Singapore’s corporate income tax/personal income tax rate is known to be one of the lowest in the world. More and more companies and entrepreneurs from all over the world have set up companies or offices in Singapore as the Asia-Pacific regional headquarters or business management center. So what tax benefits can a registered company in Singapore enjoy?

Extensive bilateral taxation agreements

Singapore currently has double taxation agreements with more than 70 countries around the world, including Japan, China, Malaysia, Indonesia and the United Kingdom.

Double taxation agreements between Singapore and other countries aim to reduce double taxation on income earned by residents of other countries in one country. Double taxation agreements provide for taxing rights between Singapore and treaty countries on certain cross-border income and may also provide for tax reductions or exemptions.

The main advantages of a double taxation agreement include: avoidance of double taxation, reduced withholding tax and preferential tax regimes. These advantages help to minimize the tax burden of the holding company structure.

An extensive network of double taxation agreements, coupled with the absence of capital gains tax and dividend tax, makes business investment from a Singapore registered holding company significant.

Collection of corporate tax rates

Singapore's tax system is often regarded as simple and investment-friendly as it provides a level playing field for foreign investors, with no restrictions on foreign ownership and no foreign exchange controls.

In Singapore, the corporate income tax system adopts a single-tier regional uniform tax rate corporate income tax system. For stakeholders under the single-tier corporate income tax regime, there is no new tax on dividends paid by companies to their shareholders. Also, capital gains in Singapore are not taxed. Common examples of capital gains are gains from the sale of fixed assets, foreign exchange gains from capital transactions, and insurance benefits.

Singapore resident companies with respect to foreign income, foreign branch profits and foreign service income (i.e. income earned from services provided through a fixed place of business in a foreign jurisdiction in the course of the taxpayer’s trade, business or occupation) received in Singapore ) is exempt from tax, provided the following conditions are met:

(1) In the year in which the income is received in Singapore, the highest tax rate in the jurisdiction from which the income is derived is not less than 15%;

(2) the income is taxed in a foreign jurisdiction;

(3) The Inland Revenue Authority is satisfied that the tax exemption will be beneficial to the Singapore resident company.

The specific collection operation of corporate tax rate

Income of a company (regardless of whether it is a tax resident enterprise) that is derived from or derived from Singapore or received in Singapore from outside Singapore is subject to corporate income tax unless the income is specifically exempt.

(1) The first 10,000 Singapore dollars of normal taxable income can enjoy a 75% tax reduction;

(2) The part of 10001-30000 Singapore dollars can enjoy a 50% tax reduction;

(3) The remaining part is subject to corporate income tax at the rate of 17%;

(4) The pre-tax net profit for the first three years is less than SGD 100,000, and the profit tax rate is 4.25%;

(5) The pre-tax net profit is 100,000-200,000 Singapore dollars, the first 100,000 is calculated at a tax rate of 4.25%, and the part exceeding 100,000 Singapore dollars is calculated at an 8.5% tax rate, and the last two are added together;

(6) If the net profit before tax is more than SGD 200,000, the profit tax rate shall be calculated at 17%.

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(Fiscal Year 2019)

Tax Exemption Scheme for Emerging Enterprises

Tax Exemption Scheme for Singapore Businesses:

(1) Singapore (tax) resident enterprise or limited guarantee company for new immigrants;

(2) The first S$100,000 of taxable income is fully exempt from tax;

(3) The portion of SGD 100,001-300,000 can receive a 50% tax deduction.

Note: This tax exemption policy is only valid within the first three years of the establishment of a qualified enterprise.

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To qualify for the above tax exemption schemes, companies must meet all of the following conditions:

(1) The company must be incorporated in Singapore;

(2) The business control and management of the company must be exercised in Singapore. The company must be a Singapore resident enterprise for the year of assessment. During the year of assessment, the company must not have more than 20 shareholders, of which: all shareholders are individuals. beneficiaries, and directly hold shares in their own names;

(3) Or at least one shareholder is an individual shareholder holding at least 10% of the common stock.

Kirin Consulting Singapore reminds you that you must be aware that companies engaged in the sale and investment of real estate and companies with equity participation are not eligible for the tax-exempt scheme.

What is a resident company/business?

A company operating in Singapore with its primary management in Singapore is considered a tax resident company in Singapore.

Generally speaking, the place where the governing body of the company manages the business, the place where board meetings are held is usually regarded as the place where tax is paid, and the place where the company is registered.

The location of the point or registered office is not directly related. A company may be a resident company for one year in Singapore and a non-resident company for the rest of the time.

Both resident and non-resident companies are subject to corporate income tax. However, the following tax benefits are only available for tax resident companies.

(1) Resident companies can enjoy the start-up exemption and partial exemption programs;

(2) Resident tax companies can enjoy the overseas income exemption scheme for dividends received from foreign sources, income from foreign subsidiaries and income from services provided from abroad;

(3) Resident companies benefit from double taxation avoidance agreements.

One-off Corporate Income Tax (CIT) Rebate

According to the Singapore Budget announcement, every Singapore company is eligible for tax rebates.

The following are the rebates that can be claimed for each tax assessment year:

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Non-Singapore Resident Personal Income Tax

Employment income of non-resident individuals is subject to the higher of the 15% tax rate and the resident individual income tax rate. Directors' fees, consulting fees and other income are subject to a 20% tax rate.

Definition of non-resident: living and working in Singapore for less than 183 days, or a director of a company without an employment pass.

(1) The tax rate on employment income is generally 15%;

(2) Director's fees, consulting income and other income are taxed at 22%.

Common taxes other than corporate income tax and personal income tax

(1) Consumption tax: Singapore’s consumption tax rate is 7%, which is equivalent to value-added tax. Sales and rentals of residential property and most financial services are exempt from GST, and exports of goods and services are subject to zero GST;

If the company's annual turnover is going to exceed S$1 million, then the company must be registered as a GST company. In addition, companies can also voluntarily register as GST companies.

(2) Real estate tax: The current real estate tax rate is 10%, and a 4% tax reduction rate applies to individuals living in their own residences.

(3) Stamp duty: Stamp duty is a tax levied on written documents related to immovable property and shares.

Income tax filing deadline

Corporate income tax returns are filed annually and the filing deadline is November 30. For example, the company's fiscal year is January 1, 2018 to December 31, 2018, and the deadline for corporate tax filing is November 30, 2019. Corporate income tax can be paid in instalments of up to 12 months without interest.

The company must submit a complete set of returns including Form C, audited or unaudited financial accounts and tax calculations. Form C is a form for reporting business income, and tax calculation is a statement of taxable income based on the company's accounts and adjustments for net profit or loss.