Corporate Tax in Singapore
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:
Singapore Company Tax Exemption Scheme for New Start-Up Companies
A newly incorporated company which satisfies the qualifying conditions can claim full tax exemption on the first $100,000 of normal chargeable income* (excluding Singapore franked dividends) for each of its first 3 consecutive YAs.
Singapore Company Tax Exemption Qualifying Conditions
To qualify for tax exemption, new start-up companies must:
- Be incorporated in Singapore (other than companies limited by guarantee**)
- Be tax resident in Singapore for the YA
- Have no more than 20 shareholders throughout the basis period of the YA:
- Shareholders are beneficially and directly holding the issuing shares in their own name, OR
- At least one shareholder is beneficially and directly holding at least 10% of the issues ordinary shares of the company
*A company is 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.
AFTER KNOWING THE SINGAPORE CORPORATE TAX RATE, THE NEXT QUESTION IS TO DETERMINE IF YOUR CONDITION NEED TO PAY SINGAPORE TAX, FACTORS LIKE
- Singapore Company’s Tax Residence
- Singapore Company’s Income Source
See Below for your Company’s Tax consideration
Tax Residence of a Singapore Company
Tax residence of business entities for tax purposes refers to whether management and control are exercised in Singapore. The site where the directors of a company manage and control its business, and hold their board meetings is where the company is deemed resident (regardless of property location).
Whether a company is tax resident or not is significant for the following purposes:
Territorial scope of Singapore’s Tax System
Your Company’s income source depend on the phrase “accruing in or derived from Singapore” 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. This above sentence can created confusion for company level , it seems to refer that if the income is not remitted to Singapore then it is not taxable. In our opinion, it is not true, let me show you why.
For example : MNC with a group of Asian companies , Singapore tax resident company invoiced oversees clients and the group treasury centre is in Hong Kong hence no money is remitted to Singapore for the invoice payment.
Does it means that this income is non taxable because the money is not remitted into Singapore bank?
According to Section 10(25) of the Act, the following amounts are to be regarded as income received in Singapore from abroad: 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;
From the above , it showed that it is taxable.
Singapore Company Tax Facts to file Tax
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 tax exemption, and companies get 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 your 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.
- Taxes paid by companies on chargeable income is the final tax. All dividends paid by companies to its 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 Incentive
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 agree 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 businesses will only pay taxes generally where income is generated. For example, a DTA between Singapore and Hong Kong states the conditions on which country will receive corporate tax based on business activities or operational production.
The objective of income tax treaties are 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 several countries, both Asia and internationally.
Singapore Tax Filing FAQs
1)What is Form C?
Your 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.
Form C filing due dates for each YA are:
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 Mar/Apr 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.
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) Documents to Prepare when Filing Form C-S/C
Audited/ unaudited financial statements, tax computations, claim forms and other documents to prepare and/ or file with your Income Tax Return (Form C-S/ C).
Records and Accounts Keeping
Companies are required to keep proper records and accounts of business transactions. Using an accounting software helps business improve record keeping and comply with tax obligations. Business can also use the information captured 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 to use an accounting software for record keeping are encouraged to consider those in 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/ unaudited financial statements;
- tax computation and supporting schedules; and
- other documents such as claim forms for claiming certain tax deductions/ 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.
More Details of such Documents
Audited/ Unaudited Financial Statements
For financial years starting on or after 1 Jul 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 2 of the following 3 quantitative criteria for immediate past two financial years:
- total annual revenue ≤ $10m
- total assets ≤ $10m
- no. of employees ≤ 50
For a company which is part of a group to qualify for audit exemption:
- the company must qualify as a small company; and
- entire group must be a “small group”, i.e. the group must meet at least 2 of the 3 quantitative criteria on a consolidated basis for the immediate past two consecutive financial years.
Please refer to ACRA’s website for more information on the Small Company Concept for Audit Exemption.
For financial years starting before 1 Jul 2015, dormant companies and exempt private companies with revenue not more than S$5 million are not required to audit their financial statements
You may wish to refer to Pages 123 to 133 of ACRA’s Guidebook for Directors for a sample of audited/ unaudited financial statements.
Companies that have filed a full set of financial statements with ACRA in 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 XBRL format.
3) What are Business Expenses to be include in Tax computation
What counts as deductible or non-deductible business expenses.
Business expenses are expenses you have paid to run the business. Some examples are CPF contributions, wages, renovation, advertising, etc.
Business expenses may be deductible or non-deductible. When deductible, they reduce your taxable income and the amount of tax you need to pay.
|– Deductible Business Expenses||$5,000|
|– Non-Deductible Business Expenses||$10,000|
|Income Subject to Tax (“Taxable Income”)|| $80,000 – $5,000 = $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. it does 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.
