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Corporate Tax in Singapore

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Corporate Tax in Singapore

Corporate income tax rates and tax exemption schemes are part of the Singapore tax system which is managed by the Inland Revenue Authority of Singapore (IRAS).

Singapore Income Tax Overview

In Singapore, taxes are only to be levied by the legal authorities; namely, the Inland Revenue Authority of Singapore (IRAS), as specified in the Income Tax Act (to be referred to as the Act) of 1948. IRAS is the Singaporean government’s primary revenue collection body. Another law related to taxes in Singapore is the Economic Expansion Incentives Act (EEIA) of 2005, which was introduced to encourage growth of targeted industries and activities.

The two acts mentioned are supplemented by various pieces of subsidiary legislation. Among this subsidiary legislation are several comprehensive tax treaties. These treaties help prevent the imposition of double taxation on cross-border transactions, enhance international trade and investment by clarifying tax rules between countries, and provide for the avoidance of fiscal evasion.

Singapore Corporate Tax Rates

A company is taxed a flat rate on chargeable income, regardless of whether it is a local or foreign company.

Tax rates and tax exemption rates/rebates for each YA are:

Corporate tax in Singapore

Singapore Company Tax Exemption Scheme for New Start-Up Companies

A newly incorporated company which satisfies the qualifying conditions can claim a 75% tax exemption on the first S$100,000 and a 50% tax exemption on the next S$100,000 of normal chargeable income for each of its first 3 consecutive years of assessment (YAs).

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Singapore Company Tax Exemption Qualifying Conditions

To qualify for a tax exemption, new start-up companies must:

  • Be incorporated in Singapore (other than companies limited by guarantee**)
  • Be a tax resident in Singapore for the YA
  • Have no more than 20 shareholders throughout the basis period of the YA:
  • Have its shareholders beneficially and directly holding the issuing shares in their own names, OR
  • Have at least one shareholder beneficially and directly holding at least 10% of the issued ordinary shares of the company

*A company is a resident in Singapore if the control and management of its business is exercised in Singapore.

** From YA 2010, companies limited by guarantee are subjected to the same conditions imposed on companies limited by shares.

 

Singapore Tax relief for company tax

After understanding the corporate tax rates in Singapore, one must determine if and how much tax must be paid by a company by assessing the following:

  • The company’s tax residence
  • The company’s income source

Keep reading to learn more about your company’s income tax obligations

Tax Residence of a Singapore Company

Tax residence of business entities refers to whether management and control of the company are exercised in Singapore. The location where the directors of a company manage and control its business and hold their board meetings is where the company is deemed to be a resident (regardless of property location).

The tax resident status of a company is significant for the following reasons:

Singapore Taxation

Territorial Scope of Singapore’s Tax System

A company’s income source is determined by the phrase “accruing in or derived from Singapore”. This phrase found in the Act describes the territorial scope of Singapore’s tax system. This means that Singapore has the right to tax income if the source of the income is in Singapore. A company will not be liable for income tax unless income has accrued to the company. Income cannot be said to have accrued to a company unless the company has an unfettered right to deal with it.

Another important phrase found in the Act is “received in Singapore from outside Singapore”. This causes foreign-sourced income to be taxable in Singapore, but only if the income is received in Singapore and not tax-exempt. However, even if income is not remitted to Singapore, it is still taxable.

According to Section 10(25) of the Act, any amount from any income derived from outside Singapore which is applied in or towards the satisfaction of any debt incurred in respect of a trade or business carried on in Singapore is deemed to be taxable.

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

E A S I E R • F A S T E R • B E T T E R

Singapore Tax Filing Information

Determining the First Year of Assessment (YA)

  • The first YA is the basis period during which a company is incorporated.
  • New start-up companies get a tax exemption, while other companies get a partial tax exemption from the fourth YA onwards.

Income Tax Basis Period

Singapore’s statutory income for YA is computed based on the income derived in the preceding calendar year (basis year) from all sources. This will form the basis of all tax assessments and provide a guide for yearly taxable income.

Income Tax Filing Due Date

  • As of 2009, November 30 is the due date for Singaporean companies to file income tax. Tax guides are widely available if needed by businesses.
  • A company must file a complete set of returns, which include Form C, audited/unaudited accounts, and tax computation.
  • All companies must file their tax returns before November 30 to avoid enforcement action. A Company Secretary will compile and prepare the required documents.

Single-Tier Income Tax System

  • Singapore introduced a single-tier corporate income tax system on 1 January 2003.
  • The tax paid by companies on chargeable income is the final tax. All dividends paid by companies to shareholders are tax-free.
  • Singapore has no capital gains tax (including sale of fixed assets, gains on foreign exchange, capital transactions, etc.).

