Corporate Tax in Singapore
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Singapore Tax Authority (IRAS) helps to develop a stronger community, a better environment and a more vibrant economy. The IRAS has governance over Singapore’s tax system, companies regardless of industry have a legal duty to pay taxes. Singapore is able to attract investments from all over the world by reducing its corporate income tax rate and introducing different types of tax incentives. Thus, Singapore corporate tax rate is one of the lowest in the world, with the current rate being 17%.
Which stage of business is this at?
How to Determine Your First Year of Assessment(YA)
- The first YA refers to the YA relating to the basis period during which the company was incorporated.
- From the fourth YA onwards, your company will be given partial tax exemption instead of the exempt amount for new start-up companies.
Income Tax Basis Period
In Singapore, the statutory Income for the Year of assessment is computed based on the income derived in the preceding calendar year (known as the basis year) from all sources. This report forms the basis of your tax assessments and would provide a guide on yearly taxable income.
Income Tax Filing Due Date
- Income tax filing due date for Singapore companies starting year 2009 is November 30. It is imperative that corporations remember these dates. Tax guides are widely available should businesses require them.
- The company has to file a complete set of returns including Form C, audited/unaudited accounts, and tax computation.
- As the filing due date has been extended to 30 Nov of each year, companies have at least 11 months to file their tax returns. All companies are required to file their returns by the due date. Please submit the tax returns by the due date to avoid enforcement actions such as composition or summons issued to the company. The company secretary will compile and prepare documents required to file tax returns.
Single-Tier Income Tax System
- Singapore has introduced a single-tier corporate income tax system since January 1, 2003. Tax paid by a company on its chargeable income is the final tax and all dividends paid by a company to its shareholders are tax free.
- There is no tax on capital gains in Singapore. Examples of capitals gains include gains on sale of fixed assets, gains on foreign exchange on capital transactions, etc. This highly effective system continues to draw in billions of investment from interested parties who understand that they will not be taxed on any dividends. Thus, the forming of businesses in Singapore is largely due to the development of this corporate tax scheme.
Tax Residence of a Company
The terms tax residence of business entities for tax purposes relates to whether management and control are exercised in Singapore. In other words, the site where the directors of a company manage and control its business and hold their board meetings is the place where the company is deemed resident, regardless of location of property.
The question of whether or not a company is tax resident in Singapore is significant for a number of purposes, including:-
A double taxation occurs where an income is taxed twice, that is, first at the source where it is generated and for a second time where it is received. In order to avoid such double taxation of income, Double taxation Agreements (DTA) are concluded between participating countries in a global context. Under a DTA, the country of residence would usually agree to either give credit to its residents for income which is taxed at reduced rates, or exempt such income from tax. Thus, those who conduct internal businesses would only pay taxes generally where income is generated. For example, a double taxation agreement between Singapore and Hong Kong would state the conditions on which country would receive corporate tax based on business activities or operational production.
The main benefit and objective of an income tax treaty is to help businesses avoid double taxation of their income. This in turn will ensure that the global market remains competitive and that governments continue to receive taxes from businesses. The costs of tax avoidance are too high for countries around the world.
Singapore has concluded tax treaties with many countries within Asia and internationally and the list continues to grow. The treaties reflect Singapore’s continual efforts to help businesses in relieving double taxation and to encourage and facilitate the trade and investment opportunities across-borders.
Tax Exemption Scheme for New Start-up Companies
Under this scheme, a newly incorporated company that satisfies the qualifying conditions can claim for full tax exemption on the first $100,000 of normal chargeable income* (excluding Singapore franked dividends) for each of its first three consecutive YAs.
The exempt amount for each YA is summarised as follows:
To qualify for the tax exemption for new start-up companies, your company must:
- be incorporated in Singapore(other thana company limited by guarantee**);
- be a tax resident* in Singapore for that YA;
- have no more than 20 shareholders throughout the basis period for that YA where:
- all of the shareholders are individuals beneficially and directly holding the issuing shares in their own names; OR
- at least one shareholder is an individual beneficially and directly holding at least 10% of the issued ordinary shares of the company.
* A company is resident in Singapore if the control and management of its business is exercised in Singapore.
** With effect from YA 2010, the scheme will be extended to companies limited by guarantee, subject to the same conditions imposed on companies limited by shares.
Corporate secretaries would be in wholly responsible for the practice of ensuring that these conditions are met and as such, it is important to ensure that they are highly qualified and well versed in local regulations and corporate laws. They will also be responsible for upkeep of important company files, reports and records.
There are various types of tax incentives available to companies. Provided here is a list of Singapore Governing bodies that where you may apply for tax incentives.
common asked questions about Tax filing
1)What is Form C?
