Guide to Singapore Corporate Taxation

Singapore is a major international finance centre which provides an attractive fiscal and economic environment from which to base regional business activities and international holding companies.

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 implemented a one-tier corporate tax system. Under this system, 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.

Singapore does not levy a withholding tax on dividends. Interest, royalties or rental of equipment payments to non-residents are subject to a 15% withholding tax.

There is no capital gains tax imposed in Singapore.

Corporate Tax Rates

Full Tax Exemption
Full corporate tax exemption will be granted on normal chargeable income of a qualifying company up to $100,000, for each of its first three consecutive tax filing years.

To qualify for this full corporate tax exemption for a relevant year under the scheme, a Singapore company must:

• be a company incorporated in Singapore
• be a tax resident in Singapore for that year
• have no more than 20 shareholders throughout the basis period relating to that year; and
• At least 10% of the shareholders must be individuals

Any company that does not meet the above qualifying conditions would still be eligible for partial corporate tax exemption as below.

Partial Tax Exemption
All companies are eligible for partial tax exemption on chargeable income of up to S$300,000 as follows:

Related Topic: Guide to Personal Income Tax in Singapore

Corporate Tax Filing Due Date
A newly incorporated Singapore company that has income accrued in or derived from Singapore or received in Singapore from outside Singapore is required to declare its income by completing an Income Tax Form for companies, known as Form C, each year. The company has to submit its completed Form C with the accounts, tax computation and supporting documents by 31st of October each year.

First Time Filing:
The first set of Form C that a newly incorporated company has to submit to IRAS depends on the financial-year-end of the company.

Example:
Assuming that a company has commenced business upon its incorporation, the first Form C that the company need to submit is as follows:

Tax Exemptions on Foreign-Sourced Income Remitted into Singapore
A Singapore company can enjoy tax exemption from its foreign-sourced dividends, foreign branch profits, and foreign-sourced service income that is remitted into Singapore if the following conditions are met:

• The highest corporate tax rate (Headline tax rate) of the foreign country from which income is received from is at least 15% in the year the income is received; and
• The foreign income had been subjected to tax in the foreign country from which they were received

For the purpose of corporate tax exemption on foreign-sourced service income, the service income refers to professional, technical, consultancy or other services rendered in the course of a company’s trade through a fixed place of operation in a foreign country.

To enjoy the tax exemption, the company has to furnish the following information:

• Nature and amount of income received;
• Country from which income is received;
• Headline tax rate of foreign country; and
• Amount of foreign tax paid in the country from which income was received.

Tax Treaties
Singapore has tax treaties for the avoidance of double taxation with more than 50 countries including Australia, Belgium, Canada, France, Germany, India, Indonesia, Israel, Italy, Japan, Malaysia, Mauritius, the Netherlands, New Zealand, People’s Republic of China, Philippines, Thailand, Switzerland and the United Kingdom.

Holding Companies
Singapore has established itself as a credible and attractive jurisdiction from which to base international holding companies, both as a result of its status as a major financial centre and through the introduction of income tax legislation encompassing specific tax exemptions and tax concessions.

As mentioned above, the Singapore tax system is territorial and foreign source income is taxed if it is remitted into Singapore. Foreign source income which is earned and retained outside Singapore is not taxed in Singapore. Dividends received in Singapore by resident companies are taxable but credit is allowed for foreign tax paid. The tax credits allowed may include the foreign tax paid on the underlying corporate profits out of which the foreign source dividend has been paid. As such when foreign tax credits in aggregate exceed 20%, there is no Singapore tax payable on the dividend.

These exemptions make a Singapore resident company an attractive entity for holding foreign investments. If the foreign source income has borne tax at a rate of 20% or more, the Singapore resident holding company does not pay any Singapore tax on that income and may distribute dividends out of such income to its shareholders on a tax exempt basis.

As Singapore does not tax capital gains further benefits may arise to the holding company upon the disposal of its investment in the foreign company, particularly in tax treaty countries where the treaty concedes to Singapore the right to tax capital gains.

Taxation for Non-Resident Companies
A company is resident in Singapore if the central management and control of its business is exercised in Singapore. Given that such management and control is normally vested with its Board of Directors, a company is generally treated as being resident in the country where its Board meets.

Non-resident Singapore companies are not entitled to the benefits of double tax treaties. However, non-resident companies are not liable to Singapore income tax on foreign source income if it is not received in Singapore. Therefore non-resident companies are an attractive vehicle as international holding or trading companies.

Other Related Information
Annual accounts must be prepared and submitted to the Singapore Inland Revenue Authority (IRAS).

If corporate turnover is less than S$5 million, the Singapore Company is not required to file audited returns, however unaudited returns must still be filed.