Singapore corporate tax is one of the most crucial factors attracting thousands of investors. The corporate tax in Singapore is relatively low, which is 17%. However, the actual payable corporate taxation in Singapore is much lower due to many available tax schemes. Singapore is known for its business-friendly environment and low corporate tax rates. It is an attractive destination for companies looking to expand their functions or establish a presence in Asia. This blog post will explore all the essential details about Singapore corporate tax, including rates, incentives, and filing requirements.
Overview of Singapore Corporate Tax
Below is the summary of corporate tax in Singapore:
1. Corporate Tax Rates:
One of the primary reasons why Singapore is a preferred choice for businesses is its competitive corporate tax rates. Currently, the corporate tax rate in Singapore stands at a flat rate of 17%. This rate applies to both local and foreign companies on their chargeable income. It is worth noting that the effective tax rate can be even lower when m
2. Tax Exemptions and Incentives:
Singapore offers several tax exemptions and incentives to encourage business growth and attract investment. Here are some critical exemptions and incentives available:
- a. Startup Tax Exemption (SUTE): For newly incorporated companies, the first S$100,000 of chargeable income is tax-exempt for the first three consecutive years. An additional 50% exemption is available for the next S$200,000 of chargeable income.
- Partial Tax Exemption (PTE): After the SUTE period, companies can enjoy a partial tax exemption. 75% of the first S$10,000 of chargeable income and 50% of the next S$190,000 are tax-exempt.
3. Tax residence in Singapore:
A tax resident company is controlled and managed within Singapore. Hence, if your company convenes its board meeting mostly inside of Singapore, it is deemed a tax resident, regardless of whether its income-generating activities are performed remotely in some far-flung areas.
4. Tax Exemption for Foreign-Sourced Income (FSIE):
Singapore corporate tax adopts a territorial tax system, meaning that foreign-sourced income is exempt from the Singapore corporate tax, with certain exceptions. To qualify for FSIE, companies must meet specific conditions, such as ensuring the payment is received in Singapore and the headline tax rate in the foreign jurisdiction is at least 15%.
5. Industry-Specific Tax Incentives:
Various finance, maritime, and technology industries have specific tax incentives to support their growth and development. These incentives include reduced tax rates, development and innovation incentives, and investment allowances.
6. Filing and Compliance:
To maintain transparency and ensure compliance, Singapore has a well-regulated tax system. Companies must prepare and file annual tax returns with the Inland Revenue Authority of Singapore (IRAS). The tax year in Singapore follows the calendar year, and companies must file their tax returns within three months after the end of the financial year.
Maintaining proper accounting records and supporting documents is essential to substantiate the income, expenses, and deductions claimed. Companies must also comply with transfer pricing regulations to make sure that transactions with related parties are conducted at arm’s length.
7. Goods and Services Tax (GST):
In addition to Singapore corporate tax, companies operating in Singapore may also need to register for Goods and Services Tax (GST). GST is a consumption tax imposed on the supply of goods and services in Singapore and the import of goods. The current GST rate is 7%. Businesses with an annual taxable turnover of S$1 million must register for GST.
8. Double Taxation Agreements (DTAs):
Singapore has an extensive network of Double Taxation Agreements (DTAs) with over 90 countries. These agreements aim to eliminate double taxation and provide tax certainty for international businesses. DTAs generally provide reduced withholding tax rates on dividends, interest, and royalties and offer mechanisms to resolve tax disputes.
9. Partial tax exemption scheme for Singapore companies:
Your company will be entitled to a Partial Tax exemption(PTE) after the startup tax exemption scheme expires in the Singapore corporate tax. All companies can benefit from this scheme if they do not claim the tax scheme for startups.
10. Tax rebate:
After 2013, the government declared a yearly tax rebate for Singapore companies. The price differs yearly, and the refund is subject to a cap. For 2020 the rebate rate was 25%.
11. Tax treaties:
Singapore posits that double taxation takes its toll on international trade. The reason is that it charges a taxpayer twice for the same product or services they offer. Hence, to address this, the city-state has entered the Avoidance of Double Taxation Agreement with more than 80 countries and is still counting.
Singapore’s corporate tax system is designed to create an attractive business environment and foster growth. However, companies must stay updated on the latest tax regulations and seek professional advice to ensure compliance and maximize tax benefits. Engaging a qualified tax advisor can help businesses navigate the complex tax landscape and make informed decisions.
They can also provide expert advice, help with tax planning, and ensure adherence to the latest tax regulations. By staying informed, proactive, and well-prepared, businesses can leverage Singapore corporate tax system to their advantage and thrive in the dynamic business landscape.