Singapore is frequently used as a model for other nations that continue to lower corporate income tax rates and implement various tax incentives to entice and retain foreign investors. Singapore’s corporate income tax structure is a single-tier, territorial-based flat rate.
The city-state of Singapore’s effective tax rates, which are among the lowest in the world, and its general “business friendliness” are the two key drivers of economic growth and foreign investment.
This guide offers a thorough understanding of Singapore companies’ tax benefits, tax system, and income tax rates.
Single-tier system for income tax
There is no double taxation for stakeholders as a result of Singapore’s adoption of a single-tier corporate income tax structure on January 1, 2003. All dividends paid by a firm to its shareholders are exempt from further taxation, and the tax a company pays on its chargeable revenue is the final tax.
Singapore does not impose a tax on capital gains. Gains from the sale of fixed assets, gains from foreign currency on capital transactions, and other types of gains are examples of capital gains.
Tax rates for corporations and general tax exemptions
Headline Tax Rate
The top corporation tax rate in Singapore is a flat 17%. Income tax rates in Singapore have been steadily declining, as can be seen here, in an effort to make the country an appealing investment location.
| 1997-2000 | 2001 | 2002 | 2003-2004 | 2005-2006 | 2007-2009 | From 2010 |
| 26% | 25.5% | 24.5% | 22% | 20% | 18% | 17% |
The actual corporate tax rate is not always accurately reflected by the headline income tax rate, as it is in many other jurisdictions. Due to applicable tax exemptions, tax incentives, depreciation regulations, etc., the effective rate is typically lower than the headline tax rate.
Tax Incentives in General
The general tax incentives/exemptions that are currently offered to Singapore tax resident corporations are listed below. For small-to-midsize Singaporean businesses, the effective income tax rate is much lower after these tax exemptions are applied to the taxable income.
Tax exemptions for newly incorporated businesses in the first three succeeding YAs are as follows starting in YA2020 and onwards:
Effective Corporate Tax Rate
For small-to-midsize businesses, the broad tax incentives mentioned above result in extremely favourable tax rates. For instance, a typical Singapore resident corporation with taxable income of S$2,000,000 will be taxed as follows:
For the first three years after incorporation, newly formed businesses must file income taxes:
| Taxable income (S$) | Tax Rate |
| 0 – 100,000 | 4.25% |
| 100,001 – 200,000 | 8.5% |
| 200,001 – 2,000,000 | 17% |
Tax returns for income filed after the first three years:
| Taxable income (S$) | Tax rate |
| 0 – 10,000 | 4.25% |
| 10,001 – 200,000 | 8.5% |
| 200,001 – 2,000,000 | 17% |
Corporate Income Tax (CIT) Rebate for YA 2020
The CIT rebate will continue through YA 2020, with a cap of S$15,000 and a rate of 25% of the tax payable.
Corporate Income Tax Exemption for companies from YA 2020
| Chargeable income | % exempted from Tax | Amount exempted from Tax |
| First $10,000 | @75% | =$7,500 |
| Next $190,000 | @50% | =$95,000 |
| Total $200,000 | =$102,500 |
Tax-exemption program for new start-ups (where any of the first 3 YAs falls in or after YA 2020)
| Chargeable income | % exempted from Tax | Amount exempted from Tax |
| First $100,000 | @75% | =$75,000 |
| Next $100,000 | @50% | =$50,000 |
| Total $200,000 | =$125,000 |
Due Date For Filing Income Taxes
Singapore enterprises must file their company tax returns by 30 November (for hard copy forms) and 15 December (for e-filing).
The business is required to submit a full set of returns, including Form C, audited and unaudited financial statements, and tax calculations. The tax computation is a statement that details the adjustments made to a company’s net profit or loss as reported in its accounts to determine the amount of income that is subject to tax. The Form C is a declaration form for businesses to declare their income.
