Singapore is frequently used as a model for other nations that continue to lower corporate income tax rates and implement different tax incentives to entice and retain foreign investors.
Singapore has a single-tier, flat-rate corporate income tax system that is based on territory.
The city-state of Singapore’s effective tax rates, which are among the lowest in the world, and its general business friendliness are the two key drivers of economic development and foreign investment.
However, things can get a bit complicated sometimes, especially for newly registered business entities, so we suggest consulting reputable income tax services like ours.
With our corporate tax services in Singapore, we can assist you in managing your tax and reporting requirements in the face of continuously changing tax laws while also using the tax breaks and allowances that are accessible to you and your company.
But first, let’s give you a basic idea of the Singapore corporate tax structure.
Singapore Corporate Income Tax Explained
Singapore only taxes profits; it does not tax revenue. Profits of your Singapore firm will be taxed at a rate of 17%, while the actual tax rate is frequently lower because of the many tax breaks and incentives offered to Singapore-resident businesses.
Singapore employs a system of territorial taxes. By using a foreign tax credit provided under those treaties, double taxation is prevented if income is derived from treaty nations. A unilateral tax credit is awarded for foreign taxes paid on all income with a foreign source for non-treaty nations. Singapore has more than 80 tax accords with foreign nations to prevent money from being taxed twice.
Singapore employs a one-tier tax structure. Only profits are taxed for businesses. Distributions of after-tax profits to shareholders are tax-free. Singapore’s government does not levy a capital gains tax.
When investing in innovative and promising sectors, R&D, and productivity-enhancing technology, Singapore gives considerable incentives and tax advantages. Singapore does not tax several forms of income with a foreign source.
What Is Considered Taxable Income In Singapore?
The top headline tax rate in Singapore is currently regulated at 17%. However, the actual Singapore corporation tax rate may be considerably lower because of the tax exemption and incentive schemes provided by the Singaporean government.
Both eligible incomes earned in Singapore and money transferred to Singapore from a foreign source are subject to taxation under the territorial tax system of Singapore.
Taxable income in Singapore includes:
- Profits or earnings from any type of business or trade
- The return on an investment, such as interest or rent on a rental property.
- Royalties, premiums, and any other revenue derived from property
- Additional revenues that are considered profits
A company that is incorporated in Singapore is not always regarded as a Singaporean tax resident.
A company must be controlled and managed from Singapore to be regarded as a tax resident of Singapore. Controlled and managed, according to IRAS, refers to decisions on strategic topics, such as those on firm policy and strategy.
A company’s control and management generally may be traced back to the site of board meetings. Tax residence can also be determined by the location of corporate employees who play important roles in decision-making.
Tax Exemption Scheme For Startups
Singapore launched the new startup company program, which offers tax exemption on the portion of a startup’s profits, in 2005 to aid in the growth of local businesses.
According to the plan, new businesses that satisfy the requirements listed below are entitled to the first three consecutive years of the following tax exemption, depending on the YA.
YA 2020 And Up
If they meet certain requirements, new businesses are awarded a tax exemption of 75% on their first S$100K in taxable income and an extra 50% on their next S$100K in taxable revenue.
2010 Through 2019
New businesses that meet the requirements are granted a full tax exemption, or 100%, on the first S$100K in taxable revenue and an extra 50% exemption on the next S$200K.
Tax Exemption On Foreign Income
There are several forms of foreign-sourced income that are free from taxes, such as:
- Dividends sourced abroad
- Foreign branch earnings
- Revenue from services provided abroad
Corporate Tax Filing
A corporation must file two documents with IRAS to finish its corporate tax returns:
Estimated Chargeable Income (ECI)
ECI is taxable income for a business after subtracting tax-deductible costs.
Forms C or C-S
A corporation discloses its real income for the tax year in Form C or Form C-S. Companies must include a Singapore tax calculation, financial statements, a thorough profit & loss statement, and other supporting documentation when submitting a Form C. Form C-S, on the other hand, is a streamlined filing that doesn’t need any further paperwork.
Get Expert Advice From Us Today
When it comes to filing taxes in Singapore, managing your accounts is seldom the area that causes the greatest confusion. While it might be challenging to distinguish between expenses and non-expenses, for instance, the primary issue frequently arises when it comes time to file your taxes.
You may make sure that your taxes are prepared, organized, reviewed, and filed to IRAS on time by hiring us – the best corporate tax services Singapore.
We can do everything to ensure that you are submitting your taxes in a way that will result in a successful outcome for your tax filing in Singapore, from making sure you have completed the proper papers to ensure you are registered for the necessary sort of tax returns.
