Corporate Tax

Corporate Tax

Singapore’s corporate tax rates and business-friendly policies are some of the contributing factors that make the city-state’s business sector an exceptional choice by investors. It’s safe to say that because of them, it became one of Asia’s major financial hubs. Take a look at the details to appreciate such level of convenience that only Singapore can offer.

Single-Tier Income Tax System

Singapore employs a single-tier tax system. Here, the taxes that are paid by business entities based on their income are final. That being said, all dividends are absolved from shareholders from further taxation. This particular system greatly simplifies corporate tax in Singapore codes and in the process, reduce the overall cost of compliance as well as administration for companies. Furthermore, it eliminates restrictions on the distribution of dividends from capital gains. Consequently, this can translate to higher dividend payouts for the shareholders who are involved.

Income Tax Basis Period

The Inland Revenue Authority of Singapore (IRAS) assess the total amount of tax (income, expenses, and so forth) during the financial year, which is also known as the basis period. It is basically a 12-month period that precedes the year assessment.

General Tax Exemptions

Corporate tax exemptions are open to all new companies except for those with principal activities that are involved in investment holding and/or undertake property development for sale, investment, or both.

Qualifying Conditions for exemption:

To qualify for tax exemptions for start up entities, a company must meet the following requirements:

  • Become incorporated in Singapore
  • Become a tax resident in Singapore
  • Have less than 20 shareholders that directly hold shares under their own names and involve one individual holding at least 10% of the issued ordinary sales of the company

Tax Residence

  • Individual tax residence
  • An individual can qualify for tax residence through a qualitative or quantitative exam. Through the former, a citizen or permanent resident is automatically regarded as a Singapore tax resident. This, even if he/she is physically away from the country on a temporary basis. However, the period of absence needs to be reasonable so he/she can enjoy company income tax in Singapore benefits and so on.
  • Foreign individuals who don’t have residency in Singapore can still avail tax residency under the quantitative exam, provided that they are physically present, or employed in the country for at least 183 days, regardless of the calendar year.
  • Company Tax Residence
  • For a company to enjoy tax residency, its control as well as management activities or operations need to be exercised in Singapore. As a general rule, the place of tax residence for a particular business entity is determined by taking note of the location where the board of directors regularly meet to formulate strategic policies and so forth.

What Makes Tax Residence Important

Achieving tax residency is important because as soon as an individual achieves such status, he/she can enjoy the benefits that are accorded under specific tax treaties between Singapore and other nations.

Determination of Taxable Income

The IRAS determines taxable incomes in accordance to corporate tax in Singapore laws and other guidelines that are indicated in the Income Tax Act. In general, the final taxable income is the amount that is achieved by factoring in qualifying deductions, incentives, relevant tax exemptions, capital allowances, and others.

Deductibility of Losses

In Singapore, there are cases when companies are allowed to offset trade losses that incurred against their statutory income. Along the the way, unutilised losses are permitted to be carried back or carried forward in an effort to offset against other incomes. It should be noted, though, that they are subject to certain conditions.

Capital Allowances (CA)

Capital allowances are deductions that can be claimed for wear and tear of fixed qualifying assets that are bought, then utilized for trade or business operations. The long list includes office equipment, machinery, and so forth. For taxation in Singapore purposes, they are referred to as plant and machinery.

Important Tax-related Dates

Filing Dates
Income tax returns (Form C)The 30th of November of each year
Withholding taxThe 15th of each month after payment (or deemed payment)
GST returns (GST F5)One month following the end of the government-prescribed accounting period, which can be 1 month (optional) or 3 months (standard).

 

Singapore Corporate Tax Advisory