A Short Guide to Corporate Taxing in Singapore

Singapore is a clean and safe city offering quality lifestyle. Singapore’s leading appeal for businesses is its attractive tax systems for both individuals and corporate entities, and it is one of the leading international financial centres in the region. Incorporating a company into Singapore can provide a tax efficient corporate structure conducive to conducting international business.

Corporate Income Tax in Singapore is assessed and calculated on the basis of accrued income earned or received during a financial year. Newly incorporated companies in Singapore can also have many tax exemptions and concessions, and you may even get to enjoy tax free air fare.

Some of which are as follows:

• For the first three years for income less than one hundred thousand dollars ($100,000) threshold attracts zero percent (0%), meaning no tax is payable for income of $100,000;
• For companies earning income above $100,000 but below $300,000, the tax rate is 8.5%; and
• Anything above $300,000 will be taxed at a fixed rate of 17%.

However, please note that this tax exemption scheme is for the first two years and where at least ten percent (10%) of the shareholdings should be owned by an individual person. But what happens after three years?

• You still get to enjoy partial tax exemption for income less than $10,000. The tax rate is at 4.25%;
• For income levels from $10,000 to $300,000, tax rate is at 8.5%; and
• Anything above $300,000 is at a flat rate of 17%.

With such low tax rates, companies can enjoy a lot of time and cost savings from such an attractive corporate tax system. Moreover, in a move to attract foreign investments and repatriation from foreign countries, the government of Singapore introduced special reduced tax rates for dividends, business profits from branch offices and income from foreign sources, earned on services performed outside Singapore.

Apart from that, Singapore has an extensive double tax treaty network. Its tax system is relatively stable and straight-forward as compared to some other economies of the region.

Capital Gain Tax

Although gains of capital nature are not taxable in Singapore, yet the gains that are considered to be revenue or income are taxable. A company making such gains can be subject to tax at the flat rate of 17% while an individual shall be taxed at the rate of 20%.

Dividend tax

Singapore tax structure is based on one-tier tax premise. One-tier taxation means that the income once taxed shall not be subject to tax twice. In case of dividends, as corporate profits are already taxed and dividends are paid out of those corporate profits, these are not taxable when paid out to the shareholders. Even shareholders are not required to declare such dividends in their annual income tax returns.

To know more about the Singapore tax system and take guidance for lowering your corporate tax rate, you should consult the accounting firms in Singapore. There are many bookkeeping and accounting service in Singapore, who can structure the most efficient tax strategy according to your business’ specific requirements.