Singapore is considered a tax haven due to its low tax rates and other benefits for foreign investors. Residents are subject to a progressive personal income tax. The highest tax bracket is applied to income over S$320,000 (Singapore dollars, or SGD), and the top marginal rate is 22% through tax year 2023. The highest marginal rate is 24% with an additional top bracket for income over S$1 million starting in the tax year 2024. Singapore generally levies no capital gains tax.
This island city-state has become a global hub for international investment and commerce due to its tax policy and advantageous location, which allows companies looking to expand into emerging Asian economies to enter the market.
Resident vs. non-resident companies
A company can be either a resident or a non-resident in Singapore. When determining residency, the Inland Revenue Authority of Singapore (IRAS) looks at the company’s place of control and management, or more specifically, the place where strategic decisions are made. This implies that a company’s incorporation location is not always its place of residence.
For instance, a business may be incorporated in Singapore, but if decisions are made in another country—for example, Hong Kong or London—it may be regarded as non-resident. Where the business holds its Board of Directors meetings is one, though not always the only, factor in determining residency.
Refer to Singapore company registration for more information.
Singapore’s Corporate Rates
In Singapore, the corporate income tax rate is 17%. However, the Singapore Inland Revenue Authority may implement additional incentives that would reduce the effective corporate tax rate.
For their first three years of operation, start-up companies in Singapore are eligible for a tax exemption of up to S$125,000 on the first S$200,000 of income. Companies must have a maximum of 20 shareholders and be incorporated in Singapore to be eligible for the startup tax exemption. There must be at least one individual shareholder holding at least 10% of the shares if none of the shareholders are individuals.
Companies may claim the Partial Tax Exemption for Companies if they haven’t already claimed the Tax Exemption for New Start-Up Companies. This allows a maximum S$102,500 exemption on the first S$200,000 of chargeable income.
Tax Breaks
Businesses in specific industries are also eligible for tax exemptions in Singapore. Tax breaks are available to offshore funds, international trading companies, and qualifying foreign banks. Payments made by banks to non-residents based on agreements that go into effect between April 1, 2011, and December 31, 2026, are exempt from withholding tax.
Certain types of income, such as dividends, gains, profits, and interest from conventional investments like deposits, bonds, shares, stocks, and securities, are also free from taxation for qualifying offshore funds.
If they meet the requirements of Singapore’s Global Trader Programme, global trading companies can benefit from five years of concessionary tax rates ranging from 5% to 10%. Companies with a track record of successful international trade are usually granted Global Trader status by Singapore.
Start-Up Tax Exemption (SUTE) Scheme
For the first three consecutive years of assessment, newly incorporated companies are eligible for a tax exemption under the Start-Up Tax Exemption (SUTE) Scheme.
For the first three years of assessment, newly incorporated companies that are tax residents of Singapore are eligible for a 75% tax exemption on the first $100,000 of chargeable income and a 50% tax exemption on the next $100,000 of chargeable income.
All of the following requirements must be met by these businesses:
- The business needs to be incorporated in Singapore.
- For the year of assessment, the company has to be a Singaporean tax resident.
- There can be no more than 20 shareholders in the company. Individuals must either hold at least 10% of the company’s common shares or at least one shareholder must be an individual.
- Investment holdings and property development for investment, sale, or both cannot be the company’s primary business activities.
A Partial Tax Exemption (PTE) Scheme
The company in question can continue to take advantage of the Partial Tax Exemption (PTE) but is no longer eligible for SUTE after the first three years. Under this scenario, the first $10,000 of chargeable income is exempt from taxes at a rate of 75%, and the remaining $190,000 of chargeable income is exempt at a rate of 50%. Therefore, the company’s maximum exemption for each assessment year is $102,500 (i.e., 75% x $10,000 + 50% x $190,000).
When and How Do I Need to File Corporate Taxes?
By November 30, companies in Singapore are required to file all of their corporate tax documentation online. Follow these four steps to file and pay your corporation taxes correctly. After your taxes are filed, IRAS will send you a Notice of Assessment (NOA), which is essentially a formal tax bill that outlines your income that is chargeable and the amount of tax that must be paid. If the business disagrees with the NOA, it may choose to object to the IRAS tax assessment.
File ECI
If you are not eligible for an exemption, you must first file the Estimated Chargeable Income (ECI) form. This form gives IRAS an estimate of the company’s chargeable income, and it must be filed within three months of your company’s Financial Year End.
If a business has less than S$5 million in annual revenue and no estimated chargeable income for the YA, it is not required to file an ECI. All businesses are required to electronically file their ECI starting in YA 2020. This can be accomplished via the IRAS-maintained myTax Portal.