Singapore Company Tax Incentives

Tax Treaties

Double taxation happens when income is taxed twice.

Double Taxation Agreements (DTAs) are concluded between participating countries globally to avoid income being taxed twice. DTAs stipulate that the country of residence agrees to either give credit to its residents for income which is taxed at reduced rates or to exempt the income from tax.

Companies that conduct internal business will usually only pay taxes where income is generated. A DTA between two countries states the conditions on which country will receive corporate tax based on business activities or operational production.

The objective of income tax treaties is to help businesses avoid double taxation on their income. This helps ensure the global market remains competitive and governments continue to receive taxes from businesses. Singapore has concluded tax treaties with many countries, both in Asia and beyond.

Details of Necessary Documents

Audited and Unaudited Financial Statements

In financial years starting on or after July 1, 2015, dormant companies and companies that meet the “small company” criteria are not required to audit their financial statements. This is provided for under the Companies Act.

A company qualifies as a “small company” if:
• It is a private company for the financial year in question (i.e. it is owned by 50 members or less); and
• It meets at least two of the following three quantitative criteria for the two preceding financial years:

  • total annual revenue ≤ $10m
  •  total assets ≤ $10m
  • number of employees ≤ 50

For a company which is part of a group to qualify for audit exemption:

  1. the company must qualify as a small company; and
  2. the entire group must be a “small group”, i.e. the group must meet at least two of the three quantitative criteria on a consolidated basis for the the two preceding financial years.

Please refer to ACRA’s website for more information on the Small Company Concept for Audit Exemption.

For financial years starting before July 1, 2015, dormant companies and exempt private companies with revenue of not more than S$5 million are not required to audit their financial statements.

One may refer to Pages 123 to 133 of ACRA’s Guidebook for Directors for a sample of audited and unaudited financial statements.

Companies that have filed a full set of financial statements with ACRA in the XBRL format are not required to file the same with IRAS. Please refer to ACRA’s website on how to prepare your financial statements in the XBRL format.

Business Expenses to Be Included in Tax Computations

Business Expenses

Business expenses are expenses paid to keep a business in operation. Some examples are CPF contributions, wages, renovation, and advertising.

Business expenses may be deductible or non-deductible. When deductible, they reduce a taxpayer’s taxable income and the amount of tax which must be paid.

Example

 
Income S$80,000
Business Expenses S$15,000
 – Deductible Business Expenses S$5,000
 – Non-Deductible Business Expenses S$10,000
 Income Subject to Tax (“Taxable Income”)

S$80,000 – S$5,000 = S$75,000

(Income minus deductible expenses)

Deductible Business Expenses

Generally, deductible business expenses are those “wholly and exclusively incurred in the production of income”. In other words, they must satisfy all these conditions:

  • Expenses are solely incurred in the production of income.
  • Expenses are not a contingent liability, i.e. they do not depend on an event that may or may not occur in the future. In other words, the legal liability to pay the expenses must have arisen, regardless of the date of actual payment of the money.
  • Expenses are revenue, and not capital, in nature.
  • Expenses are not prohibited from deduction under the Income Tax Act.

 

Chinese Version 中文版 : 

新加坡企业所得税 Corporate Tax in Singapore

 

