Singapore Corporate Tax Guide
Singapore is often cited as the leading example of countries that continues to reduce corporate income tax rates and introduce various tax incentives to attract and keep global investments. Singapore has a single-tier territorial based flat-rate corporate income tax system. Effective tax rates as one of the lowest in the world and the general “business friendliness” of Singapore are the two important factors contributing to the economic growth and foreign investment into the city-state.
Single-tier income tax system
Since January 1, 2003, Singapore has adopted a single-tier corporate income tax system, which means there is no double-taxation for stakeholders. Tax paid by a company on its chargeable income is the final tax and all dividends paid by a company to its shareholders are exempted from further taxation.There is no tax on capital gains in Singapore. Examples of capitals gains include gains on sale of fixed assets, gains on foreign exchange on capital transactions, etc.
Corporate income tax rates and general tax exemptions
Singapore’s headline corporate tax rate is a flat 17%.
General Tax Incentives
Listed below are general tax exemptions/incentives currently available to Singapore tax resident companies. Once these tax exemptions are applied to the taxable income, the effective income tax rate for small-to-midsize Singapore companies is reduced significantly.
From YA2020 onwards, tax exemptions for newly incorporated companies in the first three consecutive YAs is as the following:
- 75% exemption on the first $100,000 of normal chargeable income
Newly incorporated companies will be exempted from 75% corporate income tax rate on the first S$100,000 taxable income for each of the first three tax filing years if they meet the following conditions:
- Incorporated in Singapore
- A tax resident in Singapore (Please see below the tax residency of the company)
- Has no more than 20 shareholders of which at least one is an individual shareholder holding at least 10% of shares.
- Further 50% tax exemption on taxable income of up to S$100,000
Newly incorporated companies are also eligible for a further partial tax exemption, which effectively translates to about 8.5% tax rate on taxable income of up to S$100,000 per annum. The taxable income above S$100,000 will be charged at the normal headline corporate tax rate of 17%.
Effective Corporate Tax Rate
The above general tax incentives mean very attractive tax rates for small-to-midsize companies. For example, a typical Singapore resident company with S$2,000,000 annual taxable income will be taxed as below:
Income tax filings for newly incorporated companies in the first three years:
Income tax filings after the first three years:
Corporate Income Tax (CIT) Rebate for YA 2020
The CIT rebate will be extended to YA 2020, at a rate of 25% of the tax payable, capped at S$15,000.
Corporate Income Tax (CIT) Rebate for YA 2020
Tax exemption scheme for new start-up companies (where any of the first 3 YAs falls in or after YA 2020)
Income tax filing due date
The due date for corporate tax filing for Singapore companies is 30 November (for hard copy forms) and 15 December (for e-filing).
The company has to file a complete set of returns including Form C, audited/unaudited accounts, and tax computation. The Form C is a declaration form for a company to declare its income whereas tax computation is a statement showing the adjustments to the net profit/loss as per the accounts of a company to arrive at the amount of income that is chargeable to tax. For more details, see annual filing requirements for Singapore companies guide.
Income tax basis period
In Singapore, corporate income is assessed on a preceding year basis. This means that the basis period for any Year of Assessment (YA) generally refers to the financial year ending (FYE) in the year preceding the YA. For example, in year 2018 you will be filing corporate tax return for your company’s financial year that ended anytime between January 1, 2017 to December 31, 2017. Your company’s accounts are prepared up to the FYE each year.
Withholding tax
Singapore has implemented a withholding tax law (on certain types of income) to ensure the collection of tax payable to non-residents on income generated in Singapore. The tax withholding does not apply to Singapore resident companies or individuals. Under the law, when a payment of a specified nature is made to a non-resident company or individual, a percentage of the payment has to be withheld and paid to Income Tax Authorities. The amount withheld is called the withholding tax.
For more details on withholding taxes, see Singapore withholding tax guide.
