• Corporate Tax in Singapore

Must Know of Singapore Corporate Tax

In Singapore, taxes are only to be levied on profits and not on revenue of the company, it is collected by the legal authorities; namely, the Inland Revenue Authority of Singapore (IRAS).

  • Singapore Corporate Tax Rates is a flat rate on chargeable income, regardless of whether it is a local or foreign company. The corporate tax rate is 17%.

  • Singapore uses a territorial basis of taxation. This means that individuals and companies are primarily taxed with regard to Singapore-sourced income. However, foreign-sourced income, such as dividends, service income, and incorporate a company branch profits, will also be taxed when it is remitted or deemed to have been remitted into Singapore unless the income had already been taxed in a tax jurisdiction with a minimum headline tax rate of 15%.

  • IRAS is part of the Common Reporting Standard (CRS) by OECD where tax authorities across the world to obtain information from their financial institutions and automatically exchange that information with other jurisdictions on an annual basis to ensure that taxpayers pay the right amount of tax to the right jurisdiction.

    For example, IRAS has to obtain information of account holders from DBS, OCBC, UOB etc. If a company is a tax resident in Australia, the information will be exchanged with Australia. Similarly, banks and tax authorities in Australia must identify Singapore tax residents and exchange the information with IRAS.

  • Singapore uses a single-tier tax system which means that company only pay taxes on profits and has over 80 tax treaties with other countries to avoid double-taxation of the same income. There is no Capital gain Tax and have many tax incentives such as tax exemption for start up company

  • The Singapore income tax system is annual, and the statutory tax year in which income tax is calculated and charged is known as the year of assessment (YA). Each YA lasts from January 1 to December 31 of each calendar year. The basis period, in which profits of which tax for that year falls to be assessed, for any YA is the preceding one-year period.

    Singapore uses the preceding year basis of taxation for all sources of income. For any YA, the amount of income chargeable to tax is based on the amount of income accrued in or derived from Singapore or received in Singapore from abroad in the year preceding the YA.

Corporate Tax Rate

In Singapore, all companies are taxed based on their chargeable income. All chargeable income is taxable income and includes both locally-sourced and foreign-sourced income. This tax is imposed at a flat rate of 17% and applies to both local and foreign companies. This rate of 17% was introduced in 2010.

However, with the start up tax exemption for newly incorporated company and partial tax exemption for existing company, the effective tax rate for companies can be significantly lower.

Current tax rates

Type of corporate taxTax rate %
Headline Tax on corporate profits17%
Effective Tax on newly start up company on $300k Profits is7.34%
Effective Tax on existing company incorporated more than 3 years on $300k Profits is8.39%
Tax rate on one off capital gains from company’s divestment0%
Tax rate on dividends distributed to local and overseas shareholders0%
Tax rate on foreign-sourced income not accruing in or derived from Singapore0%

Which company’s income is liable to pay tax?

After knowing the corporate tax rates in Singapore is 17%, 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

A Singapore Company does not mean it Singapore Tax Resident company

Tax residence of business entities refers to whether management and control of the company are exercised in Singapore.

Tax substance is commonly measure by tax residency. A company is tax resident in Singapore when the control and management of the company is exercised in Singapore.

How can you achieve tax substance?

  • Having local supplier or customers invoice, contracts or agreements
  • Having a physical or virtual office in Singapore, according to company business activity
  • Having local staff located in Singapore
  • Contribute CPF for staff working
  • Pay employee tax for staff working
  • The location where the directors hold their board meetings

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

  • Liability to account for singapore tax in respect of dividend payments.
  • Liability to singapore withholding tax in respect of certain categories of interest, royalty and management fee payments.
  • Eligibility for relief from foreign taxes under the provisions of singapore’s double taxation agreements.
  • Eligibility for double tax credit relief in respect of income which is liable to tax in both singapore and an overseas jurisdiction.
  • Liability to singapore tax in respect of foreign-source income received in singapore.

Where is your company’s income source?

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.

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 as long as it fulfilled that income “accruing in or derived from Singapore”.

From the above two factors – company’s residency and Income source, you can decide what the income of your company that it taxable.

How to file your yearly tax filing

STEP 1 : File Estimated Chargeable Income (ECI)

The first step to be completed when filing corporate tax in Singapore is that of filing an Estimated Chargeable Income (ECI) form. This form estimates the company’s total amount of chargeable income with the Inland Revenue Authority of Singapore (IRAS) within three months of the financial year-end of the company. Only companies which are specifically exempt from filing an ECI form do not have to do so. These companies which are exempt are those which have a total annual revenue of S$5 million or less and which did not have any estimated chargeable income during the relevant 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.

STEP 2 : File Tax Computation With Form C/CS

Once this has been done, the company owner is to file the company’s annual income tax return with IRAS. This income tax return specifies the exact amount of a company’s income during a specific tax year. It must be filed by every company in Singapore. Even companies which are to be struck off or liquidated as well as companies which have made losses instead of profits must file this income tax return. Dormant companies are also to file an income tax return, but when they do so, they are to submit a more simplified variant instead of the standard tax return form.

The vast majority of companies based in Singapore must use Form C to file an income tax return. Information which is to be submitted on a copy of Form C includes tax computation, financial statements, and supporting schedules. However, there are also certain companies which are to use Form C-S instead of Form C for this purpose. Such companies must have fulfilled the following criteria:

  • they must have been incorporated in Singapore where their annual revenue is not allowed to exceed S$5 million,
  • their income must have corporate income tax imposed at 17% and therefore not claim any reductions in tax rate, and
  • they must not claim any foreign tax credits or investment allowances for the purposes of tax reduction.

