Overview of Singapore Taxation

To get the overview of Singapore Taxation, here is the complete guide for you. If the business’s incomes are derived from or transmitted to Singapore, then income tax must be paid. Depending on your business type, there are a few other taxes, i.e., stamp duty, withholding, etc. The most important taxes for foreign investors are described below.

 

Important Information about Corporate Tax

At the flat corporate tax rate of 17%, business income is taxed. Below are the exemption schemes to lower the tax rate of effective corporate at different tiers.

For new Start-up Companies:

Below are the conditions for new start-up companies. After meeting these conditions, new companies can get the tax exemption during the tax assessment for each of the first 3 years. The requirements are given as follows:

• The fresh start-up corporation should be incorporated in Singapore.
• The new start-up firm must occur as a tax resident in the country of Singapore.
• The organization possesses a maximum of 20 shareholders.
• The company possesses a minimum of one shareholder, holding the ordinary shares of about 10%.

Below are the conditions according to which the tax exemption is restricted to the following companies:

• If the investment holding is the principle activity of the company, then the tariff exemption is restricted.
• If the property development is undertaken by the company for investment, for sale, or both, then tax liberty can be considered for the new start-up organization.

Starting a new business? Learn how to raise startup capital and crowdfunding for your new start-up business.

Before YA 2020

Chargeable Income	Rate of Effective Tax
$100,000 (first)	0%
$200,000 (next)	8.5%
After that	17%

After YA 2020

Chargeable Income	Rate of Effective Tax
$100,000 (first)	4.25%
$100,000 (next)	8.5%
After that	17%

 

Partial Tax Exemption for Companies:

Onwards to the 4th tax assessment year, companies have the facility to enjoy and benefit from the partial tax exemption made for the companies mentioned above in Singapore.

Before YA 2020

Chargeable Income	Rate of Effective Tax
$10,000 (first)	4.25%
$290,000 (next)	8.5%
After that	17%

After YA 2020

Chargeable Income	Rate of Effective Tax
$10,000 (first)	4.25%
$290,000 (next)	8.5%
After that	17%

 

In Singapore, the tax is not subjected to capital gains. For example, if the company of trade sells the property related to the office, then no tax is subjected to the profit of selling the office property.

The resident companies of Singapore can issue exempt dividends. According to which, on such income of compensation, shareholders of organizations are not subjected to tax.

There are agreements which are mainly signed between the countries; these agreements are known as Double taxation agreements. These agreements’ primary function is to protect Singapore’s resident companies from paying the double tax on the identical income. In this way, Double Taxation Agreements help a lot the Singapore-resident Companies.

After receiving the assessment notice, you must pay the tax within one month’s time limit. There is the condition for taxes arising from ECI (Estimated Chargeable Income), you can either pay all the tax at once or use the GIRO for monthly installments of taxpaying. You should pay your taxes regularly and promptly without any delay; otherwise, you must have to pay a condition of penalty fees. If you feel any incorrectness in the tax assessment, you can contact IRAS through writing, in which you must have to write the reasons for your disappointment with the tax assessment. Need help?

But you must pay your taxes within the time limit of one month of assessment, even if you are feeling the incorrectness in the assessment system. Refer to IRAS corporate compliance requirements for more information.

 

Foreign Income

There will be tax freedom on the foreign-sourced revenues, profits of a foreign branch, foreign-sourced compensation on service transmitted to the country of Singapore on 1st June 2003, or after that date, if:

• The foreign income receiving country’s headline tax rate is at least 15% in the year of receiving income.
• The foreign income in the foreign country region, from where it is received, is subjected to tax.
• The tax exemption would be suitable for Singapore residents, IRAS is also satisfied by the condition mentioned above.
• If the income is sourced from Singapore to outside Singapore or received in Singapore from outside Singapore, this income driven by the company is only taxable in Singapore. If the income is foreign-sourced, it wouldn’t be taxed if the payment is not transmitted to Singapore.

An income which is sourced by the foreign countries is only received by Singapore when the payment is:

• Transmitted, remitted, and brought into Singapore.
• Applied to purchase the movable property of Singapore.
• They are applied regarding any trade or business that is carried out in the country of Singapore.
• To confirm whether the income is foreign sourced or not, IRAS will assess the following criteria:
  • In which country, the company is located
  • Activities of the company, whether these are natural or principle
  • Description of the operations of the company in a straightforward way, and the locations of their operations
  • Places of suppliers and customers of the company
  • Location of control and management
  • Knowing the trading of a company in Singapore through an agent, if confirmed, then knowing the detailed information about arrangements.
  • Knowing the reason for the incorporation of a company in Singapore, if the business isn’t carried out in Singapore by the company
  • The country in which the company has to pay tax
  • Knowing the staff and bank accounts in Singapore

In short, the foreign source income of the company is not subjected to tax if it isn’t transmitted into Singapore.

You can use the funding of foreign source income for the following purposes:

• The loan provided to the foreign company
• Process of settling the supplier of overseas
• The buying process of overseas property

 

Important Information on Goods and Services Tax (GST):

It is the tariff applied on welfares and services that are expended locally. If the company’s turnover exceeds the limit of $1 million per year, it must be registered for GST. If the companies are not reaching that limit, then they may register their companies voluntarily. Here is the quick overview of GST and its effect on your business.

• GST is the tax applied to the goods and services manufactured in Singapore or imported into Singapore. The current rate of GST is 7%.
• If the company’s turnover exceeds the limit of $1 million per year, you must register your company.
• If most of your supplies are exported or international, you can apply for the GST exemption from the registration.

Timcole offers GST filing services at affordable prices.

 

Personal Tax

Business income is considered a part of your total income, which is personal, taxed at your pay tax rates. Individual files tax returns, personal gain, and business income are calculated together as the business income in the part of your income. There is separate reporting of business income and added to all the other personal gain of an individual. The total payment is then subjected to the taxes of personal income. Taxes are charged at the range of 0-20% on the chargeable income of an individual. The addition of business income and personal income is chargeable income. Chargeable income doesn’t include deductions, reliefs, and rebates. These deductions and reliefs can help you save money on personal tax. Employment income is subjected to tax at 15% or the resident rate for non-resident individuals. From 2017, surcharge ratios for the non-renter souls are boosted to 22% on the consultation expenses, director’s allowances, and other received earnings. This margin is to maintain parity between the non-resident and resident individuals.

 

Withholding Tax

It is the tax applied on payments for non-residents. The withholding tax rate is the same as corporate tax for the fees paid to non-residents related to management or technical. A 20% tax of the gross payment is suggested for providing compensation to the non-residents. For a time, bareboat and voyage charter fees, the tax rate is 1 percent to 3 percent.

The withholding tax rate is 10 or 15 percent for other payments. Rates specified in the double tax agreement are applied in the applicable countries.

The company must have to withhold the 20% tax from the non-resident board director’s fee. However, there is no tax on the monthly salary to the Company Executive Director.

An executive director for tax is defined as the person who:

• Must have the job title of director
• Must play a role in daily business operations.

 

Stamp Duty

The documents for the immovable properties, stocks, or shares are subjected to Stamp Duty Tax. After the signing and dating of documents related to stores, claims, or the document holder must pay immovable properties, tax of stamp duty.

If the document is signed and dated in the Singapore country, then stamp duty tax must be paid within the 14 days after the signed date.

If the document is signed overseas, then stamp duty tax must be paid within 30 days after its receipt date in Singapore.