An Overview of the Singapore Tax System
Singapore is internationally recognised for its progressive, pro-business tax system. With low corporate and personal tax rates, a one tier tax system, double tax treaties and relief measures as well as the absence of a capital gains tax, there are few taxation systems in the world which can compete with the advantages Singapore has to offer businesses who choose to establish themselves in the city.
All persons (corporations, trustees, partnerships and bodies carrying on any sort of trade, profession or business in Singapore) are liable to pay tax on all profits arising from operations in Singapore and some forms of foreign sourced income which come about as a result of local operations.
Essential facts about the income tax system in Singapore
- Companies are mainly taxed on Singapore based income (that is income which is earned as a result of business operations in Singapore), this is known as a territorial taxation system. Foreign income is taxed when it is remitted into Singapore or deemed to be so unless it has already been taxed in a jurisdiction with headline rates of 15% at minimum. The process of determining the locality of income is deceptively simple and the rules vary depending on circumstance. When determining which profits are derived as a result of Singapore operations, authorities often place emphasis on the circumstances such as the kinds of transactions and the kind of profit arising from it.
- Corporate tax rates in Singapore are highly competitive to ensure a continual stream of foreign investment. The tax rate is capped at 17% and the one tier system means that revenue which has been taxed at the corporate level is not taxed again as dividends.
- To alleviate the Government’s reliance on income tax, the Goods and Services Tax (GST) was introduced in 1994. With a rate of 7%, Singapore has one of the lowest GST rates both regionally and internationally. This balanced out tax system increases resilience of government revenue in instances of volatile economic conditions and strengthens Singapore’s overall fiscal position.
- Singapore has a withholding tax which applies to royalties, interest, the rental of moveable objects, management and technical fees, and directors’ fees which are paid to non-residents (both individuals and companies).
- Companies are free to decide on the dates of their own financial year. Taxes are paid on a preceding year basis and the return filing deadline is set at 30 November.
- There is no capital gains tax in Singapore and as a result, there are no capital loss expense deductions.
- To help alleviate the tax burden of running a business, Singapore has more than 50 comprehensive tax treaties.
Taxes in Singapore
Although they have no capital gains, estate duty, or death taxes, Singapore has a number of taxes which may apply to your corporation including:
- Income tax for individuals and companies
- Property tax
- Motor vehicle tax (designed to curb congestion)
- Customs and excise duties (apply principally to tobacco, liquor and petroleum products)
- Goods and Services Tax (GST): an indirect tax which is included in the price of the goods and services purchased.
- Betting tax
- Stamp Duty
- Foreign worker levy and airport passenger service charge
Singapore tax rates
- Singapore corporate tax rate is capped at 17%. By keeping corporate rates competitive, Singapore continues to attract a good share of foreign investment. Singapore follows a single-tier corporate tax system, where tax paid by a company on its profits is not imputed to the shareholders (i.e. dividends are tax free).
- Singapore personal tax rates start at 0% and are capped at 22% (above S$320,000) for residents and a flat rate of 15% to 22% for non-residents.
- To increase the resilience of taxes as a source of government revenue, Goods and Services Tax (GST) was introduced in 1994. The current GST rate is 7%. The balanced mix of tax on consumption and income reduces the vulnerability of revenue intake to adverse changes in economic conditions and strengthens the resilience of Singapore’s fiscal position.
- Interest, royalties, rentals from movable properties, management and technical fees, and director’s fees paid to non-residents (individuals or companies) are subject to withholding tax in Singapore.
- For personal taxes, the tax year is the normal calendar year i.e. January 1 – December 31. Deadline for filing personal tax return is April 15. For corporate taxes, a company is free to decide on its financial year. Deadline for filing corporate tax return is November 30. Taxes are paid on a preceding year basis.
- Singapore has no capital gains tax. Capital loss expenses are correspondingly not allowed as deductions.
- Singapore has concluded more than 50 bilateral comprehensive tax treaties to help Singapore companies minimize their tax burden.
Governing taxation authority
The governing statute for both corporate and individual taxation matters in the city is The Income Tax Act of Singapore. The Inland Revenue Authority of Singapore (IRAS) is an umbrella body which conducts revenue collection across all key areas.
The IRAS is the main tax administrator for the Ministry of Finance and plays an important role in policy formulation by providing input on the technical and administrative implications. As part of an ongoing project to increase the resilience of government revenue and create an improved economic environment for businesses, the IRAS also monitors international economic developments and taxation trends which it uses to inform its own role in policy making. In addition to this, the IRAS represents the Singapore government in tax treaty negotiations, provides advice on the valuation of property and works to draft tax legislation.