Singapore Taxation System
Singapore economy is based on free enterprise, with no restrictions on foreign ownership of a business. The repatriation of profits and the import of capital are freely allowed. Singapore has a low corporate tax rate of 17% with effect from the year 2009 (or YA2010) onwards compared to other leading economies in the world. A company is taxed at a flat rate on its chargeable income and capital gains are not taxable. It includes 3 main types of tax, namely, Corporate Income Tax, Personal Income Tax, Goods and Services Tax.
Corporate Income Tax
The Singapore tax system is territorial. Income tax is levied on the net income of companies from sources within Singapore and on foreign source income if remitted into Singapore. Non-resident Singapore companies and businesses are taxed on the same basis.
Singapore has tax treaties for the avoidance of double taxation with more than 60 countries.
A one-tier corporate tax system that results from the income tax payable on the normal chargeable income of a company is a final tax and shareholders will not be taxed on such dividend income.
A person (known as the payer) who makes payment(s) of a specified nature (e.g. Royalty, Interest, Technical Service Fee, etc.) to a non-resident company or individual is required to withhold a percentage of that payment and pay the amount withheld (called ‘Withholding Tax’) to IRAS.
- Withholding tax rate on payments to non-resident company > range 10% to 15%
- Withholding tax rate on payments to non-resident individual > range 10% to 22%
No levy of withholding tax on dividends, There is no capital gains tax imposed in Singapore, Tax losses can be carried forward and set off against future tax profits, Filing of Estimated Chargeable Income within three months from the company’s financial year-end and Filing of Income Tax Return will not be later than 30 November of each year.
- Overall company tax rate is a flat 17%
- Tax Exemption Scheme for new start-up companies (for three consecutive years)
- Partial Tax exemption for existing companies
- Corporate Income Tax (CIT) Rebate (According to Yearly Budget Announcement from Singapore Government)
|Tax rate on corporate profits for up to 200,000 SGD (Tax Exemption Scheme for New Start-Up company) *WEF YA2020||6.4%|
|Tax rate on corporate profits for up to 200,000 SGD (Partial Tax Exemption Scheme for existing or not eligible for New Start-Up company) *WEF YA2020||8.4%|
|Tax rate on corporate profits above 200,000 SGD||17%|
|Tax rate on capital gains accrued by the company||0%|
|Tax rate on dividend distribution to shareholders||0%|
|Tax rate on foreign-sourced income not brought into Singapore||0%|
|Tax rate on foreign-sourced income brought into Singapore||0 – 17% subject to conditions|
Personal Income Tax
All income derived from Singapore is liable to tax. Generally, overseas income received in Singapore by an individual is not taxable and need not be declared in his/her Income Tax Return. This includes overseas income paid into a Singapore bank account. Overseas income is taxable in Singapore if:
- It is received through partnerships in Singapore; or
- Individuals’ overseas employment is incidental to Singapore employment. That is, as part of the work in Singapore, you are required to travel overseas.
- Individuals are employed outside Singapore on behalf of the Government of Singapore.
You have a trade/business in Singapore and you are carrying on a trade/ business overseas which is incidental to your Singapore trade.
Should your gains from your overseas employment be taxed in a foreign country, you may apply for double taxation relief, to avoid being taxed twice on the same income.
Individuals are either “resident” or “non-resident” in Singapore tax purposes. Generally, a person is resident if he or she is physically present or exercises employment in Singapore at least 183 days in a calendar year or continuous period of at least 183 days straddling two years or continuously for three consecutive years.
Regional representatives based in Singapore and employed by the representative office of an overseas company may be taxed concessionally on income pro-rated based on days spent in Singapore provided certain requirements are met. However, benefit-in-kind provided in Singapore are fully taxable.
Income derived from short-term employment of 60 days or less is exempted from tax.
60 days rule does not apply to a director of a company, a public entertainer or exercising a profession in Singapore. Professionals include foreign experts, foreign speakers, queen’s counsels, consultants, trainers, coaches etc.
When a foreigner’s contract for work is about to end or decide to work for another company or plan to leave Singapore for more than 3 months, the employer must inform Inland Revenue Authority of Singapore (“IRAS”). To ensure the foreigner pay all taxes before departure from Singapore, the employer is required to withhold payment of all monies (including salary, bonus, overtime pay, leave pay, allowances, gratuities, lump-sum payments, etc.) due to you from the day you gave notification of your intention to leave the job or depart from Singapore.
Personal Income Tax Rates
The income of tax residents after deducting expenses, donations and tax reliefs are subject to income tax at progressive rates ranging from 0% to 20%. The chargeable income of first S$20,000 is taxed at zero value.
A Non-residents may claim expenses and donations to save tax. However, non-residents are not eligible to claim tax reliefs.