Non-Deductible Business Expenses
Non-deductible business expenses are activities you or your employees pay for that do not fulfil the conditions above. This includes personal expenses such as travel or entertainment not related to the running of the business, and capital expenses such as expenses incurred to incorporate a company and purchase of fixed assets.
Examples of Deductible and Non-Deductible Business Expenses
|Bad debts (trade debtors)|
Book-keeping servicesBorrowing costs as a substitute for interest expense or to reduce interest costs
|Bad debts (non-trade debtors)|
CPF, skills development levy, foreign workers’ levy
|Certificate of entitlement (COE) for motor vehicles*|
Statutory contributions to CPF
Ad-hoc contributions to employees’ Medisave Account (from 1 Jan 2018, the maximum deduction allowed as medical expenses, subject to the medical expenses cap, will be raised from $1,500 to $2,730 per employee per year)
Topping-up of Employees’ CPF Minimum Sums
Voluntary cash contributions to self-employed persons’ Medisave Account
Voluntary contributions to CPF (refers to CPF contributions exceeding the statutory rate)Interest incurred on late CPF contributions
|Depreciation (you may instead claim capital allowances )|
Dividend payments made on preference shares
|Employee Equity-Based Remuneration (EEBR) Scheme|
Employment Assistance Payment (EAP)
Exchange loss (trade and revenue in nature)
|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 (you may instead claim capital allowances )Fines
|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 expensesInterest 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 country outside 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%/ 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 / commercial vehicles, e.g. van, lorry and bus)
|Medical expenses (amount exceeding 1%/ 2% of total remuneration if company is under PMBS or TMIS)|
Motor vehicle expenses (S-plated and RU-plated cars)
|Periodicals & newspapers|
Printing and stationery
Provision for bad and doubtful debts (specific)(note impairment loss on trade debts)
Provision for obsolete stocks (specific)
Prepaid expenses (not relating to the relevant basis period)
Private and domestic expenses (expenses not incurred for business purpose)
Private hire car
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 (you may claim Section 14Q deduction for qualifying expenditure incurred from 16 Feb 2008)|
Contractual retrenchment paymentsEx-gratia retrenchment payments and outplacement support costs, where there is no complete cessation of business
Ex-gratia retrenchment paymentsand outplacement support costs, where there is a complete cessation of business.
Staff remunerations (salary, bonus and allowances)
Staff welfare/benefits **
Statutory and Regulatory expenses
Supplementary Retirement Scheme (SRS)
|Tax fees (service fees paid to tax agent)|
Transport (public transport and goods / commercial vehicles)
|Transport (S-plated and RU-plated cars)|
Water & electricity
4) When and How file Form C/C-S?
The company has to file a complete set of returns
(i.e. Form C, audited/unaudited accounts and tax computation) by the following dates:
* 30 Nov will be the filing deadline from Year of Assessment 2009 instead of 31 Oct
Filing Form C
You can e-File Form C in two ways:
|Modes||How to e-File||Suitable for|
|Online Form C|
|Complete and file Form C online. Attach tax computation, financial statements, detailed profit & loss statement, other supporting documents and submit them to IRAS.||All companies/ tax agents|
|Form C (Upload)|
|Download and complete Form C (PDF format) at your own time and convenience, in your local machine. No signature is required in Part V Declaration. When the Form C is completed and the file is saved in your local drive, upload it to myTax Portal and submit it together with tax computation, financial statements, detailed profit & 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|
5)What is Estimated Chargeable Income (ECI) ?
Definition of 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.
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 ECI Form
Besides stating the ECI, you have to declare the company’s revenue in the ECI Form. This declaration is compulsory with effect from Jan 2017.
Revenue refers to a company’s main source of income, and excludes items like gain on disposal of fixed assets. If your company is an investment holding company, your main source of income will be your investment income (e.g. interest and dividend income).
Where the audited financial statements are not available, you 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 your ECI, you are not required to revise the revenue figure.
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
|Financial Year End of Company||Financial Year/ Basis Period||Year of Assessment (YA)||Filing Deadline for ECI|
|31 Mar of each year||1 Apr 2016 – 31 Mar 2017||2018||30 Jun 2017|
|31 Jul of each year||1 Aug 2016 – 31 Jul 2017||2018||31 Oct 2017|
|31 Dec of each year||1 Jan 2017 – 31 Dec 2017||2018||31 Mar 2018|
Companies will receive a notification from IRAS to file the ECI in the last month of its financial year. Companies should still proceed to file the ECI within three months from its financial year end even if they do not receive the ECI notification. To find out how to file ECI, plan your finances and taxes wisely.