The Singapore Tax System
Singapore has over 76 double taxation treaties!
Singapore is considered to be an excellent jurisdiction for business with a well-established taxation system. Over the last few years the tax system has evolved according to the current business landscape and has significantly reduce the amount of paper work to be submitted therefore minimising the time to submit and review tax reports, resulting in an efficient system for business to operate.
Singapore is currently ranked 7th in the world for the ease of paying taxes and 10th for the shortest time required to complete the compliance process.
Single-tier income tax system
Since January 1, 2003, Singapore has adopted a single-tier corporate income tax system, which means there is no double-taxation for stakeholders. Tax paid by a company on its chargeable income is the final tax and all dividends paid by a company to its shareholders are exempted from further taxation. There is no tax on capital gains in Singapore. Examples of capitals gains include gains on sale of fixed assets, gains on foreign exchange on capital transactions, etc.
The major taxes that are implemented in Singapore are as follows:
- Personal Income Tax
- Corporate Income tax
- Property Tax
- Goods & Services tax
- Withholding tax
- Stamp duty
Singapore accounting standards
The Accounting Standards Council was established to be the responsible of creating and managing the standards for corporate entities when preparing any official financial reports. This move was set to ensure the consistency in accounting standards, standardization of financial statements between different entities and enhancing the credibility and transparency of financial reporting.
Those standards are known as Singapore Financial Reporting Standards (SFRS) and are based on the international reporting standards issued by Accounting Standards Council (ASC).
Companies can submit their tax reports as per the SFRS standards to the tax authority IRAS and considered eligible if it falls under certain conditions such as the ones below:
- Total annual revenue is not more than S$10million;
- Gross assets are not more than S$10 million;
- Total number of employees is no more than 50 people;
However, if they do not apply for the SFRS, the International Financial Reporting standards (IFRS) is allowed in Singapore and companies that are eligible can apply for IFRS standards under the listing rules.
The system insures that companies are informed of the past transactions, obligations and resources to be allocated for the future.
Personal Income Tax
The personal tax amount will depend on the residency status of an individual in Singapore and is calculated as per the table below:
|No.||Period of stay||Residency status||Tax Rate||Tax Relief entitlement|
|1.||At least 183 days||Tax resident||Progressive rate||Yes|
|2.||At least 183 and over 2 years||Tax resident||Progressive rate||Yes|
|3.||3 years continuous||Tax resident||Progressive rate||Yes|
|4.||61 to 182 days||Non-resident||15%||No|
|5.||60 days or less||Non-resident||Exempt||No|
Corporate Income Tax
The corporate tax rate in Singapore is 17% for resident companies whilst the current GST rate is at 7% and set to be raised to 9% sometime between 2021-2025.
A non-resident company is legally tax exempt if certain conditions are met and this includes:
- All the income and profit are made overseas;
- The company holds an overseas bank account;
- Control and management of the company is not located in Singapore.
This offers business a smart way to book global income, with the luxury of no local corporate tax payable.
Similarly, if the company’s management and control is exercised outside of Singapore and the company operations (operational premises, staff, etc.) are elsewhere, it is considered as an overseas entity and therefore tax exempt.
If you would like to know more about Tax-Exempt Companies in Singapore, please contact us at http://helencampos.com/ and one of our company specialists will be pleased to assist you.
Taxation Benefits for Companies
A newly registered resident company in Singapore, if it meets the qualifying conditions set out below will be able to benefit from tax Rebates. This is seen as highly attractive to businesses looking to enter into Singapore.
The tax exemption is open to all new companies except these two types of companies:
- A company whose principal activity is that of investment holding; and
- A company which undertakes property development for sale, for investment, or for both investment and sale.
To qualify for tax exemption for start-ups, eligible companies must satisfy these three qualifying conditions:
- The company must be incorporated in Singapore;
- The company must be a tax resident in Singapore for that YA;
- The company’s total share capital is beneficially held directly by no more than 20 shareholders throughout the basis period for that YA where:
- all of the shareholders are individuals; or
- at least one shareholder is an individual holding at least 10% of the issued ordinary shares of the company.
Listed below are general tax exemptions/incentives currently available to Singapore tax resident companies. Once these tax exemptions are applied to the taxable income, the effective income tax rate for small-to-midsize Singapore companies is reduced significantly.
First Three Years of Income Tax Filings
|Taxable Income (S$)||Tax Rate|
|0 – 100,000||0%|
|100,001 – 300,000||8.5%|
|300,001 – 2,000,000||17%|
After First Three Years of Income Tax Filings
|Taxable Income (S$)||Tax Rate|
|0 – 300,000||8.5%|
|300,001 – 2,000,000||17%|
Corporate Income Tax (CIT) Rebate for YA 2018 & YA 2019
According to the Singapore Budget 2018, every Singapore company will be eligible for a corporate income tax rebate. The CIT rebate for YA2018 will be enhanced to 40% of tax payable for, subject to a cap of S$15,000. This is an enhancement to the previously announced rebate of 20% of tax payable, which was subjected to a cap of S$10,000.
The CIT rebate will be extended to YA2019, at a rate of 20% of the tax payable, capped at S$10,000.
Goods and Services Tax
With effect from 1 Jan 2019, Businesses need not monitor their turnover or revenue every quarter anymore.
IRAS has changed the way they determine mandatory GST registration.
Businesses are only required to determine their taxable revenue or turnover at the end of a calendar year and if it is more than SGD1 million. Then they will be required to register for GST registration.
Click here to access our article on Key GST Changes in 2019
Income tax filing due date
The due date for corporate tax filing for Singapore companies is 30 November (for hard copy forms) and 15 December (for e-filing).
The company has to file a complete set of returns including Form C, audited/unaudited accounts, and tax computation. The Form C is a declaration form for a company to declare its income whereas tax computation is a statement showing the adjustments to the net profit/loss as per the accounts of a company to arrive at the amount of income that is chargeable to tax.
Income tax basis period
In Singapore, corporate income is assessed on a preceding year basis. This means that the basis period for any Year of Assessment (YA) generally refers to the financial year ending (FYE) in the year preceding the YA. For example, in year 2018 you will be filing corporate tax return for your company’s financial year that ended anytime between January 1, 2017 to December 31, 2017. Your company’s accounts are prepared up to the FYE each year.
Singapore has implemented a withholding tax law (on certain types of income) to ensure the collection of tax payable to non-residents on income generated in Singapore. The tax withholding does not apply to Singapore resident companies or individuals. Under the law, when a payment of a specified nature is made to a non-resident company or individual, a percentage of the payment has to be withheld and paid to Income Tax Authorities. The amount withheld is called the withholding tax.