At this point, depending on the ECI submission or non-submission, IRAS will issue a Notice of Assessment.
File Form C-S
The next step is to use the myTax Portal to file your annual income tax return with IRAS. There is a difference between the two documents. The Income Tax Return provides information about the company’s actual income, whereas the ECI is only an estimate of that income.
Put Form C-S in the file.
Every company, including those that experienced a loss, are being wound up, or are applying to be struck off, is required to file an income tax return each year. Usually, an organization files its income tax return using Form C, which requires the submission of financial statements, a summary of the procedures used to calculate the tax bill, and additional supporting documentation.
If a business meets the following four requirements, it may be eligible to submit a simplified Form C, also known as Form C-S:
- It is established in Singapore.
- It generates no more than S$5 million in revenue in a year.
- The standard corporate tax rate of 17% is applied to its income. This implies that, unlike in certain promoted industries, the business cannot profit from a lower tax rate.
- It makes no claims regarding any special programs, like foreign tax credits or investment allowances.
Businesses that operate on a smaller scale and generate less than $200,000 in revenue annually may choose to file Form C-S (Lite) instead.
If a company is dormant—that is, if it has no revenue for the year and doesn’t operate—it can file the Form C-S/C for Dormant Company in instead of the full Income Tax Return.
Pay Corporate Tax
Within 30 days of the NOA’s date, the company pays the assessed corporate tax if it has no objections to the IRAS’s tax assessments. Interbank GIRO, online banking, checks, and telegraphic transfers are all accepted forms of payment.
A company may be subject to a fine equal to 5% of the assessed corporate taxes if it does not pay the assessed corporate tax on time. For each month the tax is not paid, there are additional penalties of 1%, for a maximum penalty of 12%. In more serious situations, IRAS might take legal action to recover the unpaid tax.
Tax treatment of losses
In Singapore, a business can generally deduct allowable expenses from income for taxation purposes. Subject to certain restrictions, the loss can be carried forward indefinitely; however, it must be subtracted in the first year when there is a statutory income. The “proceeding year” basis is used for the deduction of the loss. It’s important to remember that the losses can only be used if the principal activities and shareholding, if applicable, do not significantly change.
BEPS 2.0 effect on Singapore’s tax rate
Large multinational enterprises (MNEs) with headquarters in Singapore will be subject to a minimum effective tax rate of 15 percent starting on January 1, 2025, according to the country’s Budget 2023.
Through the implementation of a global minimum tax rate, the Base Erosion and Profit Shifting Initiative, or BEPS 2.0, wants to ensure a more equitable distribution of tax rights on large multinational enterprises. These changes are a part of this initiative. Base erosion is the practice of businesses using tax strategies to move profits to artificial locations with low or no tax rates by taking advantage of gaps in the tax laws.
The Organization for Economic Co-operation and Development (OECD) collaborated to deal with tax evasion, resulting in BEPS 2.0. In October 2021, Singapore was one of 130 jurisdictions that became a part of this agreement.
Multinational enterprises (MNEs) that generate consolidated annual revenues of EUR 750 million (US$797 million) or more will be required to pay a 15 percent tax on profits made within the jurisdiction in which they operate as of 2025.
Tax Evasion
Tax evasion is a major problem. This happens when an organization or person knowingly gives IRAS inaccurate or incomplete information in order to lower their tax liability or make them eligible for refunds and credits that they aren’t entitled to. Tax evasion is a severe criminal offense in Singapore, where IRAS thoroughly looks into any suspected tax evasion cases. Typically, an investigation takes 15 to 24 months to complete.
An IRAS investigation may involve conducting extensive searches of a company’s premises or making surprise visits in order to obtain accounting records and other relevant paperwork, as well as obtaining and/or verifying information from third parties (such as banks and financial institutions).
IRAS may impose the following penalties if it finds that the company intentionally intended to avoid paying taxes and that the income tax returns were falsely declared:
- Financial penalties of up to 400% of the tax undercharged.
- Fines of up to S$50,000.
- Imprisonment of up to 7 years for the guilty party.
Namaste UI collaborates closely with clients to develop tailored guest posting strategies that align with their unique goals and target audiences. Their commitment to delivering high-quality, niche-specific content ensures that each guest post not only meets but exceeds the expectations of both clients and the hosting platforms. Connect with us on social media for the latest updates on guest posting trends, outreach strategies, and digital marketing tips. For any types of guest posting services, contact us on info[at]namasteui.com.