Accountancy in Singapore

>> Taxation in Singapore

Corporate tax

Tax jurisdiction in Singapore reflects both the territorial and remittance bases of Singapore taxation.

A company is subject to Singapore income tax on its income accruing in, or derived from Singapore, or received in Singapore from outside Singapore. Therefore, foreign income is only taxable in Singapore if it is received in Singapore.

Even if the foreign income is remitted to Singapore, a Singapore tax resident company can enjoy tax exemption on its specified foreign income that is remitted into Singapore.

Specified foreign income is foreign sourced dividends, foreign branch profits and foreign-sourced service income, and such income is exempted from Singapore tax under certain conditions.

A company is taxed at a flat rate of 17% on its chargeable income regardless of whether it is a local or foreign company.

However, the effective tax rate is much lower than 17% due to the fulltax exemption scheme and partialtax exemption schemes available to companies.

  • a) All companies incorporated in Singapore qualify for partial tax exemption of the Chargeable

Income as follows: –

Note: *The effective tax rate for the first S$300,000 of chargeable income is 8.36% [(S$25,075 / S$300,000) X 100%)].

  • b) For newly incorporated Singapore companies which meet the qualifying criteria*, the tax-exemption is as follows: –
Chargeable Income Exemption Rate Tax Exempt Amount (S$) Taxable Amount (S$) Tax Payable @ 17% (S$)
On the first @ 75% 7,500 2,500 425.00
On the next S$290,000 @ 50% 145,000 145,000 24,650.00
On the first S$300,000* 152,500 147,500 25,075.00
Above S$300,00 NIL (Taxable at 17%)
Chargeable Income Exemption Rate Tax Exempt Amount (S$) Taxable Amount (S$) Tax Payable @ 17% (S$)
On the first S$100,000 @ 100% 100,000 NIL NIL
On the next S$200,000 @ 50% 100,000 100,000 17,000.00
On the first S$300,000 200,000 100,000 17,000.00
Above S$300,000 NIL (Taxable at 17%)

The qualifying criteria are as follows: –

  • The company must be tax resident in Singapore (i.e. the company must be controlled and managed in Singapore).
  • The company should have no more than 20 shareholders throughout the basis period for the relevant Year of Assessment (YA) where: –
  1. all the shareholders are individuals; OR
  2. at least one shareholder is an individual holding at least 10% of the issued ordinary shares of  the Company.

New start-up companies exclude property and investment holding companies.

To further lower the tax payable and to help Small and Medium Enterprises (SME’s), the Corporate Income Tax Rebate granted to all companies is 50% of the corporate tax payable for the Year of Assessment 2017. The rebate will be capped at S$25,000 for Year of  Assessment 2017.

Companies will be granted a 20% Corporate Income Tax Rebate capped at S$10,000 for the Year of Assessment 2018. The rebate will not apply to income derived by a non-resident company that is subject to final withholding tax.

Dividend payments

Dividends paid by a Singapore resident company are under the one-tier corporate tax system. The corporate tax paid by the company is the final tax and the dividends are tax-exempt when received by the shareholders.

Branch profits tax

A Singapore Branch is subject to tax on its profits from the Singapore operations at the corporate tax rate of 17%. The effective tax rate is usually lower as a result of the partial tax-exemption on the chargeable income of the Branch.

Personal income tax

Individuals must pay personal income tax on all income earned in or derived from Singapore. Overseas income received in Singapore is not taxable except for foreign income received through a partnership by a resident individual.

An individual is regarded as tax resident in Singapore if he stays or works in Singapore:

  1. for at least 183 days in a calendar year; or
  2. for at least 183 days for a continuous period over two years (applies to foreign employees who have entered Singapore but excludes directors of a company, public entertainers or professionals); or
  3. Continuously for three consecutive

years.

Resident individuals are taxed at progressive rates ranging from 2% to 22% on their chargeable income (Total income less personal reliefs/donations). With effect from Year of Assessment 2017, the top marginal tax rate has been increased to 22%. Non-resident individuals are taxed on their employment income at a flat rate of 15% or the progressive resident tax rates, whichever is the higher amount. A non-resident individual (except directors) who exercises employment in Singapore for less than 60 days in a calendar year is exempt from Singapore tax. Directors

fees, consultation fees and all other income derived by non-resident individuals are taxed at 22%. With effect from Year of Assessment 2017, the tax rates for non-resident individuals (except certain reduced final withholding tax rates) will  be raised to 22%.

