Singapore Tax Haven: Myths and Realities
Singapore Income Tax
Income tax in Singapore is divided into the corporate and personal. Every Individual and company in Singapore are required to pay income tax.
Singapore practices a one-tier tax system which means that company charged 17% as part of corporate tax rate. For individual, the personal tax rate range from 0% to 24%.
Unlike tax haven company where ZERO tax rate and no tax being paid. In Singapore every Individual and company is required to pay income tax.
Singapore Company Tax Incentives
Singapore’s government has for many years worked on its intricate tax policy to bring to the point at which it is today. The tax rate imposed on wealthy foreign investors is relatively low, at just 24% for those in the highest tax bracket. The corporate tax rate in the country is 17% of all chargeable income earned by a company, this rate could be further reduced through certain incentives which IRAS has put in place include the partial tax and full tax exemption for start-up.
There are also tax exemptions offered to certain foreign banks, global trading companies, and foreign funds. These tax incentives have done so in order to stimulate the level of business activity conducted in the country. The lower cost of conducting business activities in Singapore would thus draw the interest of many a business owner.
Today, many business owners from all over the world have come to Singapore in order to establish and operate a business here These incentives have always been known to be one which is pro-business not for tax evasion or tax avoidance purposes.
Tightening Financial Regulations
In terms of safety and security, Singapore is deemed as the financial capital of Southeast Asia. This is one of the reasons why companies tend to utilise Singapore’s existing regulations in order to legally circumvent the system. After all, banking laws have always been private and thus, no information can be leaked out in any instance.
However, most individuals are not aware that there are circumstances and situations where such things do occur i.e. banks have the responsibility to provide confidential information. The Singapore government has also passed new regulations that allow the country to give information in matters arising from criminal affairs even if such information is confidential and private in nature i.e. banking information. Thus, the birth of The Common Reporting Standard (CRS).
The CRS calls on tax authorities across the world to obtain information from their financial institutions and automatically exchange that information with other jurisdictions on an annual basis.
Since 1 January 2017, Singapore based Financial Institutions such as banks are required to:
If the company is NOT a tax resident in Singapore or a tax resident elsewhere, the information will be exchanged with other jurisdictions under the CRS. The information consists of the details of financial assets they hold on to behalf of non-resident taxpayers and the income derived therefrom.
Similarly, overseas Financial Institutes must identify account holders who are Singapore tax residents and report their financial accounts to IRAS through their respective local tax authorities.
Tax Havens & Singapore
The overwhelming consensus regarding Singapore is that the country is not only a tax haven, but also one of the world’s most prominent. Studies and lists from all over the world and verified by some of the world’s leading financial and tax experts are virtually unanimous in declaring Singapore as a tax haven.
A study by Zucman in 2018 ranked Singapore as the world’s third-most dominant tax haven. The Financial Secrecy Index released its own set of rankings in 2018 as well. These rankings put Singapore in fifth place, while ITEP’s 2017 study ranked it seventh. Singapore also serves as the Asia-Pacific headquarters for many major technology firms from abroad. This is due to its favourable tax policies and relatively low corporate tax rates, as well as the fact that Singapore can also serve as a pathway to other financially viable locations in the region such as Taiwan and Hong Kong.
However, despite the international stigma that comes with being a tax haven, having tax haven status is not necessarily bad for a country. Many of the countries and locations which are classified as tax havens enjoy excellent standards of living, high levels of citizen welfare, high development and per capita income levels, and much connectivity and accessibility with the rest of the world. Countries such as the Netherlands, Switzerland, Ireland, the United Kingdom, and Luxembourg are some of the world’s most developed and prosperous. Such is also true of Singapore.
Nevertheless, regardless of Singapore’s status as a tax haven, the fact that Singapore’s government has gone to such lengths to enhance its status as an international business centre and a hub for global commerce. This will only encourage business owners and investors from all over the world to continue to conduct business activities there.