All about Singapore's Corporate Taxation

Singapore has evolved as an investment destination for foreign companies over the last few decades. Two major factors contributing to this is the ease of doing business in Singapore and the friendly corporate taxation of the country. But if you want to conduct business you will need a competent accounting services in Singapore for a hassle free experience.

As global boundaries are losing its relevance, companies are choosing to locate their business base in a country that offers the best possible tax structure that can positively impact the profit margins. Singapore has thus become a favorable spot for foreign investors and hosts about 7,000 foreign companies on its land.

Here are all the important points that a company needs to know about corporate taxation and accounting services in Singapore.

Singapore Tax Rates, incentives and computation

Singapore’s tax rates have seen a consistent decline since 1997-2000 when it used to be 26%. It then moved on to be 22% in 2003-04 which further reduced to various levels and attained a flat tax rate @ 17% which is currently prevailing. This is by far one of the lowest tax rate in the world attracting many foreign investors.

Much to investors delight, Singapore had also adopted a slat single tier corporate taxation since January 2003 making the structure very simple and straight forward.

Many incentives and exemptions are also provided to start-up companies to encourage them incorporate business in Singapore. This brings down the effect rate considerably.

The exemptions for start-up are as below:-

• If Income level Up to $ 1,00,000 Tax rate 0%
• If Income level Up to $1,00,000 - $3,00,000 Tax rate 8.50%
• If Income level Up to Above $3,00,000 Tax rate 17%

Conditions

Company should be incorporated and tax resident in Singapore and shareholders should not exceed 20. The exemption of no tax up to $ 1,00,000 income gets over at the end of 3 years of operation and such income is also charged @ 8.5 % tax post that.

Besides the above, a 30% tax rebate can be availed by every Singapore Company on corporate income tax payable for YA 2016 & YA 2017. This is subject to a maximum rebate of $20,000. Such exemption was declared recently in the Budget of 2015. For all the updates and changes in the tax structure you should always go for the best accounting services in Singapore.

Tax benefits to resident companies

Certain tax benefits only accrue to Singapore resident companies. The resident companies are eligible to the tax benefits that accrue to start-up companies making their effective tax rates quite low. Section 13(8) of the Income Tax Act also favors resident companies by giving them special tax exemptions on the incomes sourced from foreign-sourced dividends, foreign branch profits, and foreign-sourced service income. Singapore has signed certain tax treaties with various countries and the benefits conferred under the Avoidance of Double Taxation Agreements can also be availed by Singapore resident company.

A company can be called a “Singapore resident company” provided the control and management of the company is exercised in Singapore itself.

The “Tax Treaties” of Singapore

Singapore has gone ahead and finalized tax treaties with over 50 countries and the exercise to add more countries is continuously ongoing.

These tax treaties allow the companies operating both in Singapore and any of the 50 countries avoid the losses caused by “Double Taxation” on their income. The treaties also encourage companies to operate globally and Trans border without the fear of having the same income taxed twice in dual countries.

Difference in net income and taxable income
Two kinds of incomes are taxable in Singapore:-

• Income that is generated in Singapore
• Income derived from other countries but repatriated to Singapore

However not the entire income mentioned above might incur taxation. Many exemptions pertaining to specific trades , foreign sourced incomes and other exemptions as defined by the Singapore Income Tax Act are excluded from taxable income.

Thus the net income is a combination of business profits, dividends, interests, premiums or any other income while taxable income is net income minus exemptions stated under Income Tax Act. Taxable income is the final income on which tax is levied.

How are losses taxed?

Singapore laws allow the losses incurred in a company to be carried forward indefinitely subject to certain conditions. Such losses can be adjusted with the income earned in any year (It is compulsory to adjust losses against the first income available in the company). Tax shall be levied on such adjusted income only. For further details it is best to consult an agent or seek accounting services in Singapore.

Income Tax Filing period and due date

The assessment period for computing taxation shall be the preceding year of filing tax. For example, if a company is filing tax on 30th November 2015, the assessment period shall be 1st January 2014 to 31st December 2014.

The due date for filing Corporate Tax in Singapore is 30th November since 2009. While filing this tax, the company has to submit the following documents:-

• Form C – This declares the total income generated within the company
• Audited/Unaudited accounts – The accounts to be submitted shall be audited or not shall depend upon parameters laid down as per statutory bodies of Singapore.
• Tax computation – This shows the calculation of net taxable income. It contains details showing the adjustments of net profits or losses of the company.

Withholding tax law

This law is applicable to certain kind of income generated by non-resident companies only. While making payments to the non-resident companies for some specific purpose, a certain percentage of the payment is withheld and paid to Income Tax authorities. This withheld income is known as “Withholding tax.”

Entrepreneurs who want to start a business would have got a good insight on the tax structure of Singapore. If there is a need for further clarification, it is best to seek the best accounting services in Singapore. The consultancies have all the information you need and they can help you run a seamless business.