The YA 2017 resident tax rates for individuals are as follows: –

Chargeable Income ($) Rate (%) Gross Tax Payable ($)
On the first 20,000 0 0
On the next 10,000 2.0 200
On the first 30,000 200
On the next 10,000 3.5 350
On the first 40,000 550
On the next 40,000 7.0 2,800
On the first 80,000 3,350
On the next 40,000 11.5 4,600
On the first 120,000 7,950
On the next 40,000 15 6,000
On the first 160,000 13,950
On the next 40,000 18 7,200
On the first 200,000 21,150
On the next 40,000 19 7,600
On the first 240,000 28,750
On the next 40,000 19.5 7,800
On the first 280,000 36,550
On the next 40,000 20 8,000
On the first 320,000 44,550
Above 320,000 22

Capital gains tax

Singapore does not have tax capital gains.

Property tax

Property tax is levied yearly on owners of immovable properties. The property tax for non-residential buildings such as commercial and industrial buildings and land is taxed at 10% of the annual value. Property tax for residential properties that are owner-occupied range from 0% to 16%. Property tax for residential properties that are not owner-occupied ranges from 10% to 20% depending on the annual value. The annual value is determined by the property tax department.

Goods and services tax

Goods and services tax (GST) in Singapore is a tax on domestic consumption. Generally, GST is chargeable at the prevailing rate of 7% by GST-registered businesses on all sales of goods and services made in Singapore including imports. For exports of goods and provision of international services, GST is charged at 0% (zero-rated). Similarly, the sale and lease of residential properties and the provision of financial services are exempted from GST.

Businesses that make taxable supplies are required to register for GST if the annual turnover exceeds SGD1 million.

Taxable supplies are the aggregate of the standard-rated supplies and the zero-rated supplies.

However, where taxable turnover is wholly or mainly from zero-rated supplies, businesses can apply for exemption from registration.

Customs and excise duties

Singapore is essentially a free port, although duties are levied on import of alcohol, tobacco products, petroleum products and motor vehicles.

Stamp duty

Stamp Duty is a tax on dutiable documents relating to immovable properties in Singapore and any stocks or shares. Examples of such documents are lease/ tenancy agreements, acceptance to option to purchase/sale, and purchase agreements, mortgages, and share transfer documents.

Tax treaties

Singapore has concluded Avoidance on Double Taxation Agreements covering all types of income with 82 countries and Limited Treaties covering only income from shipping and/or air transport with  8 countries. Credit method and exemption method are the two ways of eliminating double taxation burden.

The scope of Singapore’s DTAs is always limited to residents of Singapore and those of the treaty partner. Non-residents of either jurisdiction do not qualify for the concessionary treatment provided under the DTA.

The provisions of the DTA shall apply only to taxes on income. Therefore, taxes like GST, customs and excise duties are outside the scope of Singapore’s DTA’s.

Transfer pricing rules

The Inland Revenue Authority of Singapore (IRAS) endorses the arm’s length principle as the standard to guide transfer pricing. IRAS subscribes to the principle that profits should be taxed where the real economic activities generating the profits are performed and where value is created.

A person shall be deemed to be related to another where one person, whether directly or indirectly, has the ability to control the other, or where both of them, whether directly or indirectly, are under the control of a common person.
IRAS expects all related parties’ transactions to be carried out on an arm’s length basis. For tax purposes, a transaction will be considered at arm’s length if the transaction price would have been the same had the transaction been with an unrelated party. If a transaction is not at arm’s length or the fee charged for the services rendered does not commensurate with the level of services provided, the Comptroller will ignore the transaction price and deem the transaction at the market price in arriving at the assessable income of the Company. In such an event, if the related parties are Singapore companies, corresponding deduction will be allowed. However, if the related parties are located overseas, this adjustment may result in double taxation.

The arm’s length principle is found in all of Singapore’s Double Taxation Agreements.

IRAS generally takes guidance from the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations.


Latest version updated 1st November 2017

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5.607

Million

Population

S$

Singapore Dollar

Currency

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Billion

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