There are many benefits that the country of Singapore offers to foreign and even domestic investors and people who are in the need of starting a business. The country’s government is open and honest, the economic climate is very friendly for newcomers and with a GDP per capita of $64,584 (data for the year 2013), it is one of the richest countries in the entire Asia. In terms of the economy, there’s one thing which makes Singapore stand out from the rest and that is its tax system, which is ultimately what this article is about.
The most basic diversification of taxes in general is to personal and corporate taxes. This is applicable in Singapore, too. Let’s first have a look at the corporate tax in Singapore. The highest tax rate you could be subject to is 17%. This is enticing for foreign business people who wish to run a company in a more tax-friendly environment. The tax policy for corporations is single-tier, meaning the shareholders of the company do not pay the tax twice (capital gains such as dividends and the like are not taxes, the corporate tax is only imposed on the revenue arising from the corporation’s activities itself). The mentioned tax rate only pertains to corporations whose revenue exceeds the threshold of 300,000 SGD (Singapore dollars). If the revenue is below that, the tax rate is only 8.5%. In addition, foreign-sourced income, which has not been brought into Singapore, is not taxed at all.
Territorial Basis of Taxation
In accordance with what’s been mentioned above, Singapore as a country is a follower of the territorial system of taxation. This means that companies and even individuals pay taxes merely on the income sourced in Singapore itself. If the income is sourced outside of the country and is not brought into it, it does not count and the tax on such an income is not imposed. Whether the income is considered foreign or domestic depends on the parties of the transaction who give rise to the income. If both of them are foreigners, the income is considered foreign, as well. This should be taken into account when performing international tax planning.
Various Types of Taxes
One classification of taxes is based on whether a company or an individual pays the tax. However, taxes may also be classified with regard to what is actually taxed, not who pays the tax. In this respect, we can say that there exists income tax, property tax, estate duty, motor vehicle taxes, customs and excise duties, goods and services tax or GST for short, betting taxes, stamp duty, foreign worker levy and the airport passenger service charge in Singapore. What the individual taxes are imposed upon is, in most cases, obvious from their names. Estate duty was abolished in 2008 and the respective law regulating this tax is no longer in effect. If we take a closer look at the customs and excise duties, we find out that there are only a small selection of products that the excise duties are imposed on. These include tobacco, liquors and petroleum products. Customs duties are mostly on these products and also on motor vehicles.
Categories: Corporate Tax in Singapore