A company is resident in Singapore if its central management and control of the business is exercised there. Singapore-resident companies are generally taxed on their worldwide income; non-resident companies are taxed on their Singapore-source income only, which can prove attractive to international holding and trading companies.
Non-resident companies do not benefit from double tax treaties signed by the Singapore government.
The corporate income tax rate is 17% (decreased from 18% prior to 2010).
There is a partial tax exemption on normal chargeable income (excluding Singapore franked dividends) of up to S$300,000, as follows:
• 75% on the first S$10,000 of income; then
• 50% on the next S$290,000,
which gives a total exemption of S$152,500.
New start-up companies benefit from full tax exemption on the first S$100,000 of normal chargeable income for the first three consecutive years of assessment, plus a further 50% exemption (from tax year 2008) on the next S$200,000 of normal chargeable income (in both cases, excluding Singapore franked dividends). Therefore, a new start-up company can qualify for a total exemption of up to S$200,000 in each of the first three years of business.
International and regional headquarters can benefit from reduced corporate income tax rates of 10% and 15% respectively. There are also reduced corporate income tax rates and exemptions available to companies involved in shipping and maritime activities.
Calculation of Taxable Base
Taxable income includes:
• gains or profits from any trade or business;
• income from investment such as dividends, interest and rent;
• royalties, premiums and any other profits from property; and
• other gains of an income nature accrued in or derived from Singapore, or income received in Singapore from outside of the jurisdiction. Capital gains (e.g. gains realised on the sale of fixed assets, or on foreign exchange on capital transactions) are not liable to corporate income tax. Certain income is exempt from tax under the Income Tax Act; examples of exempt income include shipping income derived by a shipping company, and foreign-sourced dividends, branch profits and service income received by a resident company that satisfies the qualifying conditions.
Deductible expenses must have been wholly and exclusively incurred in the production of income, and must also be revenue in nature and not prohibited under the Income Tax Act. Capital expenditure is not allowable as a tax deduction. Non-deductible expenses include amortisation and depreciation (although capital allowances are allowed), bad debts, the write-off or acquisition costs of fixed assets, legal and professional fees, medical and motor vehicle expenses, and penalties and fines.
Filing Requirements and Payment of Tax
Companies are required to furnish Estimated Chargeable Income within three months of the end of their financial year to the Inland Revenue Authority of Singapore (IRAS). Income tax due can be paid either in one lump sum or over a maximum of 12 interest-free monthly instalments via the GIRO facility. Penalties for late or non-payment are 5% of the tax due, plus an additional 1% if the tax remains unpaid 60 days from the imposition of the 5% penalty.
Additionally, a company must file a tax return (Form C), along with audited or unaudited accounts and tax computation, with IRAS by end-November each year. Form C may be filed electronically. Note that these documents may also need to be filed with the Accounting and Corporate Regulatory Authority. The penalties for late filing or failure to file are a composition fee of up to S$1,000, followed by a summons to attend court for continued non-compliance. Failure to file the relevant documents for any year of assessment for two years or more will result in a penalty of double the corporate income tax owed, and a fine of up to S$1,000.
In the case of payments to non-residents or non-resident companies, tax must generally be withheld as follows:
|Tax rate||Nature of income|
|15%||- interest, commission, fee or other payment in connection with any loan or indebtedness
- rent or other payments for use of movable properties
- proceeds from sale of any real property by a non-resident property trader
|10%||- royalty or other lump sum payments for use of movable properties
- payment for use of or right to use scientific, technical, industrial or commercial knowledge or information
- distribution made by REIT to unit holder who is a non-resident other than an individual
|17% (standard corporate income tax rate)||- technical assistance and service fees
- management fees
|0% - 3%||- time charter and voyage charter fees
- bare-boat charter fees
Withholding taxes may be reduced or eliminated where a double tax treaty is in place. Such taxes must be paid to the IRAS by the 15th of the month following the date of the payment to the non-resident.
Goods and Services Tax (GST)
Companies must register for goods and services tax (GST) if their turnover for the previous 12 months exceeds SGD1m, or if the business reasonably expects its turnover will exceed SGD1m over the following 12 months. Voluntary registration is permitted, for example where the company intends to make taxable supplies, only supplies goods outside Singapore, or makes exempt supplies of financial services that are also deemed to be international services. A foreign company registering for GST must appoint a Singapore agent to act on its behalf on all its GST matters, including the accounting and payment of GST.
The standard rate of GST is 7%, and applies to most sales of goods and services made in Singapore. Exports and related international services are zero-rated. Financial services and the sale or lease of residential properties are exempt from GST.
Taxation of Operations of Foreign Business Entities
Branches located in Singapore do not qualify for tax and other incentives available to Singapore businesses; moreover, the parent company remains liable for a branch’s debts or losses. However, registering a subsidiary as a limited liability company enables the subsidiary to have access to the same tax and other incentives as are available to Singaporean companies, as well as removing any obligation on the parent as regards a subsidiary’s debts and losses.
International and regional headquarters located in Singapore can benefit from reduced corporate income tax rates of 10% and 15% respectively, compared to the standard tax rate of 17%. There are also reduced corporate income tax rates and exemptions available to companies involved in shipping and maritime activities.
Qualifying foreign investment funds that are managed by a Singapore-based fund manager are tax exempt on gains, dividends, profits and interest from designated investments such as stocks, shares and bonds. For these purposes, a qualifying foreign investment fund is one that does not have a presence in Singapore; is in the form of companies, trusts or individual accounts; and is not 100% beneficially owned by Singapore-resident investors (whether individuals or companies) or by non-residents’ Singapore-based permanent establishments.