Industry specific and special purpose tax incentives
In addition to the general tax exemptions/incentives listed above, there are certain industry-specific and special-purpose income tax incentives and concessionary tax rates offered under the Singapore Income Tax Act. For an overview of these additional tax incentives, refer to industry-specific tax incentives in Singapore.
A company is considered a tax resident in Singapore if the control and management of the business is exercised in Singapore. “Control and management” is the making of decisions on strategic matters, such as those on company policy and strategy. Generally, the location of the company’s Board of Directors meetings, during which strategic decisions are made, is one of the key factor in determining where the control and management is exercised.
If the company has an executive director or key management personnel who is playing an important role in decision-making based in Singapore, it is also one of the key factors in determining where the control and management is exercised.
In general, a company is considered non-resident in Singapore if the directors manage and control the business and hold board meetings outside Singapore. This is true even if the day-to-day operations are taking place in Singapore. A company’s residence may change from one year of assessment to the next depending on the circumstances. A Singapore branch of a foreign company is generally not treated as a Singapore tax resident since the control and management is vested with an overseas parent company.
The basis of taxation for a resident company and non-resident company is generally the same with the exception of certain benefits available to resident companies.
- A Singapore tax resident company is eligible for income tax exemption scheme available for new start-up companies
- A Singapore tax resident company can enjoy income tax exemption on foreign-sourced dividends, foreign branch profits, and foreign-sourced service income under section 13(8) of the Income Tax Act with certain conditions.
- A Singapore tax resident company is entitled to benefits conferred under the Avoidance of Double Taxation Agreements (DTA) that Singapore has concluded with treaty countries.
- Please note that the place of incorporation of a company is not necessarily indicative of the tax residence of a company.
Singapore tax treaties
A tax treaty between two countries is generally an agreement that specifies how the income earned will be taxed by the authorities of each country when a company is involved in doing business in both countries. The main benefit and objective of a income tax treaty is to help businesses avoid double taxation of their income.
Singapore has concluded tax treaties with more 80 countries and the list continues to grow. The treaties reflect Singapore’s continual efforts to help businesses in relieving double taxation and to encourage and facilitate the trade and investment opportunities across-borders.
Effective from YA2009, Singapore has gone a step further to grant unilateral tax credits to Singapore companies. According to the new policy, all Singapore companies that earned income from countries that don’t have double tax agreement with Singapore, will be allowed a tax credit on their foreign-sourced income from those countries.
For more details, see Singapore tax treaties and double tax agreements guide.
Net income vs taxable income
A company’s income means gains or profits from any trade or business income from investment such as dividends, interest and rental royalties, premiums and any other profits from property other gains of an income nature.
As per the Income Tax Act of Singapore, corporate tax is imposed on the income that is A) accruing in or derived from Singapore; B) received in Singapore from outside Singapore.
Part A is the income that has a source in Singapore. Part B is the income from a source outside Singapore and received in Singapore. For Part B however, there are certain qualified exemptions commonly known as Exemptions On Foreign Sourced Income. For more details, see the taxation of foreign-sourced income guide.
A company’s net profit/loss alone does not provide an accurate picture of the taxable income. For instance, some of the expenses incurred by your company may not be deductible for tax purposes or some of the income received may not be taxable or it may be taxed separately as a non-trade source income. For more details, see calculating taxable income for Singapore companies.
Certain company income may be exempted from tax under the provisions of the Singapore Income Tax Act. Examples include general tax exemptions available to all companies, exempt income for certain industries such as shipping income derived by a shipping company, foreign-sourced dividends, branch profits and service income received by a resident company that satisfies the qualifying conditions, exemptions on qualified foreign-sourced income, etc.
Tax treatment of losses
In general, a company can deduct allowable expenses against the income for taxation purposes in Singapore. The loss can be carried forward indefinitely (subject to certain conditions), however, it must be deducted in the first available year where there is a statutory income. The deduction of the loss follows the “proceeding year” basis. It’s important to note that the losses can be utilised only as long as there is no substantial change in the shareholding and principal activities where applicable.