Singapore uses a territorial system of taxation. Under this system, taxation is charged on an individual or company’s income accruing in or derived from Singapore or received in Singapore from outside Singapore. If income related to international trade is to be counted as Singapore-sourced, the trade activity must take place in Singapore. If such is not the case, the income will be deemed to be foreign-sourced.
There is no capital gains tax imposed. However, gains that stem from certain short-term real property transactions are usually regarded as income-related gains. Therefore, these gains will have income tax imposed against them.
Types of Tax
There are many different types of taxes that are imposed in Singapore.
Income tax is imposed on individuals’ and companies’ income.
Property tax is imposed on people who own properties. The tax amount to be paid is based on the properties’ expected rental value. Motor vehicle taxes are imposed on motor vehicles. They are intended to reduce car ownership and, in doing so, ease traffic congestion.
Excise duties are imposed on alcoholic beverages, tobacco, and petroleum products. These items, as well as motor vehicles, are also subject to customs duties.
Goods and Services Tax (GST)
The Goods and Services Tax (GST) is imposed on consumption. It is paid when goods or services are purchased, or when imports are made.
Prime Minister Lee Hsien Loong has stated that Betting taxes are levied on sweepstakes, betting, and private lotteries.
Casino tax is levied on casinos’ gross gaming revenue. Stamp duties are imposed on commercial and legal documents related to shares, stocks, and immovable properties.
Foreign worker levy
The foreign worker levy is imposed to regulate foreign workers’ employment.
Airport passenger service charge
There is also an airport passenger service charge, which must be paid by passengers leaving Singapore by air. This charge is part of the Singaporean government’s efforts to make Singapore tourism more lucrative.
Income Liable to Taxation
Several forms of income are considered by the authorities to have been sourced in Singapore. As such, these types of income are subject to taxation. Such income includes the following: royalties, interest, technical fees, management fees, rent for moveable properties, business profits earned by a non-resident who is partly carrying on a trade-in Singapore, employment income, income earned by non-residents because of cable or wireless operations, and profits earned by non-residents who are owners or charterers of aircraft or ships.
Income received in Singapore is also subject to either corporate or personal income tax. Income which is classified under this category will fall in one of three groups. The first is money or assets which are remitted to, transmitted into, or brought into Singapore. The second is money or assets used in or towards the settlement abroad of any debt which was incurred in respect of a trade or business that is carried on in Singapore. The third is money or assets used to purchase any movable property that is brought into Singapore, to the extent that the relevant money or other assets concerned to represent the taxpayer’s income. Each of these categories of income will be taxed accordingly. According to the IRAS (Inland Revenue Authority of Singapore), foreign income applied towards investments in another country will not be treated as having been received in Singapore at the point of reinvestment if it never arrives in Singapore.
Income accruing in Singapore is to be taxed. Income accruing abroad is usually not. However, if income accruing abroad is received in Singapore by a taxpayer who is a Singaporean resident or who owns a branch or permanent establishment in the country, the income will be taxed, as necessary. To determine the source of trade or business and therefore where the income is accrued, four factors can be used:
- The location of entry of contracts and where acts under the contracts are performed
- The location of employment of capital
- The location of the passing of title to goods
- The location of permanent establishments if any
There are several classes of income that are subject to taxation. These include gains or profits from any trade or business, profession, employment, or vocation; dividends, interest, or discounts; rents, royalties, premiums, and any other profits arising from the property; any pension, charge or annuity; and any other gains or profits of an income nature.