FAQs

How to Filling form C (e-Filed) in two ways?2021-07-07T09:54:03+08:00

ModesHow to e-File
OnlineComplete and file Form C online. Attach tax computation, financial statements, detailed profit and loss statement, and other supporting documents before submitting them to IRAS.
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.

When and How to File Form C/CS?2021-07-07T09:52:08+08:00

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

Why is Singapore tax so low?2020-11-19T11:38:30+08:00

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

What is the corporate tax rate in Singapore?2020-11-19T11:35:43+08:00

The corporate tax rate in Singapore is 17%. 

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. 

What Business Expenses to Be Included in Tax Computations?

Business expenses are expenses paid to keep a business in operation. However, 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.

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.

What Happened after Tax Submission?

Once IRAS has assessed and approved all forms which have been submitted, it will send a Notice of Assessment to the company. The Notice of Assessment provides information about all of the company’s tax liabilities. Should the company intend to object to the tax assessment specified by IRAS, it may also use the Notice of Assessment to do so. As long as there are no problems regarding the Notice of Assessment, the company must pay the amount of corporate tax specified within 30 days of receiving it. This amount may be paid via Internet banking, cheque, interbank GIRO, or even telegraphic transfer.

The entire process of filing corporate tax can be tedious and time-consuming. For this reason, we at Paul Hype Page & Co are willing to be of service. Our tax experts will work with you so that all your corporate taxes are properly filed and accounted for. We will even submit all that is necessary to IRAS for you.

Is there ways to Reduce of Corporate Tax?

In Singapore, there are several ways by which a company might be able to reduce its corporate tax burden. These are the legitimate ways as followings:

1.

Buying a fixed assets like machinery or furniture allows a company to accumulate capital allowances. Capital allowances can be claimed in the form of tax deductions. They pay for a company’s acquisitions of machinery or equipment which are used to generate income for the company. Any capital allowances which have gone unused during a particular YA may be carried forward to subsequent YAs as long as the company has not made any major changes to its primary business activities or shareholdings.

2.

Many companies which have made losses in prior years can lower tax by utilising those losses to offset profits for the current year, lowering the amount of tax money they will be to pay. For this purpose, companies need to pass the Shareholding Test. The Shareholding Test states that there must not have been any substantial changes in the shareholding of the company between the end of the YA in which the company incurred the losses and the beginning of the YA which is related to the income from which these losses are to be deducted.

3. 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.

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

Advise:
*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.

Company Tax Exemption Scheme for New Start-Up Companies in Singapore

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.

Assume chargeable income = S$300,000
Chargeable income$ 300,000
Less: New Start-Up exemptions (first 3 years)
1st $100,000 @ 75%(75,000)
Next $100,000 @ 50%(50,000)(125,000)
Chargeable income (after exempt amount)175,000
Tax payable @ 17%29,750
Less: CIT Rebate ($29,750 x 25%, cap of $15,000)(7,437)
Net tax payable$ 22,313
Effective tax rate7.34%

Companies Which Are Not Eligible for the Start-up Tax Exemption Scheme

Not every company in Singapore is eligible to claim the tax advantages provided by the Start-up Tax Exemption Scheme.

  • Start-ups which were created for the purpose of development of properties for sale, investment, or both are ineligible for this scheme.
  • The same is true of any Singapore-based start-up which has the primary objective of investment holding. Such is the case because of the inherent nature of these types of companies. Investment holding companies, which own investments including shares and properties for the purposes of long-term investment, are able to earn passive income which may come in the form of interest, dividend, or rental income.

    For these reasons, such companies are not eligible for these tax exemptions. However, this does not mean that such companies are permanently ineligible for any tax exemptions which exist in Singapore. Companies which are not eligible for the Start-up Tax Exemption Scheme may nevertheless claim partial tax exemptions.

Except these companies, all other companies are eligible for tax exemptions. For that, there is a criterion for full tax exemptions. In case, the companies do not meet the criteria, then they will be still eligible for partial tax exemptions.

4. 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.

Assume chargeable income = S$300,000
Chargeable income$ 300,000
Less: Partial Tax exemption
1st $10,000 @ 75%(7,500)
Next $190,000 @ 50%(95,000)(102,500)
Chargeable income (after exempt amount)197,500
Tax payable @ 17%33,575
Less: CIT Rebate ($33,575 x 25%, cap of $15,000)(8,394)
Net tax payable$ 25,181
Effective tax rate8.39%

5. Other Tax Incentive Scheme

There are various types of tax incentives available to companies and these are provided in the Singapore Income Tax Act (ITA) and Economic Expansion Incentives Act (EEIA). Some of the tax incentives available are listed in the table.

How Double tax treaty Prevent 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 the use of double taxation agreements (DTAs) with over 80 countries where Singapore firms can claim

Double Tax Relief (DTR), its the relief provided for under an Avoidance of Double Taxation Agreement (DTA) to reduce double taxation, in the form of a tax credit. It allows the Singapore tax residents to claim a credit for the amount of tax paid in the foreign jurisdiction against the Singapore tax that is payable on the same income.

Certain criteria must be fulfilled by a company that intends to claim DTR:

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

Companies that have been making a loss are not allowed to claim DTR it 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 DTR 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 DTR once this income has been taxed in Singapore.

Eric

Tip: What Happens if there is no Double Taxation Agreement (DTA) ?

Effective Year of Assessment (YA) 2009, a Unilateral Tax Credit (UTC) will be granted on all foreign-sourced income received in Singapore by Singapore tax residents from jurisdictions that do not have DTAs with Singapore.

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6 Discussions

  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 - Reply

      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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