Section 1: Overview of Corporate Tax Singapore
Once you set up a company in Singapore, the Inland Revenue Authority of Singapore (IRAS) expects you to file your corporate income taxes every year. The taxes are usually levied on the income that you generate from your business activities in Singapore. Otherwise, late payment or non-payment of corporate taxes attracts hefty penalties, which could ultimately prove to be detrimental to your company.
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Now, to help you maintain compliance, we’ve prepared a comprehensive corporate income tax guide. It covers all the business tax basics that you ought to know as a company owner in Singapore. And if you’d like to go deeper and find out the technical details, we’ve included links to the corresponding reference guides across each section.
Singapore Corporate Tax Rates
Generally, the corporate income tax rate in Singapore is 17%. This is usually imposed on:
- The profits that you make from your business activities within Singapore - not the overall revenue of the company.
- The premiums and royalties that your company generates from properties.
- Any additional business income that you make in the form of interest, or perhaps, rent from real estate property.
- Qualifying income remitted to Singapore from a foreign source.
Make no mistake about it, though. While 17% happens to be one of the lowest corporate income tax rates in the world, Singapore actually makes it possible for companies to reduce their taxes even further. The trick here is to take advantage of the various tax incentives and tax exemptions offered by the Singapore government.
But, there’s a catch. How your corporate taxes are ultimately assessed depends on your tax residency status.
Here’s an article that explains more about corporate income tax rates in Singapore.
Tax Residency status
As it turns out, incorporating and registering your company in Singapore doesn’t necessarily make it a tax resident. Rather, a company only qualifies to be a tax resident if it’s managed directly from Singapore.
In simple terms, that means all your company’s decisions must be made in Singapore. And yes, this applies even to strategic policies, as well as administrative controls.
The government of Singapore typically determines tax residency status after checking and confirming the location of companies’ board meetings, policymakers, and AGMs - among other critical factors.
This approach allows even multinational companies with branches in various countries to qualify as Singapore tax residents. But that’s only if their day-to-day operations are coordinated from Singapore.
On the other hand, companies that are largely controlled from other countries are considered non-residents. A perfect example is a foreign-based holding company that happens to be registered in Singapore, but its board meetings and shareholders are based outside the city-state.
Such non-residents are automatically locked out of:
- Tax exemptions for startups.
- Tax exemption on foreign-sourced service income, foreign branch profits, and foreign-sourced dividends.
- Tax benefits offered under Avoidance of Double Taxation Agreements.
It’s worth noting, though, that tax resident and non-resident statuses are not permanent. They can change from year to year, depending on how the IRAS assesses your company’s situation.
Here’s a guide that lets you in on the process of applying for tax residency in Singapore, the qualification conditions for both individuals and businesses, as well as the perks that come with it.
Section 2: Minimizing your Singapore Tax
As a tax resident in Singapore, you get the chance to minimize your corporate income taxes through:
- Corporate income tax rebates and exemptions.
- Business expense deductions.
- Business capital allowances.
- Relief from past company losses.
- Group relief.
- Special Singapore tax incentives like DTAs and tax credits.
Take Advantage of CIT Rebates and Exemptions
Tax rebates, for starters, are basically reimbursements that taxpayers are given by tax authorities. Then exemptions, on the other hand, refer to amounts that are deducted from one’s tax bill to reduce the total payable tax.
If that sounds like something you’d want to take advantage of, Singapore offers the benefits through two types of schemes:
- Tax exemption for new startups.
- Partial tax exemption (PTE) scheme for new companies.
Tax Exemption for New Startups
Just as the name suggests, this is a Singapore corporate tax benefits scheme that specifically targets new startup companies. Since 2005, the government of Singapore has been using it to drive the growth of startups within the city-state.
You see, if your company meets the qualification conditions, Singapore will automatically reduce your payable business tax. And not just for one year. Rather, this tax exemption typically runs consecutively for the first three years.
From year of assessment (YA) 2020 onwards, for instance, new startup businesses can take advantage of as much as 75% tax exemption on their company income - at least for the first S$100,000 of taxable income. Then for next S$100,000, Singapore grants them a company tax exemption of 50%. And the trend continues to change across various corporate income levels.
What’s more impressive is the tax exemption awarded to new startups whose initial financial years fall between YA 2010 and YA 2019. Their exemption stretches to 100% on the first S$100,000 of taxable corporate income, followed by 50% on the next 200,000.
Partial Tax Exemption (PTE) Scheme for Companies
Singapore’s Partial Tax Exemption (PTE) Scheme is open to all qualifying companies that haven’t already made claims under the tax exemption scheme for new startups.
If you choose to leverage it in YA 2020 onwards, you could reduce your corporate income taxes by about 75% on the first S$10,000 of taxable income, followed by a 50% tax exemption on the next S$190,000 of taxable business income.
For YA 2010 to YA 2019, on the other hand, Singapore businesses get a 75% tax exemption on their first S$10,000 of chargeable income, followed by 50% on the next $190,000.
It doesn’t stop there, though. Click here to reveal a table showing all the tax rebates and exemption rates across various company income levels.
Maximize Business Expense Deductions
In addition to tax exemptions and tax rebates, you could further minimize your corporate income in Singapore through expense deductions.
You see, according to Singapore’s Income Tax Act, the IRAS shouldn’t impose taxes on everything. Companies are given the privilege of deducting business expenses from their taxable corporate income.
All these deductible expenses should have been incurred for the sake of producing income. Some examples include:
- Advertising costs.
- CPF contributions.
- Wages.
- Renovation costs. .
- Repairs and maintenance costs.
- Insurance premiums.
On the flip side, however, it turns out not all business expenses are deductible. You might want to leave out expenses incurred through:
- Personal engagements like entertainment and travel.