Non-Deductible Business Expenses

Examples of Deductible and Non-Deductible Business Expenses

Deductible   Non-Deductible
Accounting fee
Administrative expenses
Advertisement
Auditors’ remuneration
  Amortisation
Bad debts (trade debtors)
Bank charges
Book-keeping servicesBorrowing costs as a substitute for interest expense or to reduce interest costs
  Bad debts (non-trade debtors)
Commissions
CPF, skills development levy, foreign workers’ levy
  Certificate of entitlement (COE) for motor vehicles*
CPF-related
Statutory contributions to CPF
Ad-hoc contributions to employees’ Medisave Account (from January 1, 2018, the maximum deduction allowed as medical expenses, subject to the medical expenses cap, will be raised from S$1,500 to S$2,730 per employee per year)
Topping-up of Employees’ CPF Minimum Sums
Voluntary cash contributions to self-employed persons’ Medisave Account
  CPF-related
Voluntary contributions to CPF (refers to CPF contributions exceeding the statutory rate)
Interest incurred on late CPF contributions
Directors’ fees
Directors’ remuneration
  Depreciation (capital allowances may instead be claimed)
Dividend payments made on preference shares
Donations
Employee Equity-Based Remuneration (EEBR) Scheme
Employment Assistance Payment (EAP)
Entertainment
Exchange loss (trade and revenue in nature)
Exhibition expenses
  Entrance fee (country club or other clubs)
Exchange loss (non-trade or capital in nature)
Expenses incurred before commencement of business
    Fixed assets written off
Fixed assets acquisition cost (capital allowances may instead be claimed)
Fines
    Goodwill payment
Employee’s income tax borne by employer (in accordance with employment contract)
Insurance premium (group term life insurance where employees are the intended beneficiaries, keyman insurance, workman injury compensation)
Insurance for underwriting bad trade debts
Interest expenses
Interest incurred on late payment of fees to a Management Corporation for a Strata Title Plan (MCST)
Interest incurred on loans to re-finance earlier loans or borrowingsIntellectual property (IP) licensing expenditure
  Impairment loss on non-trade debts
Singapore income tax and any tax on income in countries besides Singapore
Installation of fixed assets
Interest expenses on non-income producing assets (interest adjustment)
Legal and professional fees (trade and revenue transactions)   Legal and professional fees (non-trade or capital transactions)
Medical expenses (restricted to 1%, or 2% of total remuneration if company is under Portable Medical Benefits Scheme (PMBS) or Transferable Medical Insurance Scheme (TMIS)
Motor vehicle expenses (such as upkeep, maintenance, running and financing costs of goods or commercial vehicles, such as vans, trucks, and buses)
  Medical expenses (amount exceeding 1%, or 2% of total remuneration if company is under PMBS or TMIS)
Motor vehicle expenses (S-plated and RU-plated cars)
Office upkeep    
Periodicals and newspapers
Postage
Printing and stationery
Property tax
Provision for bad and doubtful debts (specific)(note impairment loss on trade debts)
Provision for obsolete stocks (specific)
  Penalties
Prepaid expenses (not related to the relevant basis period)
Private and domestic expenses (expenses not incurred for business purposes)
Privately hired cars
Provision for bad and doubtful debts (general)(note impairment loss on trade debts)
Provision for obsolete stocks (general)
Reinstatement costs (expenses incurred to reinstate
premises to its original condition prior to vacating
it at the end of the tenancy agreement)
Rental of business premises
Registration of patents, trademarks, designs, and plant varieties
Repairs and maintenance
Research and development
  Renovation or refurbishment works (Section 14Q deductions for qualifying expenditures incurred may be claimed starting from February 16, 2008)
Retrenchment payments
Contractual retrenchment payments
Ex-gratia retrenchment payments and outplacement support costs where there is no complete cessation of business
  Retrenchment payments
Ex-gratia retrenchment payments and outplacement support costs, where there is a complete cessation of business
Secretarial fees
Staff remunerations (salaries, bonuses, and allowances)
Staff training
Staff welfare and benefits **
Statutory and regulatory expenses
Stock obsolescence
Supplementary Retirement Scheme (SRS)
   
Tax fees (service fees paid to tax agent)
Telephone bills
Transport (public transport and goods / commercial vehicles)
Travel
  Transport (S-plated and RU-plated cars)
Wages
Water and electricity
   

When and How to File Form C/C-S?

A company has to file a complete set of returns by November 30, the filing deadline, every year.

Filing Form C

Form C can be e-Filed in two ways:

Modes   How to e-File   Suitable for 
Online   Complete and file Form C online. Attach tax computation, financial statements, detailed profit and loss statement, and other supporting documents before submitting them to IRAS.   All companies/ tax agents

Form C (Upload)

 

Available now

  Download and complete Form C (PDF format), in a local machine. No signature is required in the Part V Declaration. When the Form C is completed and the file is saved in a local drive, upload it to myTax Portal and submit it together with tax computation, financial statements, detailed profit amd loss statement, and other supporting documents. Please upload the original Form C (PDF Format). Do NOT upload a scanned or printed copy of Form C or Form C-S.   Companies/ tax agents who need to show the completed Form C to obtain approval prior to submitting the Form C to IRAS

What is Estimated Chargeable Income (ECI) ?

Definition of ECI

A 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 a company’s financial year end is December 31, ECI must be furnished for the accounting period ending on that day by March 31 of the next year.

ECI is an estimate of the company’s taxable income (after deducting tax-allowable expenses) for a Year of Assessment (YA).

 

Declaration of Revenue in an ECI Form

The ECI must be stated and company’s revenue must also be declared in the ECI Form. This declaration is compulsory with effect from January 2017.