Your company is required to declare its income by completing an Income Tax Form for companies, known as Form C, each year.
The due date for filing of Form C for each YA is as follows:
|2007 and before||31 Jul of each year|
|2008 onwards||30 Nov of each year*|
* IRAS is pleased to inform that in response to feedback from companies, 30 Nov will be the filing deadline from Year of Assessment 2009 instead of 31 Oct as announced previously.
When will the Form C be sent to my company
IRAS will send the first Form C to a newly incorporated company in the second year following the year of incorporation.
|Year of incorporation||Year in which your company will receive its first Form C||Remarks|
|2007||2009||Form C for Year of Assessment (YA) 2009 will be sent to your company in Mar/Apr 2009.This Form C is for your company to declare its income for the financial year ending in year 2008.|
Thereafter, Form C for subsequent YAs will be sent to your company in Mar/Apr every year.
Do I need to request for my company’s first Form C to be sent earlier
You may need to request for the first Form C to be sent to you earlier, that is, in the year immediately after the year of incorporation (instead of the second year following the year of incorporation) under certain circumstances.
Please note that income is assessed on a preceding year basis. This means that the basis period for any YA generally refers to the financial year ending in the year preceding the YA.
Your company is incorporated on 1 Jul 2007 and its financial year end is 30 Jun.
If your company’s first set of accounts covered the period from the date of incorporation (1 Jul 2007) to 30 Jun 2008, your accounts is for YA 2009. You do not need to request for Form C for YA 2008.
Your company is incorporated on 1 Jul 2007 and its financial year end is the 31 Dec.
- If your company’s first set of accounts covered the period from the date of incorporation (1 Jul 2007) to 31 Dec 2007, your accounts is for YA 2008. In this case, you have to request for Form C for YA 2008.
- You can request for Form C via the form Request for Form C for Newly Incorporated Companies or Companies Granted Waiver to Submit Form C/Change of Particulars (36KB).
- If your company’s first set of accounts covered the period from the date of incorporation (1 Jul 2007) to 31 Dec 2008, your accounts is for YA 2009. In this case, since the first set of accounts is for YA 2009, you do not need to request for Form C for YA 2008. Your accounts for the period from 1 Jul 2007 to 31 Dec 2008 is to be submitted with the Form C for YA 2009, which will be sent to your company in Mar/Apr 2009.When you file Form C for YA 2009, please note that you need to submit separate tax computations for YA 2008 and YA 2009 since your accounts covered a period of more than 12 months. You have to apportion the income for the period from 1 Jul 2007 to 31 Dec 2007 (YA 2008) and 1 Jan 2008 to 31 Dec 2008 (YA 2009). When submitting Form C for YA 2009, please attach a covering letter stating that you have enclosed the tax computations for YA 2008 and YA 2009.
2)When to file?
The company has to file a complete set of returns (i.e. Form C, audited/unaudited accounts and tax computation) by the following dates:
|Year of Assessment||Filing deadline|
|2007||31 Jul 2007|
|2008||30 Nov 2008|
|2009 and thereafter||30 Nov of each year*|
* IRAS is pleased to inform that in response to feedback from companies, 30 Nov will be the filing deadline from Year of Assessment 2009 instead of 31 Oct
3)How to file Form C ?
For details on the filing and completion of Form C, refer to Filing Income Tax Form (Form C). You may also refer to the guide on “Essential Information for Newly Incorporated Companies” (287KB)
4)What is Estimated Chargeable Income (ECI) ?
Your company has to furnish an estimate of its chargeable income known as Estimated Chargeable Income (ECI) within three months from the end of its accounting period.
For example, if your company’s financial year end is 31 Dec, you have to furnish ECI for the accounting period ending 31 Dec 2007 by 31 Mar 2008.
Plan your finances and taxes wisely.
Paul Hype Page & Co. is an ACRA-certified business adviser. Paul Hype Page Consultants would be able to give you more information and assistance on policy updates, compliance regulations and changes to tax conditions. More information on Corporate tax in singapore.
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By Eric Eio
Managing Partner of Paul Hype Page & Co.
Eric was awarded an ACCA graduate in 2000 and also graduated from University of Sydney with a Bachelor degree in Computer Science & Accounting. Since graduation, he had worked in Big 4 as an auditor , including a one year overseas stint with Ernst & Young, Shanghai in 2005. He left his last appointment as an Audit Managerial position with PricewaterhouseCoopers, Singapore in 2008 before setting up his own Certified Public Accountant Practice – Paul Hype Page & Co. His firm is being selected to be one of the advisory panel for Singapore top 500 SME.