Singapore is frequently highlighted as a prime example of a country that continually reduces corporate income tax rates and introduces various tax incentives to attract and retain global investments.
Single-Tier Income Tax System
Since January 1, 2003, Singapore has adopted a single-tier corporate income tax system, which means no double taxation for stakeholders. Tax paid by a company on its chargeable income is the final tax, and all dividends paid to shareholders are exempt from further taxation. There is no tax on capital gains in Singapore, including gains on the sale of fixed assets and foreign exchange on capital transactions.
Corporate Income Tax Rates and General Tax Exemptions.
Singapore’s headline corporate tax rate is a flat 17%. To make Singapore an attractive investment destination, income tax rates have consistently decreased over the years:
- 1997-00: 26%
- 2001: 25.5%
- 2002: 24.5%
- 2003-04: 22%
- 2005-06: 20%
- 2007-09: 18%
- From 2010: 17%
The effective tax rate is often lower than the headline tax rate due to applicable tax exemptions, incentives, and depreciation rules.
The following general tax exemptions and incentives are available to Singapore tax resident companies. These significantly reduce the effective income tax rate for small-to-midsize companies:
From YA2020 onwards, newly incorporated companies receive:
1. 75% exemption on the first SG$100,000 of normal chargeable income for the first three consecutive YAs if they:
- Are incorporated in Singapore.
- Are tax residents in Singapore.
- Have no more than 20 shareholders, with at least one holding 10% of shares.
2. Further 50% exemption on taxable income up to SG$100,000, resulting in about an 8.5% tax rate on this income.
Effective Corporate Tax Rate.
The above incentives make for very attractive tax rates for small-to-midsize companies. For instance, a typical Singapore resident company with SG$2,000,000 annual taxable income will be taxed as follows:
- 0 – 100,000: 4.25%
- 100,001 – 200,000: 8.5%
- 200,001 – 2,000,000: 17%
- 0 – 10,000: 4.25%
- 10,001 – 200,000: 8.5%
- 200,001 – 2,000,000: 17%
The CIT rebate is extended to YA 2020 at 25% of the tax payable, capped at SG$15,000.
Corporate Income Tax Exemption for Companies from YA 2020.
Chargeable income: % exempted from Tax: Amount exempted from Tax:
- First $10,000: 75% = $7,500.
- Next $190,000: 50% = $95,000.
- Total $200,000: $102,500.
Chargeable income: % exempted from Tax: Amount exempted from Tax:
- First $100,000: 75% = $75,000.
- Next $100,000: 50% = $50,000.
- Total $200,000: $125,000.
The due date for corporate tax filing is November 30 (hard copy) and December 15 (e-filing).
The company must file a complete set of returns, including Form C, audited/unaudited accounts, and tax computation. Form C declares income, while tax computation shows adjustments to the net profit/loss to determine chargeable income. For details, see the annual filing requirements for Singapore companies guide.
Income Tax.
Basis Period Corporate income is assessed on a preceding year basis. For instance, in 2018, you file for the financial year ending between January 1, 2017, and December 31, 2017. Accounts are prepared up to the FYE each year.
Withholding Tax
Singapore’s withholding tax law ensures tax collection on certain types of income paid to non-residents. This does not apply to resident companies or individuals. When specified payments are made to non-residents, a percentage is withheld and paid to tax authorities.
Industry-Specific and Special Purpose Tax
Incentives In addition to general tax exemptions, there are industry-specific and special purpose incentives under the Singapore Income Tax Act. For an overview, see industry-specific tax incentives in Singapore.
Tax Residence of Company
A company is tax resident in Singapore if control and management occur in Singapore, typically where strategic decisions are made, such as in Board meetings. An executive director or key personnel in Singapore also contributes to this determination.
Non-resident status applies if directors manage and control the business outside Singapore, even if operations are in Singapore. A company’s tax residence can change yearly. A Singapore branch of a foreign company is generally non-resident.
Resident and non-resident companies have similar taxation, except for benefits exclusive to residents:
- Income tax exemption for new start-ups.
- Exemption on foreign-sourced dividends, branch profits, and service income under section 13(8) of the Income Tax Act.
- Benefits under Avoidance of Double Taxation Agreements (DTA).
The place of incorporation does not necessarily indicate tax residence.
Singapore Tax Treaties
Tax treaties help avoid double taxation for businesses operating in both countries. Singapore has tax treaties with over 80 countries, promoting cross-border trade and investment. From YA2009, Singapore grants unilateral tax credits for income from non-treaty countries.
For more details, see the Singapore tax treaties and double tax agreements guide.
Net Income vs. Taxable Income Corporate tax is imposed on income accruing in or derived from Singapore or received in Singapore from outside. Exemptions exist for foreign-sourced income under certain conditions.
Net profit/loss does not accurately reflect taxable income due to non-deductible expenses and non-taxable income. For details, see calculating taxable income for Singapore companies.
Certain income may be exempt from tax, such as general exemptions, industry-specific exemptions, and foreign-sourced income.
Tax Treatment of Losses
Allowable expenses can be deducted against income for tax purposes, with losses carried forward indefinitely under certain conditions. Losses are deducted in the first available year with statutory income. Changes in shareholding and principal activities affect loss utilization.
