source or services are provided by work done in Singapore and on selected types of payments such as interest, commission, royalties, management fees, and services rendered.
The following items are exempted from further tax:
- Dividends declared after Profit.
- Foreign sourced service income/dividends
- Royalties subject to terms and conditions.
TAX FILING DEADLINE 2023 SINGAPORE
All Singapore-incorporated companies must annually submit two of the following returns to the tax authority (IRAS) before Singapore’s corporate tax filing deadline.
Estimated Chargeable Income (ECI):
A company has to file its ECI within 3 months from the end of the financial year unless the company qualifies for the ECI filing waiver or the company is specifically not required to file ECI.
ECI estimates your company’s taxable profits (after deducting tax-allowable expenses) for a specific Year of Assessment (YA).
A company must file its ECI within 3 months of its financial year-end.
Form C or Form C-S: In both Form C or Form C-S
A company must declare its corporate income tax for a specific year. A Form C filing requires the company to submit a detailed tax computation using the prevailing corporate tax rate Singapore with the relevant supporting documents such as financial statements and detailed profit & loss statements.
Whereas form C-S is a simplified filing that does not require additional documents.
The corporate tax filing deadline in Singapore is due by November 30 annually.
Relin Consultants provides corporate services in Singapore. We provide tax filing services and can assist our clients with tax planning and Singapore business tax optimization.
Contact us now to obtain more information about your Singapore business setup. You can also reach out to us for matters relating to Corporate tax services in Singapore.
FAQs
How Much Is A Corporate Tax In Singapore?
A 17% rate is charged on all qualifying corporate income. However, there are various tax incentives available to companies. Hence the effective tax rate is lower at 8.5% to 13% after considering all incentives.
Is Corporate Tax In Singapore Low?
The corporate tax rate in Singapore is 17% while the effective tax rate is even lower considering the various tax incentives.
Is Singapore A Tax Haven?
Singapore is sometimes referred to as a tax haven because it offers various tax advantages to offshore non-resident companies.
Singapore has many Free Trade Agreements (FTAs), and Double Taxation Treaties (DTTs) and has been ranked one of the world’s most competitive and open markets.
How Can Singapore Companies Reduce Corporate Tax?
There are various ways a Singapore company can legally reduce corporate tax. A company can check and apply for available investment exemptions or it can assess and claim exemptions on foreign-sourced income for tax relief.
Will trading capital gains be tax-free if stock trading is the company's main business?
An investment or stock dealing firm is a business that purchases and sells securities or shares with the goal of making a profit. The company’s investments and shares are listed as trading stocks. Therefore, under S10(1)(a) of the Income Tax Act, any gain from the disposal of these investments is taxable.
Is there a tax credit available for income derived from nations with whom Singapore does not have a tax treaty?
Yes. According to Section 50A of the Singapore Income Tax Act, you are eligible for a unilateral tax credit for the overseas taxes paid on the following types of income:
- any professional, consultancy, or other revenues from services provided outside of Singapore.
- Dividends
- profits made by a Singapore-based company’s foreign division.
You must be a tax resident in Singapore and meet all other requirements imposed by the tax department in order to claim the aforementioned unilateral tax credit.
If there is no profit in the first three years, may tax exemptions be carried over to later years?
No, your chargeable income and tax payable will be zero if, during any of the first three tax years, your firm experiences losses or has no income (for example, since operations have not yet begun). Since there is no chargeable income in this situation, your business is not eligible to benefit from the tax exemption program for new start-up businesses for that particular tax year.
However, the first three consecutive tax years will still be determined using that specific tax year.
For Singaporean corporations, are capital gains taxable?
No, capital gains are not taxable in Singapore.
Are shareholder dividends taxed for Singaporean companies?
Singapore firms are exempt from dividend taxes. Your company’s profits can be transferred to shareholders tax-free once you’ve paid corporate income tax on them.
Can shareholders in another country receive post-tax corporate profits?
Dividend income is typically used to describe the post-tax firm profit distribution to shareholders. Dividends can be repatriated to shareholders anywhere in the world without extra tax repercussions as far as Singapore is concerned.
The local tax regulations of the foreign shareholders’ nation and the applicable tax treaty between Singapore and that country will determine whether the dividend income is subject to taxation there.
How long may business losses be carried forward?
There will be unutilized losses from the tax year if your company has business losses in a year and the adjusted losses were greater than the other sources of income or if no other sources of revenue existed to make up for the trade losses.
If your company satisfies the ownership test and there hasn’t been a significant change in its shareholders’ shareholdings as of the relevant dates as decided by authorities, the unutilized losses may be carried forward to be deducted against your company’s assessable income for the following tax years.
What is the tax treatment of royalties?
The term “royalty revenue” refers to earnings from the use of patents, trademarks, and copyrights. Taxable royalties include those produced outside of Singapore and received in Singapore, as well as those that are accrued in or derived from Singapore.
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