Benefits of Singapore Business Taxation

Corporate Tax

Singapore’s business enjoys one of the planet’s lowest corporate taxes – only 17%. For comparison: in the US, corporate taxes may reach 40%; in Australia, it is 30% while Asia’s average is 22%. Such outstanding tax policy helps Singapore to lure hordes of investors and entrepreneurs and develop the country’s startup ecosystem. BERI’s report (2015) praises Singapore for having the best investment potential. 17% aren’t the final rate as well. Companies can get it decreased thanks to lavish governmental tax incentives and rebates.

• Tax rebate for new startups with limited liability: pay 0% for the first earned 100k SGD (during first 3 consecutive years) and only 8.5% for the next earned 200k SGD. Only firms registered as the Private Limited and having no more than 20 shareholders (during the relevant accounting period) can qualify for this rebate. The shares mustn’t be held by corporations, but physical bodies, and at least one of them must hold 10% of the issued shares. After exceeding the limit of first 300k SGD of revenue, the company’s income will be taxed at the rate of 17%.
• If the company’s normal changeable income doesn’t exceed 300k SGD, it gets 75% of first 10k SGD and 50% of the rest (290k SGD of income) exempted (thus, you save up to 152.5k SGD).
• The government regularly comes up with various corporate tax rebates: for example, during 2016-17, companies can get a one-time rebate of 30% (but no more than 20k SGD per the accounting period).

The significant feature of Singapore corporate taxation is its one-tier structure: after the company pays its corporate tax, its revenue is no longer subjected to the dividend tax.

Personal Income Tax

Taxation of personal incomes is based on the principle of tax residence (it differs from the country residence):

• Tax residents (citizens, Singapore Permanent Residence, and foreigners working in Singapore longer than 183 days a year) enjoy one of the world’s lowest income taxes. The rate starts from 0% for those whose salary is no more than 20k SGD a year. Next 10k SGD will cost you 2%, another 10k SGD – 3.5%, then 7% for the next 40k SGD, and so on. The maximum fixed rate is 20% today, and it is for those who earn more than 320k SGD a year. The government plans to increase this “rich” rate to 22% in 2017, but even then Singapore’s personal income tax for top earners will remain among the world’s lowest. For comparison: it is more than 50% in Japan and Finland, 45% in Australia, 40% in the US while Asia’s average is 27%.
• Incomes of non-residents (individuals who live and work in Singapore for a period shorter than 183 days a year) are taxed at the flat rate of 15%.
• Individuals who spend in Singapore no more than 60 days a year are tax exempts.

Capital Gain Tax

The traditional capital gain tax on profits got from selling properties (or foreign exchange) isn’t imposed in Singapore unless a company buys and sells commercial property regularly and professionally. Companies having such specialisation may be taxed. The authorities will analyse every situation based on the frequency of deals, period of holds, and reasons for such deals. FYI, as there is no capital gain tax, your capital loss won’t result in getting the tax deduction as well.

Goods and Services Tax

• Singapore’s GST is among the lowest on our planet – only 7%. For comparison: it is 27% in Hungary, 25% in Norway, Denmark and Sweden, 20% in the UK and France, and 18% in Israel.
• This tax is applied to the services and goods that are offered inside Singapore or imported. Export goods and such items as property leasing and selling, financial services, and precious metals are tax exempt.
• Companies whose yearly sales turnover is expected to reach 1 million SGD must undergo registration for paying the GST. After registration, the value of this tax is added to the cost of services and products, and the difference is taken by the IRAS.
• Registering your business for paying the GST is positive for your company’s image: doing so, you inform your customers that your business is well-established and reliable.
• There are certain schemes that allow companies to claim the paid GST afterwards. But if you wish to avoid paying the GST and claiming back it afterwards, it is reasonable to buy goods and services from sellers who aren’t GST-registered.

Avoidance of Double Taxation

Over 70 countries have signed treaties with Singapore for avoiding double taxation. If a Singaporean company earns a profit abroad and pays the relevant tax there, the same tax isn’t imposed again in Singapore and the opposite. If the country you earned your income in doesn’t have such an agreement with Singapore signed, the company is allowed to claim tax exemptions from the Ministry of Finance on a case-by-case basis.

Group Relief

Companies that are parts of one group and have synchronised accounting periods can transfer their losses between each other. For instance, if the company bears losses, it can pass its expenses (unabsorbed allowances or unutilised donations) to any other company of the same group. The Group Relief isn’t intended for investment allowances or losses having a foreign source.

Other Taxes Applicable to Doing Business

• Withholding Tax. If a company/individual makes a special payment (royalty, interest, rental, and so on) to a non-resident, the withholding tax must be paid: a certain percentage of the amount is withheld in order to be submitted to the IRAS afterwards. This way, the IRAS ensures that Singapore-sourced profit of non-residents is taxed.
• Excise and Import Duties. Companies that are specialised in such “excise” goods as tobacco, petrol, liquors or motor vehicles, will have to pay the excise and import duties. Singapore follows a free port policy, and, therefore, the list of excise goods is very short. 
• Stamp Duty. A company that issues legal/business documents concerning shares and real estate (such as lease agreements, transferring shares, mortgages etc.) must pay the Stamp Duty.
• Foreign Worker Levy. A Singaporean company that hires a foreigner holding either the S Pass or the Work Permit must pay a monthly levy for such worker based on the level of his/her expertise and skills. Such measure was intended to reduce the influx of under-skilled foreigners.