In addition, Singapore also has a simple method for filing taxes, which has incorporated an -electronic process since 1992. This method has lessened the dependency on the subjective expertise of individual tax officers and led to a prominent reduction in the level of corruption. Singapore, an island city-state in Southeast Asia, is primarily famous for being a tax haven because there are no capital gains tax in Singapore.
It is known internationally for offering a progressive tax regime with low Singapore tax rates and a slew of tax incentives. It is also considered wise to open up businesses or bank accounts in Singapore because of the ease with which they can be opened up, and no hassle being faced by individuals. It is also worthy to note that Singapore was graded with a Financial Secrecy Index value of 1,118. It was also given a Secrecy Score of 71 by the Tax Justice Network.
Despite all this, people still have misconceptions regarding Singapore company tax, and this deters worldwide entrepreneurs and investors who do not have access to actual information. We have compiled a list of the top 5 myths about corporate tax in Singapore, as given below:
- All Companies Are Required To File Their Audited Accounts There is a general belief among many entrepreneurs that all businesses must file their audited accounts with the Accounting and Corporate Regulatory Authority in Singapore (ACRA). This is not the case. Not all Singapore businesses have to undergo audit procedure before they file their annual account. Examples of this include Private Exempt Companies (PECs), who are free from filing audited account.
- Fear of Double Taxation: While incorporating a company in Singapore, or any foreign country for that matter, people are always fearful of double taxation, for example, first at the income level, and then at the personal level. Many people believe this to be common in Singapore too, but it is just a myth. With the help of a broad network of Double Tax Agreements (DTAs) that has a membership of over 74 countries worldwide, with Singapore being one of them, the threat of double taxation is minimized and a thriving platform for starting business is provided.
- Presence of Capital gain Tax: Another one of the common myths that surrounding the corporate tax in Singapore is that capital gain tax is present in Singapore just because it is present in most the jurisdictions in the world. They tend to believe that capital gain tax is also applicable in Singapore. Whereas, the truth is that there is no tax on capital and inheritance available under Singapore taxation.
- Taxes Are Applied To Capital Incomes And Earnings Abroad: Singapore’s published tax rates are also quite low. For Singapore’s top personal income tax, the first S$20,000 exempt from tax and the next S$10,000 are taxed at 2 percent. Little or no tax applies to capital incomes and earnings abroad.
- It Is Necessary To Pay Tax In Advance: To clear this misconception, it must be stated that in reality, corporate tax in Singapore is only assessed and paid on a yearly basis. This means that taxes are paid only after the financial year end.
Absence of Tax Exemption Schemes: People often falsely assume that there is no provision of tax exemption schemes in Singapore due to the low and already competitive Singapore tax rates.
Singapore, however, offers three types of tax exemption schemes. These are:
- full tax exemption for newly startup companies
- partial tax exemption scheme for all companies
- exemption for foreign sourced income
Other than these exemptions, however, it is true that it may be difficult to find exemption schemes in any other jurisdictions.