Singapore has deservedly gained the reputation of being a global corporate powerhouse. It is one of the countries that many foreign entrepreneurs consider to be a very attractive business location. Singapore’s laws that govern corporations in the country are a major reason for this. The country’s business laws have been designed to set corporations up for success and attract business owners to potentially relocate or expand there. Another major factor that has propelled Singapore to economic success is its extremely business-friendly corporate tax system. Many businesses have greatly benefited from this system which takes care of corporations’ financial well-being like few others in the world.
Singapore’s Corporate Tax System
Paying corporate tax in Singapore is much simpler than doing so in most other countries. Furthermore, corporate tax rates there are among the most favourable to businesses in the world. Therefore, it is only to be expected that many companies are interested in operating out of Singapore.
The corporate tax system in Singapore is a single-tier system. In a single-tier system, corporations only need to pay corporate tax once a year. This is to be done at the conclusion of the financial year. This tax is to be paid with regard to the entire revenue of the company. Shareholders are not taxed on any business profits received. There is also no tax imposed on capital gains, nor is there a dividend withholding tax. All dividends paid by companies which are Singapore tax resident are tax-exempt when possessed by shareholders.
Singapore’s corporate tax rate has been gradually declining over the past two decades. In 1997, corporations based in Singapore had to pay tax at a rate of 26%. Since then, the rate has been lowered six times. It fell to 25.5% in 2001, 24.5% in 2002, 22% in 2003, 20% in 2005, 18% in 2008, and most recently, 17% in 2010. The corporate tax rate has remained at 17% since then.
Singapore’s corporate tax system uses a preceding-year basis. This means that when one files corporate tax in a certain year, the tax paid will be related to the company’s profits earned during the calendar year directly preceding the current one. When filing corporate income tax returns, the documents that are also required by tax authorities are a Form C, tax computation, and any necessary accounts, be they audited or unaudited. It must also be kept in mind that not all companies need to be audited. Private companies that have fewer than 20 shareholders and an annual revenue totalling less than S$5 million do not have to be audited. Companies that were dormant during the most recent financial year used as a basis period also do not require any auditing.
Corporate Tax Incentives
Owners of Singapore tax resident companies may also take advantage of certain tax incentives. These incentives are intended to mitigate the costs incurred in operating a business. One such incentive is the Corporate Income Tax Rebate. This incentive allows eligible businesses to receive tax rebates of either up to 30% of taxable income or S$30,000 for each applicable year of assessment (YA). Another notable tax incentive is the Startup Tax Exemption Scheme. This scheme allows companies which have recently begun operations to claim a full tax exemption on the first S$100,000 of qualifying expenses for the first three YAs for which they are to be taxed. The Wage Credit Scheme benefits managers and employers. The scheme grants an exemption of 40% of wage increases which employers give to employees who earn at least S$4,000 worth of gross monthly salary. Employers who granted their employees wage increases in the relevant YAs qualify for this scheme.
Those who own companies which are deemed to be Singapore tax residents are also eligible for a partial tax exemption. Such people have to pay corporate tax at a rate of just 8.5% on the first S$300,000 of their income. Any further income earned is taxed at the usual corporate tax rate of 17%. If the company is the Singapore branch of a foreign company, tax treaties may also be used to help it avoid double taxation. This also reduces the total effective tax payable.
It is clear that Singapore’s corporate tax system has allowed companies based there to experience tremendous benefits. This tax system has proven to be very accommodating to businesses of all sizes and in all fields.
If you would like your company to reap some of the advantages of being based in Singapore, we at Paul Hype Page & Co provide services related to starting a company there. We also provide accounting and tax planning services for companies.
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Here, you will find detailed information about Singapore’s Corporate Tax System. Paul Hype Page & Co helps companies with strategic tax planning, tax advisory, and accountancy services.
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IRAS (Singapore’s Tax Authority) governs Singapore’s tax system, helps develop a stronger economy, better environment and a more vibrant economy. All companies, regardless of industry, have a legal duty to pay taxes.
Singapore attracts investments from around the world by reducing its corporate income tax rate and introducing different tax incentives. Singapore has one of the lowest corporate tax rates in the world.
As your company’s Tax agent , Paul Hype Page & Co Chartered Accountant will be fully responsible for the practice of ensuring that these conditions are met. It is important that we be highly qualified and well versed in local regulations and corporate laws, as we are responsible for the upkeep of important company files, tax reports and tax records.
Categories: Corporate Tax in Singapore