Types of Tax
- Income Tax-Income tax is chargeable on income of individuals and companies.
- Property Tax-Property tax is imposed on owners of properties based on the expected rental values of the properties.
- Motor Vehicle Taxes-These are taxes, other than import duties, that are imposed on motor vehicles. These taxes are imposed to curb car ownership and road congestion.
- Customs & Excise Duties-Singapore is a free port and has relatively few excise and import duties. Excise duties are imposed principally on tobacco, petroleum products and liquors. Also, very few products are subject to import duties. The duties are mainly on motor vehicles, tobacco, liquor and petroleum products.
- Goods & Services Tax-GST is a tax on consumption. The tax is paid when money is spent on goods or services, including imports.
- Betting Taxes-These are duties on private lottery, betting & sweepstake.
- Casino Tax-The casino tax is a new tax levied on the casinos’ gross gaming revenue.
- Stamp Duties-This is imposed on commercial and legal documents relating to stock & shares and immovable property.
- Others-The two main taxes are the foreign worker levy and the airport passenger service charge. The foreign worker levy is imposed to regulate the employment of foreign workers in Singapore.
Who is considered to be Singapore Tax Resident and liable to Singapore Tax?
A person who is physically present or who exercises employment (other than as a director of a company) in Singapore for 183 days or more during the year preceding the year of assessment is regarded as a Singapore resident for tax purposes.
A company is regarded as resident in Singapore for tax purposes if its management and control are exercised in Singapore. In other words, the place where the directors of a company manage and control its business and hold their board meetings is the place where the company is deemed resident.
The question of whether or not a company is tax resident in Singapore is significant for a number of purposes, including:-
- 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.
For Singapore income tax purposes, a trust is generally taken to be resident where:
- the trustee of the trust is resident at any time during the year in which income is earned, or
- the management and control of the trust is in Singapore at any time during the year in which income is earned.
A registered business trust is considered resident in Singapore if:
- the trustee of the registered business trust, in its capacity as such, carries on a trade or business in Singapore, and
- the control and management of the business is in Singapore.
A partnership is resident in Singapore if the management and control of its business is exercised in Singapore.
An entry may be considered resident in more than one country by application of the relevant country’s domestic legislation. If this is the case, the tax treaty entered into between Singapore and the relevant country may contain a tie-breaker test to determine the country of residence.
In Singapore, income tax is charged on a preceding year basis. This means that the income from any source for any year of assessment is measured by the income from that source in the preceding year. In this regard, the concepts of year of assessment and the basis period for a year of assessment need to be understood.
Year of Assessment
The year of assessment is the year in which income tax is calculated and charged. Each year of assessment or statutory tax year begins on 1 January and ends on 31 December.
The basis period for a year of assessment is the period of income relevant to the year of assessment. The basis period for any year of assessment is the calendar year proceeding that year of assessment.
Eg. The basis period for the year of assessment 2010 is the period from 1 January 2009 to 31 December 2009 and it is the income of this period that is charged to tax in the year 2010.
Companies are allowed to adopt a different financial year other than a calendar year. A different basis period applies to businesses whose accounts are made up to a date other than 31 December.
Eg. The basis period for the year of assessment 2010 for a company with a June year end is from 1 July 2008 to 30 June 2009. In this case, the income in the period 1 July 2008 to 30 June 2009 is subject to tax in the year of assessment 2010.