Revenue refers to a company’s main source of income, and excludes items such as gain on disposal of fixed assets. If the company is an investment holding company, the main source of income is investment income (e.g. interest and dividend income).

Should the audited financial statements be unavailable, one can refer to the company’s management accounts for the purpose of declaring the revenue amount. Should the revenue amount based on audited financial statements be different from that declared in the ECI Form, and there is no change in the ECI, the revenue figure does not have to be revised.

 

When to File ECI

All companies including new companies are required to file ECI within three months from the end of their financial year except for companies that qualify for the administrative concession and those that are specifically not required to file.

 

Examples of ECI Filing Deadlines Based on Different Financial Year Ends

Companies will receive a notification from IRAS to file the ECI in the last month of its financial year. A company should still proceed to file the ECI within three months from its financial year end even if it does not receive an ECI notification.

Financial Year End of Company   Financial Year/ Basis Period   Year of Assessment (YA)   Filing Deadline for ECI
March 31 of each year   April 1, 2016 – March 31, 2017   2018   June 30, 2017
July 31 of each year   August 1, 2016 – July 31, 2017   2018   October 31, 2017
December 31 of each year   January 31, 2017 – December 31, 2017   2018   March 31, 2018

Singapore Tax Filing FAQs

What Documents are to be prepared when filing Form C-S/C?2020-06-22T12:46:15+08:00

Audited and unaudited financial statements, tax computations, claim forms, and other documents must be prepared or filed with an income tax return (Form C-S/ C). 

Records and Accounts Keeping 

Companies are required to keep proper records and accounts of business transactions. Using accounting software helps businesses improve record keeping and comply with tax obligations. Businesses can also use the information found in the software to ensure that operations are effective and efficient. The IRAS’ Accounting Software Register lists the accounting software that are able to meet IRAS’ technical requirements, and businesses considering using accounting software for record-keeping purposes are encouraged to consider software on this list. 

For companies eligible to file Form C-S 

Companies that meet the qualifying conditions may report their income by filing Form C-S instead of Form C.  Such companies must prepare: 

  • audited and unaudited financial statements; 
  • tax computation and supporting schedules; and 
  • other documents such as claim forms for claiming certain tax deductions or benefits. 

The above mentioned documents are to be prepared and retained for submission upon IRAS’ request, except for Declaration for the Purpose of Claiming Writing-Down Allowances for Intellectual Property Rights (IPRs) under Section 19B of the Income Tax Act. 

What is Form C?2020-06-22T12:45:53+08:00

A company must declare its income by completing the Income Tax Form for companies. This is known as Form C and must be completed each year. 

IRAS will send the first Form C to a newly incorporated company in the second year following the year of incorporation. 

Thereafter, Form C for subsequent YAs will be sent to your company in March or April every year. 

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. 

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. 

Example 1 

Your company is incorporated on July 1, 2007, and its financial year end is June 30. 

If your company’s first set of accounts covered the period from the date of incorporation (July 1, 2007) to June 30, 2008, your accounts will be for YA 2009. You do not need to request for Form C for YA 2008. 

Example 2 

Your company is incorporated on July 1, 2007 and its financial year end is December 31. 

If your company’s first set of accounts covered the period from the date of incorporation (July 1, 2007) to December 31, 2007, your accounts will be for YA 2008. In this case, you have to request for Form C for YA 2008. 

  • Form C can be requested via the form titled “Request for Form C for Newly Incorporated Companies or Companies Granted Waiver to Submit Form C/Change of Particulars (36KB)”. 
  • If a company’s first set of accounts covered the period from the date of incorporation to December 31 of a particular year, accounts will be for the YA after the December 31 which ends the period. There is no need to request for Form C for the YA before it. 

 

Accounts for a given period are to be submitted with the Form C. Form C will be sent to a company in March or April. When filing Form C for a YA, separate tax computations must be submitted for each of two YAs if accounts cover a period of more than 12 months. Income must also be apportioned for each period, and a letter stating that tax computations for the two YAs are enclosed must be attached. 

2020-10-21T11:26:04+08:00December 17th, 2014|6 Comments

6 Comments

  1. Jarvis Lee September 8, 2015 at 7:06 am - Reply

    Hi, I’m doing my ACCA with a paper remaining, and I am very interested in doing tax. Was wondering if you company have any intention to hire. Thanks and regards.

    • Paul Hype Page September 9, 2015 at 5:55 am

      Dear Jarvis,

      Thank you for your interest with our company. Do drop us an email to angela@php-cpa.com.sg for job application.
      Our HR will contact you should you be shortlisted.

      Thank you

      Best Regards
      Paul

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