Income Tax Basis Period
Corporate income is evaluated in Singapore using data from the prior year. This means that the financial year ending (FYE) in the year prior to the year of assessment (YA) is typically referred to as the basis period for any Year of Assessment (YA). For instance, in 2018 you will submit a corporate tax return for the fiscal year of your business, which ended at any time between January 1, 2017, and December 31, 2017. Up until the FYE, your company’s accounts are prepared annually.
Withholding tax
To make sure that the tax owed by non-residents on income earned in Singapore is collected, Singapore has adopted a withholding tax law (on specific types of income). Companies and people who reside in Singapore are not subject to the tax withholding. A portion of any payment of a certain type that is made to a non-resident business or person must, by law, be withheld and remitted to the income tax authorities. The withholding tax refers to the sum that was taken.
Industry specific and special purpose tax incentives
In addition to the general tax exemptions/benefits mentioned above, the Singapore Income Tax Act also provides industry-specific and special purpose income tax incentives as well as reduced tax rates.
Tax residence of company
If the firm’s management and control are exercised in Singapore, the company is regarded as a tax resident there. Making decisions on strategic issues, such as those pertaining to corporate policy and strategy, is referred to as “control and management.” In general, one of the important factors in determining where the control and management are exercised is the location of the company’s Board of Directors meetings, during which strategic decisions are taken.
One of the essential considerations in assessing where control and management are exercised is if the company has an executive director or other key management personnel who is based in Singapore and is playing a significant role in decision-making.
A company is typically regarded as non-resident in Singapore if the directors run and oversee the operation and hold board meetings elsewhere. Even though the day-to-day operations are carried out in Singapore, this is still true. Depending on the situation, a company’s residence may vary from one year of assessment to the next.
Since the control and management are held by a foreign parent company, a Singapore branch of a foreign company is typically not treated as a Singapore tax resident.
With the exception of a few perks offered to resident companies, the basis of taxation for resident and non-resident corporations is often the same.
Singapore Tax Treaties
An agreement that outlines how the money received will be taxed by the governments of each country when a corporation conducts business in both countries is known as a tax treaty. A tax treaty’s principal advantage and goal is to assist businesses in avoiding paying income taxes twice.
Singapore has signed tax treaties with more than 80 nations, and the number is growing. The agreements show Singapore’s ongoing efforts to assist companies in avoiding double taxation as well as to promote and ease cross-border trade and investment opportunities.
Singapore has advanced by giving unilateral tax benefits to Singaporean businesses as of YA2009. All Singapore enterprises that received money from nations without a double tax treaty with Singapore will be permitted a tax credit on their foreign-sourced income from such nations under the new policy.
Net Income Vs Taxable Income
Income for a business is defined as gains or profits from any trade or business, including dividends, interest, rental royalties, premiums, and any other profits from property.
Corporate tax is levied under Singapore’s Income Tax Act on income that is either A) earned in or derived from Singapore, or B) received in Singapore from outside Singapore.
The income that comes from Singapore is Part A. Part B is the income that was received in Singapore but had a source outside of Singapore. But there are some qualified exemptions for Part B, also called Exemptions on Foreign Sourced Income.
The net profit or loss of an organization does not accurately represent its taxable revenue. For instance, some of your company’s expenses might not be tax deductible, and some of the money you get could not be taxable or might be taxed separately as non-trade source income.
According to the Singapore Income Tax Act’s rules, some business income may be exempt from taxation. Examples include general tax exemptions that apply to all businesses, exempt income for specific industries, such as shipping income earned by a shipping company, foreign-sourced dividends, branch profits and service income earned by a resident business that meets the requirements, exemptions on qualified foreign sourced income, etc.
Tax treatment of losses For taxation purposes in Singapore, a firm may generally offset permitted expenses against the income. The loss must be taken into account in the first year where there is statutory income, although it can be carried forward forever (under certain restrictions). The “proceeding year” basis is used for deducting the loss. It’s vital to remember that the losses can only be used if there hasn’t been a significant change in the shareholding and, where appropriate, core activity.
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