The employment income of non-residents is taxed at the flat rate of 15% or the progressive resident tax rate, whichever gives rise to a higher tax amount. Director’s fees, consultant’s fees and all other income are generally taxed at 22%.
|Tax rate on first 20,000||0%|
|Tax rate on next 10,000||2%|
|Tax rate on next 10,000||3.5%|
|Tax rate on next 40,000||7%|
|Tax rate on next 40,000||11.5%|
|Tax rate on next 40,000||15%|
|Tax rate on next 40,000||18%|
|Tax rate on next 40,000||19%|
|Tax rate on next 40,000||19.5%|
|Tax rate on next 40,000||20%|
|Tax rate on above 320,000||22%|
|Tax rate on capital gains||0%|
|Tax rate on income earned overseas||0%|
|Tax rate on dividends received from Singapore company||0%|
Allowable expenses, donations, reliefs and rebates are some common deductions individuals claim to reduce their taxes.
You may be able to claim tax deductions on employment expenses ‘wholly and exclusively’ incurred in earning your income. This means you used your own money to pay for expenses necessary to your employment such as travel expense, entertainment expense, subscriptions, etc.
- The expense was incurred while carrying out your official duties;
- The expense was not reimbursed by your employer; and
- The expense was not capital or private in nature.
- You are a Singapore tax resident; and
- You meet the qualifying conditions.
Some tax reliefs and rebates are targeted at certain groups of taxpayers to promote specific social and economic objectives.
Goods and Services Tax (GST)
Features of GST
GST is a broad-based consumption tax levied on the import of goods, as well as supplies of goods and services in Singapore (In other countries, GST is known as the Value-Added Tax or VAT).
GST exemptions apply to the provision of most financial services, the sale and lease of residential properties, and the importation and local supply of investment precious metals. Goods that are exported and international services are zero-rated.
GST Rates & Registration
GST is currently charged and accounted at a rate of 7% on the value of supply.
All Singapore companies with an annual turnover exceeding S$1 million are required by law to register for GST.
Companies with an annual turnover of less than S$1 million may choose to register for GST voluntarily.
Companies need to apply for GST registration within 30 days of the date which their registration liability arises.
GST Tax Rates
Goods and Services Tax (GST) is a domestic consumption tax which is chargeable on supplies of goods and
services made in Singapore. In other countries, GST is known as the Value-Added Tax or VAT. The current GST rate is 7%.
GST exemptions apply to the provision of most financial services, the supply of digital payment tokens, the sale and lease of residential properties, and the importation and local supply of investment precious metals. Goods that are exported and international services are zero-rated.
Applying for GST registration
As a GST-registered merchant, you are effectively acting as a tax collecting agent in collecting the GST which you have charged on your local supplies of goods and services. Businesses are required to continually assess the need to be registered for GST.
In most cases, registering for GST is compulsory when:
- Your taxable turnover at the end of the calendar quarter (i.e. 3 months ending Mar, Jun, Sep or Dec) prior to 1 Jan 2019 and the past three quarters is more than S$1 million.
You will have to monitor at the end of every calendar quarter and register for GST if your taxable turnover for the past 12 months exceeds S$1 million.
- Your taxable turnover at the end of any calendar year on or after 1 Jan 2019 is more than S$1 million.
For periods on or after 1 Jan 2019, taxable turnover will be computed on a calendar year basis for the purpose of determining registration liability. You have to monitor at the end of every calendar year (i.e. 31 Dec) and register for GST if your annual taxable turnover exceeds S$1 million.
- Your combine sales for all your sole-proprietorship OR combines sales for all your partnership with the same composition of partners is more than S$1 million.
You are currently making sales and you can reasonably expect your taxable turnover of your business in the next 12 months to be more than S$1 million. e.g. signing of a sales contract or business agreement. You must continuously monitor if have reasons to believe (e.g. confirmed contract or agreement bringing in high revenue) that the taxable supplies will be more than S$1 million in the next 12 months (under “Prospective View”)
Reverse charge and Overseas Vendor Registration
With effect from 1 Jan 2020, you may also be liable for registration:
- Under the reverse charge regime if the total value of your imported services for a 12 months period exceed S$1 million and your business would not be entitled to full input tax credit even if you were GST-registered, or
- Under the overseas vendor registration regime if you are an overseas supplier or a local/ overseas
electronic marketplace operator that provides digital services to individuals and businesses in Singapore that are not registered for GST, have a global turnover exceeding S$1 million and supplies of digital services to customer in Singapore exceeding S$100,000 is liable for GST registration.
On or after 1 Jan 2019, you are required to apply for GST registration within 30 days of the end of the calendar year or on 31st day from the date of the forecast.
There are serious consequences for late registration:
- Your date of registration will be backdated to the date that you were liable to be registered.
- You will have to account for and pay GST on your past sales starting from the effective date of registration, even if you did not collect any GST from your customers.
- You may face a fine of up to S$10,000 and a penalty equal to 10% of the GST due. Prosecution action may apply.
You can also choose to be voluntarily registered for GST even though your business turnover does not fall under the above circumstances. However, approval is subjected to assessment by the Inland Revenue Authority of Singapore (“IRAS”). A deposit may be required from the applicant if the Comptroller deems fit and the applicant is expected to attend a course to learn the basic knowledge of GST so that you can be in compliance with the GST law.
Our services include:
- GST Registration
- GST Deregistration
- GST computation
- Perform regular submission and filing of GST Returns