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Corporate income tax in Singapore involves topics such as tax rates, years of assessment (YAs), and tax exemptions on corporate tax for start-up companies which have been incorporated in Singapore.

Singapore Taxation

Tax Exemption Scheme for New Start-Up Companies

A tax exemption scheme designed to provide assistance for companies that recently commenced operations was introduced by the Singaporean government for the 2005 year of assessment (YA). This scheme was intended to promote local business initiatives and help them grow.

Eligible companies benefit from this scheme for three YAs. During these YAs, the company receives a complete tax exemption on the first S$100,000 of normal chargeable income it earns. This exemption is then followed by a 50% exemption on the next S$200,000 of normal chargeable income earned. All income which is to be taxed at the prevailing corporate tax rate is regarded as normal chargeable income.

However, this scheme will be changed starting from YA 2020. From YA 2020, qualifying companies will receive an exemption of 75% on the first S$100,000 of normal chargeable income over the first three YAs. The second exemption of 50% on the next S$200,000 of normal chargeable income earned will remain intact. The initial exemption was reduced because other forms of support for such companies are being developed in tandem with this scheme.

Companies that are eligible for this tax exemption must have fulfilled certain qualifying conditions. The company must have been incorporated in Singapore. It must also have been a Singapore tax resident during the YA to which the exemption applies. During the basis period for the YA in question, the company cannot have more than 20 shareholders. Among these shareholders, all must be individuals unless at least one is an individual who holds a minimum of 10% of the company’s ordinary shares.

Two types of companies are permanently ineligible for the exemption. Companies whose primary business activity is investment holding and companies which undertake property development for investment, sale, or both cannot receive the exemption.

Annual Tax Filing Requirements

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E A S I E R • F A S T E R • B E T T E R

Corporate Income Tax Rates 

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.  Certain corporate income tax rebates, dividends paid or received, complete or partial tax exemptions, withholding taxes, and tax treaties may also change the total amount of tax payable.

Singapore’s corporate tax rates are among the world’s lowest. Corporate tax rates in Singapore are part of why the country is among the world’s leading destinations for corporate activity, business expansion, and investment.

Annual Tax Filing Requirements tax rates

Years of Assessment and Basis Periods 

Companies are taxed on all income earned during the preceding financial year. This applies to all local and foreign companies, regardless of their status as Singapore tax resident companies if they have it. The year in which a certain amount of income is assessed to tax is referred to as the YA. Tax is assessed after a taxpayer’s income and expenses over a financial year are examined. This financial year in question is the one-year period directly preceding the YA. The financial year is also known as the basis period.

As an example, income assessed to tax in YA 2019 is related to income and expenses over the 2018 basis period.

A company’s first YA is the YA that immediately follows the basis period containing the date of the company’s incorporation. It must be noted that neither a company’s YA nor basis period must be concurrent with a calendar year. The factors that determine the beginning and ending dates of a company’s YA include the date on which the company has chosen as its financial year end, as well as the closing date of its first set of accounts. Therefore, even companies that were incorporated at the same time could have different beginning and ending dates for their respective YAs and basis periods.

Maintenance of Financial Documents and Records

Every company is required to maintain records detailing its financial transactions. It must also retain accounting schedules and records, source documents, bank statements, and any other records containing information about the company’s business activity. These documents and records are to be kept for five years. They are important in filing an income tax return, as the Inland Revenue Authority of Singapore (IRAS) may require references to them.

Annual Tax Filing Requirements FAQs

What is Form C?2020-07-01T10:23:12+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. 

Why must Singapore have Tax exemptions on International air travel and shipping Income?2020-07-01T10:22:59+08:00

The countries to which these tax exemptions apply are heavily involved in shipping and air routes to and from Singapore. Therefore, these exemptions encourage the people of these countries to continue to engage with and conduct business activities in Singapore.

How to claim for tax exemption?2020-07-01T10:22:37+08:00

You are required to make a declaration in your income tax returns by giving the nature and amount of the foreign-sourced income that was remitted to Singapore. You are also required to complete the Declaration Form for Foreign-Sourced Income Received in Singapore From 22 Jan 2009 to 21 Jan 2010 (60KB) for submission to IRAS. Although you have to state the use of the foreign income in the declaration form, the usage of such foreign income will not affect the claim for tax exemption.

2021-02-04T16:54:12+08:00January 9, 2015|1 Comment
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