Corporate Taxation

Corporate Taxation

A corporate income tax is a tax levied on the profits of your company. As a business owner in Singapore, you are required to pay these taxes to the Inland Revenue Authority of Singapore (IRAS).

Each country follows a tax system. In Singapore, the corporate tax system is a one-tier or single-tier tax system, which is territorial as well as a flat rate, which means the tax rates are not different for local as well as foreign companies. As per single-tier tax system:

  • There is no double taxation as far as stakeholders are concerned
  • The tax paid by a Singaporean company on its income is its final tax
  • The dividends paid by the company to its shareholders are exempt from further taxation.
Territorial-Based Taxation

Singapore follows a territorial-based taxation system in which you will be taxed on the location of profits and not your corporate residence. This signifies that companies who earn their profits outside Singapore will not be subjected to taxation. The taxable income is as follows:

  • Profits from any nature of business or trade
  • Income derived from rental property
  • Royalties and other premiums derived from property
Corporate Tax Benefits

The corporate tax income in Singapore is fixed at a rate of 17 percent. Additionally, Singapore also offers various tax breaks and incentives to companies, which will most likely bring down your personal tax rate from 0 percent to 22 percent. The benefits of corporate taxes in Singapore are as follows: 

  • Transparent and low taxes
  • Governmental support to start-ups, such as exemptions for the first three years of incorporation
  • With the single-tier tax system, you will not have to pay taxes on dividends, inheritance and capital gains
  • Promising incentives for superior R&D and production-based technologies
  • Tax exemptions are provided to foreign-sourced service income and dividends
Tax Exemptions and Incentives

The following table illustrates the tax exemptions and incentives offered to the tax resident companies in Singapore.

Startup Tax Exemptions

If your company meets the qualifying criteria below, you will be eligible for tax exemptions for the first three YAs:

  • Your company should be incorporated in Singapore
  • Your company should be a tax resident in this country
  • Your company should not have more than 20 shareholders and at least one shareholder needs to hold 10 percent of the issued company shares
Partial Tax Exemption Scheme (PTE) Under the PTE scheme, you are entitled to a 75 percent tax exemption on the first $10,000 of your income. For your next $190,000 income, you will obtain a 50 percent exemption.
Foreign-Sourced Income Tax Exemptions

Foreign-sourced service income, dividends and foreign branch profits are also exempt from taxes. To qualify for foreign-sourced income tax exemptions:

  • Your company should satisfy the Singapore government that the tax exemption will be beneficial to Singaporean resident
  • The foreign income your company derives should be taxed in the foreign jurisdiction
  • The headline tax rate of the foreign jurisdiction should be at least 15 percent by the time the income is received in Singapore
Development and Expansion Incentive (DEI)

If you are seeking to upgrade your business operations in Singapore or planning to expand into global industries, you will be eligible for DEI. To qualify:

  • Your business expenditure should contribute to the Singaporean economy
  • You should create new jobs with skills and expertise that benefits Singaporeans
  • Your business should build new capabilities and skillsets
Productivity and Innovation Credit (PIC) Scheme

Your company will be offered a 400% taxdeduction or allowance on specificexpenditures incurred in any of the below-mentioned activities:

  • The license of intellectual property rights
  • Training of workforce
  • Research and Development activities
  • Patents, trademarks and designs registration
  • DesignSingapore Council's approved design projects
Investment allowance

Investment allowances, depending on the qualified projects, are allowed for 5 years and in some cases may extend up to 8 years. Under this allowance, your company may obtain up to a tax credit of up to 100% of the capital expenditures incurred

Tax Return Filing

You will have to file an Estimated Chargeable Income (ECI) and Form C or Form C-S to complete your corporate tax returns. While ECI is your taxable income after deducting expenses, Form C requires you to attach tax computations, profit & loss statements, financial statements and other documents. Form C-S is simple and does not need additional documents.

With low tax rates and incentives, Singapore is one of the best places for emerging businesses. However, if you are uncertain as to the corporate tax exemptions and schemes, do get in touch with Jaanik. We will provide you with insightful guidance based on the nature of your business.

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