Singapore is often cited as the leading example of countries that continues to reduce corporate income tax rates and introduce various tax incentives to attract and keep global investments. Singapore has a single-tier territorial based flat-rate corporate income tax system. Effective tax rates as one of the lowest in the world and the general “business friendliness” of Singapore are the two important factors contributing to the economic growth and foreign investment into the city-state.
There is no capital gains tax imposed in Singapore.
Singapore Corporate Tax Rates
Overall Singapore corporate tax rate is a flat 17%. Listed below are general tax exemptions/incentives currently available to Singapore resident companies. Once these tax exemptions are applied to the taxable income, the effective Singapore corporate tax rate for small-to-midsize Singapore companies is reduced significantly.
Full Tax Exemption
Full Tax Exemption for new Singapore resident companies which meet the Full Tax Exemption criteria on the first S$100,000 normal chargeable income for the first 3 years.
Full Tax Exemption scheme does not apply to the following companies incorporated after 25 Feb 2013:
- A company whose principal activity is that of investment holding; and
- A company whose principal activity is that of developing properties for sale, for investment, or for both investment and sale.
Investment holding companies derive only passive incomes such as dividend and interest income, while the real estate industry typically incorporates a new company for each new property development. The start-up tax exemption for encouraging entrepreneurship is not intended for such companies. These companies will be given partial tax exemption.
Partial Tax Exemption
All companies are eligible for partial tax exemption on normal chargeable income of up to S$300,000 as follows:
Tax Exemptions on Foreign-Sourced Income Remitted into Singapore
A Singapore company can enjoy tax exemption from its foreign-sourced dividends, foreign branch profits, and foreign-sourced service income that is remitted into Singapore if the following conditions are met:
- The highest corporate tax rate (Headline tax rate) of the foreign country from which income is received from is at least 15% in the year the income is received; and
- The foreign income had been subjected to tax in the foreign country from which they were received
For the purpose of corporate tax exemption on foreign-sourced service income, the service income refers to professional, technical, consultancy or other services rendered in the course of a company’s trade through a fixed place of operation in a foreign country.
Singapore has tax treaties for the avoidance of double taxation with more than 60 countries including Australia, Belgium, Canada, France, Germany, India, Indonesia, Israel, Italy, Japan, Malaysia, Mauritius, the Netherlands, New Zealand, People’s Republic of China, Philippines, Thailand, Switzerland and the United Kingdom.
Singapore has established itself as a credible and attractive jurisdiction from which to base international holding companies, both as a result of its status as a major financial centre and through the introduction of income tax legislation encompassing specific tax exemptions and tax concessions.
As mentioned above, the Singapore tax system is territorial and foreign source income is taxed if it is remitted into Singapore. Foreign source income which is earned and retained outside Singapore is not taxed in Singapore. Dividends received in Singapore by resident companies are taxable but credit is allowed for foreign tax paid. The tax credits allowed may include the foreign tax paid on the underlying corporate profits out of which the foreign source dividend has been paid.
As Singapore does not tax capital gains, further benefits may arise to the holding company upon the disposal of its investment in the foreign company, particularly in tax treaty countries where the treaty concedes to Singapore the right to tax capital gains.
Taxation for Non-Resident Companies
A company is resident in Singapore if the central management and control of its business is exercised in Singapore. Given that such management and control is normally vested with its Board of Directors, a company is generally treated as being resident in the country where its Board meets.
Non-resident Singapore companies are not entitled to the benefits of double tax treaties. However, non-resident companies are not liable to Singapore income tax on foreign source income if it is not received in Singapore. Therefore non-resident companies are an attractive vehicle as international holding or trading companies.
Tax Filing Requirement and Preparation of Financial Statements
An incorporated Singapore company that has income accrued in or derived from Singapore or received in Singapore from outside Singapore is required to declare its income by completing an Income Tax Form for companies, known as Form C, each year. The company has to submit its completed Singapore corporate tax forms with the accounts, tax computation and supporting documents by 31st of November each year.
Information Source: IRAS website (http://www.iras.gov.sg)
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