Singapore Company Incorporation with Paul Hype Page
Company Registration at Paul Hype Page Singapore

Singapore has some of the lowest corporate tax rates in the world. Companies that are based in Singapore may claim further tax advantages by making use of certain schemes that provide tax reductions or exemptions. Doing so significantly eases their tax burden.

Corporate tax plays an important role in every country’s tax system. Governments impose corporate tax so that corporations can do their part in contributing to the financing of government actions taken on behalf of the citizens. Corporate taxes also ensure that all companies in a certain country are operating in a legal and trustworthy manner. Every country’s government must decide upon the most appropriate tax rates to be imposed on its companies, as well as what other taxes related to the operation of a business are also to be imposed.

Corporate Tax in Singapore

Singapore is known for its extremely generous rates of corporate tax. The country taxes its corporations at a flat rate of just 17%. This is one of the lowest rates in the world. This low rate could potentially fall even further. Companies that are eligible for certain subsidies, rebates and tax schemes introduced by the Singaporean government may use them to lower the amount of tax they pay. Double taxation relief may also be utilized by the companies to which it applies. Singapore also does not impose a tax on capital gains; dividends also remain unaffected by tax regulations because of the lack of a withholding tax there. Those who require further information on taxation may also request for an Advance Ruling.

Companies in Singapore that fulfill certain criteria can claim related advantages that reduce their overall tax burden. If you would like to receive further information about your company’s corporate tax status and how you might proceed to reduce its corporate tax burden, do not hesitate to contact us at Paul Hype Page & Co. Our tax experts will work with you to ensure that your company’s tax burden is reduced by as much as possible while all the time adhering to the tax laws of Singapore.

Start-Up Tax Exemption Scheme

In 2004, the Singaporean government introduced the Start-up Tax Exemption Scheme. The purpose of this tax exemption scheme was to promote investment and improve the business environment of the country. It grants tax exemptions to companies that have been newly incorporated in Singapore. These tax exemptions are to be applied to companies’ taxable profits earned during their first three years of business activity.

Companies that are eligible for this scheme may claim a 75% exemption on the first S$100,000 of normal chargeable income that has been earned. The next S$100,000 of normal chargeable income earned by an eligible company will receive an exemption of 50%. Therefore, the maximum chargeable income that may be exempt from taxation is S$200,000.

Partial Tax Exemption Scheme

The Partial Tax Exemption Scheme is targeted at the small and medium-sized enterprises (SMEs) of Singapore. It was introduced by the Singaporean government in 2008. This scheme was intended to recognize the significant economic contributions made by Singapore’s many SMEs. SMEs form the bulk of the country’s economic production and employment. However, when they first begin operations, they often struggle to remain in business. Certainly, it would be extremely negative for Singapore if most or all its SMEs were to go out of business. Therefore, this scheme was introduced to help Singapore’s SMEs develop and grow, and subsequently establish themselves within Singapore’s corporate scene. The criteria and exemption thresholds were also tailored by the government to cater to SMEs.

Companies which are eligible for this scheme can claim a tax exemption of 75% on the first S$10,000 of normal chargeable income earned. The next S$190,000 of normal chargeable income earned will receive a tax exemption of 50%. Therefore, the first S$200,000 of normal chargeable income earned by an eligible company may receive a tax exemption of up to S$102,500.

Thinking of incorporating in Singapore? Let’s get started.

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Prevention of Double Taxation

The Singaporean government does all it can ensure that the companies based in Singapore do not have to pay corporate taxes to tax authorities of more than one country. It does so through

either of two methods: the use of foreign tax credit (FTC) and the use of double taxation agreements (DTAs).

Foreign Tax Credit (FTC)

FTC was introduced to Singapore in 2003. It was intended to help the country’s businesses simplify their tax matters, particularly when dealing with foreign tax issues. Certain criteria must be fulfilled by a company that intends to claim FTC:

  1. The company must be a tax resident of Singapore.
  2. The tax must have been paid or be payable on the same income in a tax jurisdiction other than Singapore.
  3. The income must be subject to taxation in Singapore.