- Purchase of fixed assets.
- Company incorporation.
That said, check out this guide for a comprehensive list of all the deductible and non-deductible business expenses, along with their corresponding qualification conditions.
Take Full Advantage of Various Capital Allowances
It’s also possible to claim deductions against different types of costs that you incur as capital in your business. The technical term for this is capital allowances, and they’re usually calculated from the losses or capital expenditure on the fixed assets you’ve been using in your business to generate income.
Overall, this scheme seeks to encourage Singapore companies to make capital investments, as well as compensate them for the wear and tear their fixed assets are subjected to while generating income.
Some of the capital allowances you could claim on your taxable corporate income include:
- Industrial Building Allowances (IBA): Here’s a comprehensive guide to claiming IBA.
- Land Intensification Allowances (LIA): Here’s the ultimate guide to claiming LIA.
- Mergers and Acquisitions Allowances (M&A): Here’s an in-depth article on everything you’d want to know about M&A in Singapore.
- Writing-Down Allowances (WDA) - Here’s the complete guide to claiming WDA.
Then to learn more about capital allowances - their qualification conditions, how to calculate them, and how to claim them - feel free to check out this guide.
Claiming Relief From Past Losses
While business losses are known to reduce your corporate income tax, it turns out that in Singapore, you even get to transfer the losses to offset other tax bills.
Take the Loss Carry-Back Relief program, for instance. It essentially allows you to transfer back unutilized business losses and capital allowances to previous YAs. Yes, that’s right - you can use it to reduce your preceding year’s corporate income taxes.
Find out how to do that from this Loss Carry-Back Relief guide, which also explains the accompanying qualification conditions.
Singapore doesn’t stop there, though. If your company happens to be part of a group of companies, you could transfer losses from another member and then use them to reduce your taxable corporate income.
This is known as the Group Relief Scheme, and here’s a guide that provides all the critical details about it.
Apply For Special Tax Incentives
Singapore is also considerate enough to offer additional corporate tax benefits via various special tax incentives.
If you’re running a multinational corporation, for instance, you might be interested in Singapore’s Avoidance of Double Taxation Agreements (DTAs). They help Singapore tax residents avoid additional taxation in other jurisdictions outside the city-state.
So far, Singapore has signed DTAs with over 80 countries. Click here to find out how you can leverage them through the IRAS.
Apply For Tax Credits
The Avoidance of Double Taxation Agreements further offer tax credits through a scheme called Double Taxation Relief.
Basically, if you end up paying tax to a foreign jurisdiction in accordance with the DTA terms, you can go ahead and claim tax credits from the IRAS. Such credits are established by working out the difference between the foreign taxes paid and the amount that would otherwise have been paid out to the IRAS if the taxes were imposed in Singapore.
Here’s an article on the types of tax credits in Singapore, plus their qualification conditions.
Section 3: Filing Your Taxes
Overview of Filing Taxes
Each company in Singapore is taxed on the corporate income generated in the preceding financial year.
If you’re filing your Singapore business taxes in 2021, for instance, you ought to submit your company’s expense and income records for 2020. This is known as the basis period, which the IRAS will review in detail to determine your company’s assessable and chargeable income.
That said, the corporate tax filing process itself involves two types of filings:
- Estimated Chargeable Income (ECI) filing.
- Form C / Form C-S filing.
The IRAS requires companies to submit these tax forms along with their tax computation and financial statements. Here’s a guide that explains the whole procedure in detail.
Filing your ECI
Estimated Chargeable Income - or ECI, in short - refers to an early estimate of your company’s taxable corporate income, after deducting the tax-allowable expenses.
Such returns are compulsory for all companies, and they’re usually due within three months from the company’s financial year-end.
Here’s a complete guide on how to file ECI in Singapore, as well as how to pay the accompanying taxes.
Filing your Form C and Form C-S
While ECI forms are based on estimates, Form C and Form C-S quote the company’s actual taxable income during the tax year. As such, you ought to file your company’s Form C or Form C-S way after the financial year-end.
Now, to be precise, the IRAS requires businesses to submit the forms by December 15 for electronic filing, and November 30 for paper filing.
Form C, in particular, should be accompanied by supporting documents like profit and loss statements, financial statements, and tax computations - while, contrastingly, Form C-S, can be submitted without additional documentation.
Paying your Corporate Income Tax
The process of paying corporate income tax in Singapore is pretty straightforward.
At first, the Estimated Chargeable Income (ECI) filing will give the IRAS an early estimate of your company’s taxable income right after its financial year-end. Then once the IRAS conducts its initial assessments, it’ll send you a tax bill in the form of a Tax Assessment Notice. This is what you’ll use to pay your company’s estimated Singapore corporate tax.
After ECI filing, the IRAS will leave you to prepare a final tax return based on the actual income figures. You’ll have adequate time to consolidate your company accounts and work out the total business income, as well as apply deductions and incentives. All these details should ultimately be included in your Form C or Form C-S filing.
And with that, the IRAS will be able to establish the final tax amount owed after deducting your ECI payment. If the difference turns out to be negative, the government of Singapore will, of course, refund your money.
Section 4: Other FAQs
Is there capital gains tax in Singapore?
Thankfully, Singapore doesn’t charge capital gains tax on anything. All the capital gains and dividends are exempted from tax to give shareholders the opportunity to enjoy their investments.
How to file taxes for dormant companies
All companies in Singapore are required to file their tax returns every year. This applies even to dormant companies.
That said, the only thing that can exempt a dormant company from tax filing is a Waiver of Income Tax Return Submission. If you successfully apply for one, you can go ahead and skip the entire tax returns procedure.