What’s in this article
The two countries for the longest time have each been trying to top as the best place to do business in Asia by luring overseas investors mainly through their tax friendly procedures. This is alongside the use of ease of company incorporation measures and good communications as a tool to attract people to invest in their countries. The two countries have been having cutthroat competition for the supremacy of business in the region. However Singapore has fast been attracting the bulk of distant shareholders on its soil.
When it comes to corporate taxation Singapore Vs Hong Kong the corporate tax rate in Singapore is 17% while the corporate profits in Hong Kong is 16.5 for corporations profits and for the unincorporated companies it stands at 15%. This goes to show that Singapore keeps lowering its tax rates constantly in order to help maintain its competitiveness.
Taxes affect the decision of any person in the way of setting up business in an area. Singapore has a low efficient individual and also corporate tax rates giving it an advantage since the personal income tax rate begins at 3.5% going up to 20% for higher earners. However in Hong Kong salary tax begins at 2% and goes up to 17% for higher earners even though the net tax paid in Singapore is much lower than in Hong Kong.
See how you can Form A Singapore Company To Lower Business Tax here
Typically headline company tax rate in Singapore as is the case in many other authorities does not of necessity make available a precise suggestion of efficient corporate tax rate. This is because effective rate is more often than not lesser than the headline tax rate because of applicable tax exemptions and also tax incentives. With the application of these tax exemptions to the taxable income, the effectual tax rates for small size Singapore companies becomes considerably reduced in comparison with the corporate tax rate payable in Hong Kong. The valuable corporate tax rate for Singapore private companies goes up to 17% for companies that make profits of up to SGD 300,000. For any new corporate in Singapore will enjoy full tax exemption on the first S$100,000 in profits made for the first 3 years and thereafter 50% for the next S$200,000. Starting 2010 government up graded its fractional and full-tax exemption scheme for start-ups too while permitting start-ups to enjoy either Corporate Income Tax (CIT) rebates or SME cash grants.
Find out about Singapore Tax – A Summary of Singapore Tax Incentives here
All in all the Singapore government has as well set up many industry-specific tax incentives so as to persuade foreign investment as well as increase of the targeted industries in Singapore. What this tax structure does is that it permits SMEs to thrive and promotes entrepreneurs in setting up operations. Singapore and Hong Kong only tax their residents on domestic income which goes in agreement with the territorial taxation principle as opposed to other countries whose residents have to pay tax both on their home as well as foreign income. This factor has proved to be a great attraction for corporate to come and invest in either of the two countries due to their position of taxation.
However in the two countries vary in the way that they carry out territorial taxation since in Hong Kong there is need to carry out certain transactions outside the country so as to be able to enjoy tax exemption. This is as opposed to a Singapore corporation where to be let off of tax the transactional profit has to be kept outside the country. The two countries also have more tax benefits for companies by way of exempting any dividend that is received by a company in Singapore or Hong Kong being off the hook from corporate tax.
Because of their territorial tax systems, Hong Kong and Singapore can be able to pose as perfect location for a company occupied in trading, financing or licensing activities. In the event that such actions are put to a Hong Kong or a Singapore company, then the proceeds made through such actions need not be taxed in Hong Kong or Singapore as long as the physical goings-on are carried out not within these countries. Foreign tax liability can be passed off as well if no permanent enterprise is formed by such behavior in any other country.
All in all the current international tax planning both in Hong Kong and Singapore put forward thrilling new options. On the other hand, particularly specific features of the territorial tax system of these countries, mainly the intricacy of tax regulations and also practice in relation to the determination of the basis of the income have need of comprehensive planning and tax structuring ahead of the coming up of business and corporate structures involving Hong Kong and even Singapore companies.
FAQs
| Modes | How to e-File |
|---|---|
| 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. |
| 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. |
A company has to file a complete set of returns by November 30, the filing deadline, every year.
No, Hong Kong (16.5%) has lower corporate tax as compared to Singapore (17%).
There are several reasons why people choose to do business in Singapore and one of the main advantages is the ease of doing in the country and the ability to adapt in Singapore fast as a foreigner.
Yes, living in Hong Kong is more expensive than living in Singapore. According to the Economist Intelligence Unit’s cost of living report 2020, Hong Kong is the most expensive city in the world. A cup of coffee will easily cost around S$9.48 in Hong Kong; while in Singapore, it will cost about S$6.77 per cup.
Singapore tax is relatively low as compared to other countries because competitiveness is a decisive consideration undergirding its tax policy.
The corporate tax rate in Singapore is 17%.
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.
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.
Thai Citizen wanting to setup a Corp in either HK or Singapore.
Type of Business is online Pet Supplies Marketing. No products to be sold in either HK or Singapore…online sale only. All transactions are credit card sales. No physical presence in either country. It seems difficult to obtain a Merchant Account for a Thai Corp.
If you can help me please contact me.
Thanks
Dear Jerry,
You can go for our Incorporation package with Nominee director. We will also need to understand more about your business plan so to recommend the right kind of incorporation that best suit your business model.
Paul