Singapore’s reputation as a lucrative business gateway to Southeast Asia is undoubtedly bolstered by its low corporate income tax rates and its long list of tax incentives.
With one of the lowest effective tax rates in the world, and a welcoming, business-friendly attitude to global companies, Singapore has ushered in a new era of economic growth and foreign investment.
Here we take a quick look at the tax system, rates and incentives behind it all.
This guide includes info on:
● The single-tier income tax system;
● Corporate income tax rates;
● General tax exemptions and incentives;
● Important tax dates & deadlines;
● And tax residents and treaties.
The single-tier income tax system
Singapore has a single-tier corporate income tax system. This means there’s no double-taxation for shareholders. The tax paid by a company on its chargeable income is the final tax bill, and shareholders paid dividends by a company are exempt from further taxation in Singapore
In most situations, there’s also no tax on capital gains for items such as fixed assets and investments.
The headline tax rate
Singapore has steadily reduced its headline tax rate by almost 10% over the past decade. From 2010 onwards, the corporate tax rate has settled at a flat 17%, marking the city-state out as an attractive investment destination.
However, that headline number isn’t always an accurate indication of the effective corporate tax rate. After exemptions and incentives are applied, the effective rate can actually be much lower.
General tax exemptions & incentives
Below we’ve listed the general tax exemptions and incentives currently available to tax resident companies in Singapore. Once these exemptions are applied to the taxable income, the effective income tax rate for small and medium-sized companies is significantly reduced.
From YA2020 (YA stands for ‘Year of Assessment’) onwards, the tax exemptions for newly incorporated companies in the first three consecutive YAs are:
● A 75% exemption on the first S$100,000 of normal chargeable income
Newly incorporated companies will be exempt from 75% of corporate income tax on the first S$100,000 of taxable income for each of the first three tax filing years if the company:
○ is incorporated in Singapore
○ is a tax resident in Singapore
○ has no more than 20 shareholders, of which at least one is an individual shareholder holding at least 10% of shares
● A further 50% exemption on the next S$100,000 of taxable income
Newly incorporated companies will also be eligible for a 50% exemption (an 8.5% tax rate) on the next S$100,000 of taxable income per year.
So, what does this look like in action?
Let’s take an example of a Singapore resident company with S$500,000 in annual taxable income.
In the first three years, they’d be taxed as follows
● 4.25% on the first S$100,000;
● 8.5% on the next S$100,000;
● And 17% on S$200,001 to S$500,000.
This results in an effective tax rate of approximately only 13%.
Industry-specific and special purpose tax incentives
In addition to the general tax exemptions and incentives outlined above, the Singapore Income Tax Act offers a number of industry-specific and special purpose incentives, and concessionary tax rates.
If you have any questions specific to your industry, or you’d like to find out more, please let us know.
Important Dates & Deadlines
Income tax basis period
● Corporate income tax is assessed on a preceding year basis in Singapore. This means that, for example, you would file your 2019 corporate tax returns for your company’s financial year that had ended anytime between January 1, 2018 and December 31, 2018.
Income tax filing due date
● The due date for corporate tax filing for Singapore companies is 30 November (hard copies) and 15 December (online).
Singapore Corporate Income Tax FAQs:
Q. What is a tax resident company?
In general, a company is considered a tax resident if the management and control of the business is handled in Singapore. This includes consideration of matters such as where board meetings and strategic decisions on company policy are made. However, it’s also important to consider broader factors, such as where the economic substance of the business is.
Q. What is a tax treaty?
A tax treaty exists between two countries to specify how any income earned will be taxed by the authorities of the respective countries when a company does business in both. The benefit of a tax treaty is that helps businesses avoid double taxation.
Singapore has tax treaties with over 80 countries, and the list is growing. This is a reflection of Singapore’s ongoing effort to make the city-state as attractive as possible for cross-border trade and investment.
Get in Step with Your Corporate Taxes
With its incentives and exemptions, corporate tax compliance in Singapore can appear complicated – but it doesn’t have to be.
Stepping Stone can help you make the most of doing business in this fast-paced and forward-thinking city state. We’ll ensure your business is structured correctly, your liabilities are minimised, and that you never miss a deadline.
Contact us today to get started.