Often, Singapore has been used as an example of a country which continues to lower income-tax rate while introducing multiple tax incentives so as to attract as well as keep global investments. Singapore uses a single-tier income tax system and due to its effective tax rates which is amongst the lowest world-wide as well as its general “business friendliness”, these two important factors has greatly contributed to the foreign investment and economic growth into the city-state.
With this tax guide, it offers a detailed overview of tax system, income tax rates as well as tax incentives for all companies in Singapore. However, use our online tax calculator to calculate your estimated Singapore’s taxes as well as compare how they measure up against those in your home-country.
Singapore started using a single-tier corporate income-tax system as from January 1, 2003. This kind of system simply means that when it comes to stakeholders, no double taxation is applicable. The company pays taxes based on chargeable income while all dividends paid to shareholders by a company are exempted from taxation. Therefore, In Singapore, there is no taxation on capital gains such as gains of foreign exchange that is no capital transaction, gains on fixed assets’ sale and much more.
Income tax rate for Singapore has been a flat rate of 17% since 2010. This is to make the country as an attractive investment-destination. Since 1997, the corporate-income tax rate has been reducing consistently; in 1997, it was 26% but since 2010 onwards, it has been 17 percent up-to date.
Today, there are various general tax incentives or exemptions made available for all tax residents companies in Singapore. Henceforth, after these tax incentives are applied on the taxable-income, the effective income-tax rate for small to midsize companies is significantly reduced.
1) 0 % tax on S$100K taxable-income
For the first S$ 100,000 taxable-income, the income tax rate is 0% that is, for each of the 1st three
tax-filling years. This is applied to newly incorporated company which meets the below conditions;
• Must be established in Singapore.
• Must be tax-resident in Singapore
• Shouldn’t have more than 20 shareholders with at-least one of the shareholder having at-least 10 percent of the shares
2) 8.5% tax on taxable-income of up to S$300K
Normally, all Singapore’s resident companies are eligible for partial tax-exemption. This translate to almost 8.5% tax rate on taxable-income that amount up-to S$300,000 p/a. while for taxable income that is above S$300,00 are charged based on the normal headline corporate tax-rate of 17 percent.
As from 2009, Singapore Income Tax filling due-date is November 30. Companies are required to file a complete returns set that also include Form C, tax computation and audited or un-audited accounts. Form C is the Company’s declaration form to declare all its income while tax computation is the statement that shows the adjustments done to the net loss or profit according to the company’s accounts in order to reach the total income which is tax chargeable. For additional details, please see the annual filing requirements for Singapore Company’s guide.
In Singapore, Corporate income tax is assessed based on "a preceding-year" basis.
Singapore implemented a withholding-tax law but only on certain type of income in-order to fortify the collection of tax-payable for non-residents on income that is generated in Singapore. According to this law, any payment that is made to any non-resident company/ individual, a certain percentage of the payment is withheld and paid to Singapore’s income tax authorities thus he amount withheld is often known as the withholding tax. For more details, please check Singapore's withholding tax guide.
Under the Income Tax Act in Singapore, there are certain industry-specific as well as special purpose income-tax incentives including concessionary tax rates to attract investments in addition to help investors expand their businesses. They include:
Regional and International Headquarters Awards-to encourage companies to use Singapore as global as well as regional base.
Pioneer Incentive-encourages the introduction as well as growth of new industries.
Development and Expansion Incentive-provides preferential income-tax rate to all qualifying profits that are above pre-determined base but for a set period.
Investment Allowances-a capital allowance offered to partially offset costs of acquiring equipment but within a set period meant to attract companies investing in new equipment to introduce new technology.
Approved Royalties Incentive-to provide grants to help partially offset the costs associated with the R&D projects. It attracts and encourages companies to transfer their know-how and cutting edge technology to Singapore.
Local Enterprise Finance Scheme (LEFS)-to encourage companies that have at-least 30 percent local ownership to expand as well as upgrade their operations by providing loans.
Local Enterprise Technical-Assistance
Scheme (LETAS)-to encourage as well as assist companies that have at-least 30 percent local ownership to seek external expertise so as to improve in their operations. For more information, please check; industry-specific tax incentive in Singapore.
The main reason why Singapore has signed various income tax treaties with several countries is to assist
businesses avoid double-taxation of their income, Singapore has concluded tax-treaties with more than 50 countries and they continue to do so. This reflects the continual efforts of Singapore to help businesses relieve double taxation as they in-turn encourage as well as facilitate the investment opportunities and trade across borders.
In 2008, Singapore provided unilateral tax credits to all Singapore companies. Based on this new policy,
all Singapore companies earning income from countries which has not signed double-tax agreement with Singapore will be permitted a tax credit in regards to their foreign-sourced income coming from those countries.
Qualifying condition for one to enjoy tax-exemption on foreign-sourced income
According to Singapore's Income Tax Act (ITA), Sections 13 (7A), companies in Singapore would benefit from the foreign-sourced income-exemption Scheme-FSIE and it’s applicable to the foreign sourced dividend, foreign branch profits as well as foreign sourced service income.
However, these exemptions can only be applied when the headline corporate-tax rate in regards to the foreign country in which the received income is at-least 15% and that the income is already taxed in the aforementioned country.
In addition, it’s necessary for the controller of income tax to be satisfied that the tax exemption will benefit the aforementioned resident taxpayer. For more details, please see Singapore tax-treaties and double tax agreements guide.
For taxation purposes, a company is allowed to deduct allowable expenses from the income in Singapore. These losses can be indefinitely carried forward but are subjected to certain conditions though, these deductions can only be done in the 1ST available year that is, if there is statutory income(s) and it’s done based on "the proceeding year basis". However, it’s essential to note that, these losses can only be utilized as long as no substantial change is experienced in the shareholding as well as principal activities where applicable.