Starting a Company in Singapore as a Foreigner? Here Are 9 Tax Tips Before You Start

Singapore’s pro-business environment, strategic location, and stable political landscape make it a premier destination for foreign entrepreneurs. While setting up a company is remarkably straightforward, navigating its tax system requires careful planning and a clear understanding of your obligations. A proactive approach to tax management ensures compliance and unlocks significant financial advantages for your new venture.

This guide provides nine essential tax tips for foreigners starting a company in Singapore. From understanding corporate tax rates and leveraging incentives to managing GST and avoiding common pitfalls, these insights will help you build a strong financial foundation for your business from day one.

Key Takeaways

• Singapore’s flat corporate tax rate is 17%, but new start-ups can benefit from significant exemptions, reducing the effective tax rate during the first three years.
• GST registration is mandatory for companies with taxable turnover exceeding S$1 million, but voluntary registration can be advantageous for businesses serving GST-registered clients.
• Filing Estimated Chargeable Income (ECI) and corporate tax returns (Form C-S/C) on time is essential to avoid penalties.
• Directors should structure their salaries and dividends wisely to optimise personal and corporate tax positions while meeting regulatory expectations.
• Engaging a tax advisor ensures compliance, maximises tax efficiency, and helps identify grants and incentives tailored to your business needs.

1. Understand Singapore’s Corporate Tax Rate

Singapore boasts one of the most competitive corporate tax systems in the world. The headline corporate tax rate is a flat 17%, which is already attractive compared to many other developed economies. However, the effective tax rate for new companies is often much lower due to generous exemptions.

For the first three consecutive Years of Assessment (YA), qualifying new start-up companies can benefit from the Tax Exemption Scheme for New Start-Up Companies. Under this scheme:

• The first S$100,000 of normal chargeable income is given a 75% exemption.
• The next S$100,000 of normal chargeable income is given a 50% exemption.

This means the first S$200,000 of your company’s profit is taxed at a significantly reduced rate, providing crucial cash flow support during the initial growth phase.

2. Plan for Goods and Services Tax (GST)

Goods and Services Tax (GST) is a consumption tax levied on the supply of goods and services in Singapore. The current rate is 9%. GST registration is a critical consideration for any new business.

Registration is mandatory if:

• Your company’s taxable turnover exceeded S$1 million in the past 12 months.
• You expect your company’s taxable turnover to exceed S$1 million in the next 12 months.

You can also choose to register for GST voluntarily, even if you do not meet the mandatory registration threshold. This can be advantageous if your business primarily serves GST-registered companies, as you can claim back the GST paid on your business purchases (input tax). However, voluntary registration comes with compliance responsibilities, including filing quarterly GST returns.

Related Read: Singapore Goods and Services Tax (GST): An Essential Guide

3. Leverage Industry-Specific Tax Incentives

Beyond the start-up exemption, Singapore offers a wide array of tax incentives and grants aimed at encouraging growth in specific industries. These schemes are designed to support innovation, international expansion, and high-value activities.

Some prominent incentives include:

• Development and Expansion Incentive (DEI): Offers a reduced corporate tax rate of 5%, 10% or 15% on qualifying income for companies undertaking new projects or expanding their operations.
• Pioneer Industries (Manufacturing) (PC(M)): Provides a full corporate tax exemption for up to five years for companies engaging in high-value, pioneering manufacturing activities.

Researching the incentives relevant to your sector can provide a substantial competitive advantage and reduce your overall tax burden.

4. Understand Double Taxation Agreements (DTAs)

For foreign entrepreneurs, double taxation is a significant concern. This occurs when the same income is taxed twice: once in Singapore and again in your home country. Singapore mitigates this issue through an extensive network of over 90 Double Taxation Agreements (DTAs).

