Taxation in Singapore
Taxation in Singapore
Singapore uses a single-tier corporate income tax system with simplified tax codes to reduce administrative costs for companies operating in Singapore.
Both resident and non-resident companies are taxed on their income. Foreign-sourced income, such as dividends, branch profits and service income, may be exempt from tax if remitted by a resident company under certain conditions.
- Corporate tax is capped at 17% to attract investors.
- For residents, personal tax is capped at 20%.
- Non-residents pay personal tax of 15%.
- Singapore has no capital gains tax.
Corporate tax rates
|Capital gains accrued by the company||0%|
|Dividend distribution to shareholders||0%|
|Foreign-sourced income outside of Singapore||0%|
|Foreign-sourced income brought into Singapore||0-17%|
|Corporate profits up to S$300,000||8.5%|
|Corporate profits over S$300,000||17%|
Companies with the following may be eligible for the Start-up Tax Exemption scheme to significantly reduce their tax rates over the first three years of operation:
- no more than 20 individual shareholders
- one individual with at least 10% of the shares
Singapore also offers lenient tax schemes for foreign-sourced income to encourage the repatriation of money earned abroad. Any dividends, branch profits and service incomes that are not the result of trade or business in Singapore are entitled to tax exemption.
Goods and Services Tax
A 7% GST tax is applicable for the supply of most goods made or imported into Singapore. Financial services and the sale or lease of residential properties are exempt from GST tax.
Your business must be registered to collect GST if your turnover exceeds or is likely to exceed S$1 million per year from taxable goods and services, though you may also voluntarily register if you wish to claim back GST incurred on business purchases.
In accordance with the Inland Revenue Authority of Singapore (IRAS), there is a legal obligation to withhold a percentage of payments to non-residents under the Singapore Income Tax Act. Businesses with parent companies that manage operations from overseas are non-residents.
The types of payments subject to Withholding Tax include:
- Commission fees to overseas agents
- Management/director’s fees to non-residents
- Professional fees to offshore accountants
Personal Income Tax
Singapore’s personal income tax rates are among the most affordable in the world. The amount of tax payable is dependent on your tax residency status in Singapore, with non-residents taxed at the flat rate of 15%, unless resident rates result in a higher tax amount.
In most cases, all remunerations from your employment are fully taxable, including salaries, bonuses, housing and stock options.
Non-residential properties and land are taxed at 10% of the annual value.
To regulate car ownership and control road congestion, tax is tiered based on the Open Market Value (OPM) of the vehicle.
Customs & Excise Duty
Very few products require excise and import duties. Those that do include tobacco, petroleum products and alcohol.
For legal betting or sweepstake activities in Singapore, any amount received on bets is subject to duty.
Stamp duty is imposed on stocks and shares and property.
Foreign Worker Levy
You must pay the monthly foreign worker levy for each Work Permit holder you employ.
Under the Singapore Companies Act, your business needs to maintain scrupulous records of all business transactions, including invoices and receipts, sales listings and bank statements.
In addition, you need to follow strict compliance regulations set by both ACRA and IRAS to ensure you don’t risk of unnecessary penalties down the line. Following these regulations not only helps your company achieve transparency and clarity but also helps potential investors determine your company’s performance.
To stay compliant, your company needs to:
- Establish a local registered office address in Singapore
- Appoint an auditor within the first three months (but only if the company has corporate shareholders, more than 20 individual shareholders or an annual turnover exceeding S$5 million)
- Determine a financial year end
- Continually notify ACRA of any changes to the company structure such as transfer of shares, increase in capital or the resignation of directors
- Complete the following documentation each financial year
|Estimated chargeable income||An estimate of chargeable income for the Year of Assessment (YA) submitted within three months after the end of financial year|
|Accounting records||Profit and loss accounts, a balance sheet, cash flow statement and equity statement|
|Tax returns||Audited/unaudited accounts with a tax computation form|
|Financial report||A financial statement for the company|
Under the Employment Act, you must pay your employees’ salaries at least once a month and within seven days of the end of the salary period. For Singapore citizens and permanent residents, you also need to stay on top of your CPF contributions. The WorkRight campaign launched by the government now gives employees an opportunity to flag up any late payments of CPF funds, so it’s absolutely imperative you have a streamlined system in place.
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