Singapore Corporate Tax Guide
Singapore is well known for providing a wide range of tax incentives to different types of businesses and individuals.
The purpose of the Singapore tax incentives is to attract more foreign investment and facilitate the businesses in expanding their operations. The country is using a flat-rate corporate income tax system.
Such kind of low tax rates has made Singapore a leading name in business-friendly countries. It also contributes to the overall economic growth of the country. The purpose of this article is to discuss the tax rates and tax incentives in Singapore.
What is the Single-tier Income Tax System?
The single-tier income tax system was adopted by Singapore in 2003. It means that there is no double taxation on shareholders. In other words, the tax paid by the company on the chargeable income is the final tax.
The dividends paid to the shareholders by the company are also exempt from tax in this system. Other examples of Singapore tax incentives include no taxation on capital gains.
Flat Tax Rate
The primary corporate tax rate in Singapore is a flat 17%. Over the years, the income tax rate in Singapore has gone down quite significantly to attract more foreign investment.
However, you should remember that this kind of headline income tax does not represent the entire amount of tax that a company has to pay because there are certain types of taxes that are only applicable to certain industries.
Singapore Tax Incentives for Corporate
There are many different tax incentives available in Singapore. Once these incentives are applied to the taxable income of Singapore, the final tax amount is significantly reduced. Following are the major incentives available from the year 2020 and onwards:
- Companies can claim 75% tax exemption on the first $100,000 of the chargeable income.
Under this tax scheme, the newly-incorporated companies can get up to 75% exemption from the corporate income tax rate on the first S$100,000 of taxable income for the first three years of assessment. Companies that are incorporated in Singapore and run by a tax resident of the country are eligible for this scheme.
- Companies can get 50% tax exemption on the taxable income of up to S$100,000
This tax incentive is an extension of the previous scheme. It allows companies to obtain a further exemption of 50%, which means an 8.5% tax rate on the income of S$100,000 per year.
Following are some other important factors to keep in mind about the corporate tax system in Singapore:
1. Income Tax Due Date
The last date for filing corporate tax in Singapore is 30 November for forms and 15 December for online tax filing.
Generally, companies that hire the services of accounting and audit firms in Singapore do not have to worry about these deadlines, as professional accountants are fully capable of handling these important business functions and making sure that no important deadline is passed for filing the taxes.
2. Income tax basis period
According to Singapore law, the corporate income tax is calculated on the basis of the previous year. This year is typically referred to as the Year of Assessment (YA) or the financial year.
3. Withholding Tax
The withholding tax law is relatively new in Singapore. It is applicable to some types of income to make sure that the non-residents are paying their taxes in Singapore. However, tax withholding is not applicable to Singapore resident companies or individuals.
4. Industrial Taxes
There are many different taxes as well as tax incentives that are applicable to certain types of industry and special purposes. A business owner has to manage a variety of aspects in a business, so it can be challenging for them to keep up with the taxation procedures.
However, by relying on audit firms in Singapore, you will be able to streamline this process and ensure maximum compliance with the rules and regulations.
5. Tax Treaties
There are many different taxes as well as tax incentives that are applicable to certain types of industry and special purposes. A business owner has to manage a variety of aspects in a business, so it can be challenging for them to keep up with the taxation procedures.
However, by relying on audit firms in Singapore, you will be able to streamline this process and ensure maximum compliance with the rules and regulations.
6. Net Income Vs. Taxable Income
Every business owner should be clear about the difference between net income and taxable income. According to the Income Tax Act of Singapore, corporate tax is only applicable to the taxable income that is derived from Singapore or received from outside Singapore.
In a Nutshell
These are some of the many important aspects that you should know about the corporate tax system in Singapore.
The good thing is that there are professional audit firms in Singapore that provide reliable services to a wide range of companies in Singapore to help them in getting suitable tax incentives and complying with the tax regulations. For more information, feel free to get in touch with us.
