Singapore Company Tax Incentives
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:
- the company must qualify as a small company; and
- 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 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.
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.
Non-Deductible Business Expenses
Examples of Deductible and Non-Deductible Business Expenses