Companies that have been making a loss are not allowed to claim FTC. FTC is also only granted to companies that have income taxed in Singapore; companies with a permanent establishment which is based abroad which is the source of the income of the companies in question are not allowed to claim FTC either. Companies that have received passive income, which includes dividends and interest, from outside Singapore will normally be taxed abroad. This income will also be taxed in Singapore during the year of remittance. These companies may receive FTC once this income has been taxed in Singapore.

Double Taxation Agreements (DTAs)

Singapore is also part of many DTAs. A DTA specifies all taxing rights between the two countries involved in it. The two countries which are part of a DTA are referred to as treaty partners. The Singaporean government chose to sign DTAs with the governments of many other countries to ease the tax burden of its residents. If a company is either a tax resident of Singapore or the country with which Singapore is a treaty partner, the company may accept the tax benefits offered by the DTA. Some of the tax benefits which DTAs confer upon their beneficiaries include tax reductions and exemptions related to certain types of income earned by the taxpayer in question.

Companies that are tax residents of Singapore are to submit a Certificate of Residence to the tax authorities of the other country in question. Doing so provides ample evidence that the company in question is indeed a tax resident of Singapore. DTAs also protect Singapore companies from suffering double taxation by allowing them to claim a tax credit if they have had the same income taxed twice, once by Singapore and once by the other country. Such tax credits are referred to as double tax relief.

Should you require clarification on any matters related to international taxation, we at Paul Hype Page & Co are willing to assist you. We will help you navigate matters such as DTAs, how to claim double tax relief, how to claim FTC and many other similar issues.

Mergers and Acquisition Allowance Scheme

This scheme was introduced by the Singaporean government in 2010 and received further reinforcements in 2015 and 2016. M&A scheme is extended to 31 Dec 2025 in Budget 2020. The purpose behind this scheme’s introduction was to encourage companies based in Singapore to grow and expand by way of acquisitions and mergers.

The scheme grants an allowance to all companies which acquire the ordinary shares of another company at any point between April 1, 2010, and December 31, 2025. This allowance will be given out on a straight-line basis over a period spanning five years. Companies that are in line to receive this allowance may not defer their doing so. Certain criteriamust be fulfilled before a company may become eligible for this scheme.

For all qualifying share acquisitions which are made on April 1, 2016, or later, there will be an upper-value limit of S$40 million. Since the maximum allowance value is limited to 25% of the value of the acquisition, this means that all share acquisitions to which this scheme applies have a maximum allowance of S$10 million.

Any eligible share acquisition, which may take place either through an acquiring subsidiary or directly, must also result in the acquiring company ending up with a minimum of 20% of the target company’s ordinary shares if it owned less than this amount prior to the acquisition of shares. This is known as the 20% shareholding threshold. There is also a 50% shareholding threshold which works in much the same way.

Acquiring companies that can receive the allowance are those which have been incorporated in and are tax residents of Singapore, be separate from the target company for a minimum duration of two years prior to the acquisition of shares, conducted business activities in Singapore on the date that shares were acquired, and employed at least three locals, not including the directors of the company throughout the one-year period directly preceding the date on which the shares were acquired. The latter two criteria also apply to target companies. Should the acquisition have been made through an acquiring subsidiary, the acquiring subsidiary must not already have claimed any tax benefits under this scheme, not have been carrying out any business activities anywhere in the world on the date of acquisition of shares and have been fully and directly owned by the acquiring company on the date of share acquisition.

Corporate Tax Advantages for Singapore Companies FAQs

Does Singapore offer the lowest corporate tax rate in Southeast Asia?2021-01-29T10:14:32+08:00

Yes, Singapore offers the lowest corporate rax rate in Southeast Asia.

What is the corporate tax rate in Singapore?2021-01-29T10:14:09+08:00

The corporate tax rate in Singapore is 17%.

Which countries have signed Avoidance of Double Taxation Agreements (DTAs) with Singapore?2021-01-29T10:13:43+08:00

Countries like the USA, Malaysia, India, Australia, China, Indonesia, and Japan have signed DTAs with Singapore. View the full list of the countries here.

Why is Singapore tax so low?2021-01-29T10:09:22+08:00

Singapore tax is relatively low as compared to other countries because competitiveness is a decisive consideration undergirding its tax policy.

2021-02-04T12:53:26+08:00August 7, 2019|0 Comments
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