A DTA clarifies the taxing rights between Singapore and another country. It can reduce or eliminate the tax on certain types of income, such as dividends, interest, and royalties. To benefit from a DTA, your company must be a tax resident of Singapore. A company is generally considered a tax resident if its control and management are exercised in Singapore.

5. Differentiate Between Capital Gains and Revenue

Singapore does not have a capital gains tax. This means that profits from the sale of fixed assets, such as property or machinery, are generally not taxed. However, the distinction between a capital gain and revenue income is critical.

The Inland Revenue Authority of Singapore (IRAS) will examine the “badges of trade” to determine if a transaction is part of your company’s core trading activities. Factors considered include the frequency of similar transactions, the holding period of the asset, and the motive behind the purchase and sale. If a gain is deemed to be revenue in nature, it will be taxed at the prevailing corporate rate.

6. Maintain Meticulous Bookkeeping and Records

Flawless record-keeping is the backbone of tax compliance. Under Singapore law, companies are required to maintain proper records and accounts for at least five years. This includes invoices, receipts, bank statements, and other supporting documents for all business transactions.

Good bookkeeping ensures you can substantiate your claims during a tax audit while providing valuable insights into your company’s financial health. It is the basis for preparing your annual financial statements and filing your Estimated Chargeable Income (ECI) and Form C-S/C.

7. Comply With Annual Filing Requirements

All Singapore-incorporated companies must comply with annual filing requirements with IRAS. The key obligations include:

• Estimated Chargeable Income (ECI): You must file an ECI within three months of the end of your company’s financial year. This is a declaration of your company’s estimated taxable income.
• Form C-S/C: This is the corporate income tax return. It must be filed by November 30th each year. Depending on your company’s turnover and eligibility, you may file a simplified Form C-S or the more detailed Form C.

Missing these deadlines can result in penalties and fines. Engaging a corporate secretarial or accounting firm can help ensure all deadlines are met accurately.

Related Read: Singapore Estimated Chargeable Income (ECI) Guide

8. Structure Your Personal Remuneration Wisely

As a foreign entrepreneur and director of your company, your salary is subject to personal income tax in Singapore. Singapore’s personal income tax rates are progressive, ranging from 0% to 24%.

It is important to pay yourself a reasonable market-rate salary. An excessively low salary could be questioned by MOM when renewing your Employment Pass (EP), while an unusually high salary might be scrutinised by IRAS.

Planning your remuneration strategy, including salary, bonuses, and dividends, can help optimise your overall tax position. Dividends paid by a Singapore tax-resident company are tax-exempt in the hands of the shareholder.

9. Seek Professional Tax Advice

While these tips provide a solid foundation, Singapore’s tax landscape is nuanced and subject to change. Engaging a professional tax advisor or a corporate services firm early in your journey is a strategic investment.

A qualified expert can provide tailored advice based on your specific business model, industry, and long-term goals. They can help you structure your company for maximum tax efficiency, ensure full compliance with all regulations, and identify opportunities for grants and incentives you might otherwise miss. This professional guidance allows you to focus on what you do best: building and growing your business.

Build a Tax-Efficient Foundation

Starting a company in Singapore as a foreigner is an exciting venture filled with opportunity. By integrating tax planning into your business strategy from the outset, you can avoid common pitfalls, enhance your cash flow, and position your company for sustainable growth.

Understanding the nuances of corporate tax, GST, and available incentives is not just about compliance, but about making smart financial decisions that will pay dividends for years to come. Need help with more tax saving tips? Talk to our experts at InCorp to find out how we can optimise your tax strategy today.

About the Author

Mabel Ng

With over two decades of experience in direct and indirect taxation, Mabel has honed her expertise across a broad spectrum of environments, including the Big 4 accounting firms, mid-tier firms, and various industry roles. Her extensive background spans not only Singapore but also the wider Asia-Pacific region, reflecting a deep understanding of diverse tax landscapes and practices. She is also a member of the ISCA and FCCA, and is an SCTP Accredited Tax Practitioner.

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