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Singapore offers many benefits to foreign and domestic investors who want to start a business in Singapore. Among the benefits, one thing that makes Singapore stand out from the rest is its tax system, which is what this article is about.

Overview of Singapore Tax System

The most basic diversification of taxes, in general, is personal and corporate taxes. This is applicable in Singapore, too. First, let’s have a look at the corporate tax in Singapore. The highest tax rate a company could be taxed in Singapore is 17%. This is enticing for foreign business owners who want 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

As mentioned, Singapore practices territorial system of taxation. Meaning, 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 are foreigners, the income is considered foreign, as well. This should be considered when performing international tax planning.

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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 is 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 on motor vehicles

Corporate Tax in Singapore FAQs

Will Singapore double tax me if I already pay tax in another country?2021-02-16T17:31:42+08:00

It depends, if you are conducting international business and have paid taxes in a foreign country that has signed Avoidance of Double Taxation Agreement (DTA) with Singapore, Singapore will not double tax your income.

Which countries have signed Avoidance of Double Taxation Agreements (DTAs) with Singapore?2021-02-16T17:31:25+08:00

Countries like the USA, Malaysia, India, Australia, China, Indonesia, and Japan have signed DTAs with Singapore. View the full list of the countries here.

What are the Tax Forms that Companies must submit annually?2021-02-16T17:30:32+08:00

The Tax Forms that companies must submit every year are:

  • Estimate Chargeable Income (ECI)
  • Corporate Income Tax Returns
What is an Avoidance of Double Tax Agreement?2021-02-16T17:28:48+08:00

An Avoidance of Double Taxation Agreement (DTA) is an agreement signed between Singapore and another country (a treaty country) which serves to relieve double taxation of income that is earned in one country by a resident of the other country.

It makes clear the taxing rights between Singapore and its treaty partner on the different types of income arising from cross-border economic activities between the two countries. The DTA also provides for reduction or exemption of tax on certain types of income. Only Singapore tax residents and tax residents of the treaty country can enjoy the benefits of a DTA.

2021-02-16T17:41:37+08:00July 24, 2015|0 Comments
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