Singapore is well-known for its attractive corporate and personal tax rates, tax relief measures, absence of capital gains tax, one-tier tax system, and extensive double tax treaties. Because of this, a lot of entrepreneurs are build their business in Singapore.
Persons, including corporations, partnerships, trustees, and bodies of persons carrying on any trade, profession, or business in Singapore are chargeable to tax on all profits (excluding profits arising from the sale of capital assets). In addition, the profit that arising in or derived from Singapore and certain foreign-sourced income from such trade, profession or business.
Singapore follows a territorial basis of taxation. In other words, companies and individuals are taxed mainly on Singapore sourced income. Foreign sourced income (branch profits, dividends, service income, etc.) will be taxed when it is remitted or deemed remitted into Singapore unless the income was already subjected to taxes in a jurisdiction with headline tax rates of at least 15%.
Although the concept of locality of the source of income seems simple, in reality, its application often can be complex and contentious. No universal rule can apply to every scenario. Whether profits arise in or are derived from Singapore depends on the nature of the profits and of the transactions which give rise to such profits.
Corporate Tax Rates
The corporate income tax rate in Singapore is a flat 17%. However, the effective corporate tax rate could be lowered by other incentives introduced by the Inland Revenue Authority of Singapore.
For an easier understanding of corporate tax rates, refer to this table.
|Tax rate on corporate profits for up to $300,000||Effective tax rate at 8.5%|
|Tax rate on corporate profits above $300,000||17%|
|Tax rate on capital gains accrued by the company||0%|
|Tax rate on dividend distribution to shareholders||0%|
|Tax rate on foreign-sourced income not brought into Singapore||0%|
|Tax rate on foreign-sourced income brought into Singapore||0 – 17% subject to conditions|
Personal Tax Rates
Singapore’s personal income tax rates for resident taxpayers are progressive. In other words, the higher-income earners pay a proportionately higher tax, with the current highest personal income tax rate at 22%.
For more details about Singapore personal income tax, refer to this table below.
|Tax rate on first 20,000||0%|
|Tax rate on next 10,000||2%|
|Tax rate on next 10,000||3.5%|
|Tax rate on next 40,000||7%|
|Tax rate on next 40,000||11.5%|
|Tax rate on next 40,000||15%|
|Tax rate on next 40,000||18%|
|Tax rate on next 40,000||19%|
|Tax rate on next 40,000||19.5%|
|Tax rate on next 40,000||20%|
|Tax rate on above 320,000||22%|
|Tax rate on capital gains||0%|
|Tax rate on dividends received from Singapore company||0%|
Types of Taxes in Singapore
- Income Tax – chargeable on the income of individuals and companies.
- Property Tax – imposed on owners of properties based on the expected rental values of the properties.
- Estate Duty – abolished since February 15, 2008.
- Motor Vehicle Taxes – taxes, other than import duties, that are imposed on motor vehicles. These taxes are imposed to curb car ownership and road congestion.
- Customs and Excise Duties – Singapore is a free port and has relatively few excises and import duties. Excise duties are imposed principally on tobacco, petroleum products, and liquors. Also, very few products are subject to import duties. The duties are mainly on motor vehicles, tobacco, liquor, and petroleum products.
- Goods & Services Tax (GST) is a tax on consumption. The tax is paid when money is spent on goods or services, including imports. This kind of indirect tax is also known as Value Added Tax (VAT) in many other countries.
- Betting Taxes are duties on private lottery, betting, also sweep-stake.
- Stamp Duty is imposed on commercial and legal documents relating to stock & shares and immovable property.
- Others – The two main taxes are the foreign worker levy and the airport passenger service charge. Also, the foreign worker levy is imposed to regulate the employment of foreign workers in Singapore.
The truth is, nobody likes paying taxes. Luckily, Singapore offers some benefits to small business in paying tax. So with these benefits, your business will be able to enjoy a tax “discount” from the government. In addition, you can save or use it for your business development.
So, what are some of the tax reliefs in Singapore?
Start-up Tax Exemption (SUTE)
In order to encourage new business setup and benefit small businesses in general, Inland Revenue Authority of Singapore (IRAS) introduced the Start-up Tax Exemption Scheme (SUTE) in 2004, which provided newly incorporated qualifying companies exemption from taxable profits in the first 3 years of operations.
The eligibility conditions include:
- must have no more than 20 individual shareholders
- in case of corporate shareholders, one individual must hold at least 10% of the issued shares
- property and investment holding companies are not eligible
The newly-incorporated company also cannot be:
- a company whose principal activities are that of investment holdings; or
- a company that undertakes property development for sale, for investment, or for both investment and sale
YA 2020 onwards
- 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
YA 2019 and before
- Full exemption on the first $100,000 of normal chargeable income; and
- A further 50% exemption on the next $200,000 of normal chargeable income
Refer to this table below for a better understanding of the exemption:
Where any YA of the first 3 YAs falls in or after YA 2020
|Chargeable income||% exempted from|
|Amount exempted from Tax|
Where any YA of the first 3 YAs falls in YA 2010 to YA 2019
|Chargeable Income||% Exempted from Tax||Amount Exempted from Tax|
To claim the tax exemption under Start-up Tax Exemption (SUTE), you simply need to file your corporate tax return as per normal. IRAS will then compute the amount of tax exemption you’re entitled to automatically.
Note that there are penalties for making incorrect tax returns, even if you had no intention to evade tax.
My company qualifies for the Tax Exemption Scheme for New Start Up Companies and its first three YAs are YA 2019, YA 2020, and YA 2021. So, what is the maximum amount of exemption that I can claim under the tax exemption for new start-up companies?
So, with the information the maximum amount of exemption on normal chargeable income for each YA is as follows:
|YA||Normal chargeable income||% exempted||Amount exempted||Maximum exemption|
Partial tax exemption for companies (from YA 2020)
In 2008, the Partial Tax Exemption Scheme was introduced, the taxable profits of SMEs in general. The rates as follow:
|Chargeable income|| % exempted from|
|Amount exempted from Tax|
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). Also, the company has to file a complete set of returns including Form C, audited/unaudited accounts, and tax computation. 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.
Some Tips For Small Business in Filing Tax
- Remember due date
You must always remember the due date of tax filing. Because if you late, there is some penalty that your business might receive. If payment is not received by the due date, a 5% penalty and subsequently an additional 1% penalty will be imposed for every completed month (up to a maximum of 12% of the tax unpaid).
- Apply for exemption
As mention before, there are some exemptions in taxes for business. Apply for the exemption that fits your business. Because this can help your business to grow.
- Prepare documents
Prepare documents your business needs to pay tax long before the due date. So if there is something that needs to be edited, you don’t have to rush it to meet the due date.
Doing manual tax is not an easy job. If you are calculating the tax wrong, you can be seen as evading tax that later can be a serious problem. Luckily, HRMLabs can help you calculate tax for employees. Our system always updated to the latest government regulations. You don’t need to worry about the wrong tax calculation anymore.
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