Singapore Corporate Tax: An Overview

By Author: Ashley V.
Total Articles: 63
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Why Singapore is considered to be an ideal location for commerce and industry by international business communities can be greatly attributed to its taxation scheme. The tax structure in Singapore is excellent for every foreign investor who wishes to expand his business overseas. But before we discuss Singapore Corporate Tax, let us take a brief look at the Singapore tax system.

* TERRITORIAL TAX SYSTEM. The tax system in Singapore is territorial in the sense that income tax is charged upon the net income of a company from sources within the country and on income from overseas, if such income is remitted into the country. The same principle also applies to non-resident Singapore businesses and companies.

* WITHHOLDING TAX. No withholding tax is charged on dividends. A 15% withholding tax is levied upon the interest, royalties, and rental equipment payments made to non-residents.

* CAPITAL GAINS TAX. In Singapore, there is no imposition of capital gains taxes.

Now, let us focus our attention to Singapore Corporate Tax. What is corporate tax in Singapore? What are its basic features?

* ONE-TIER ...
... TAX SYSTEM. A one-tier corporate tax system is implemented in Singapore. This means that the chargeable income of a company is being taxed as the company's income tax and this is already considered as a final tax. Thus, the shareholders are no longer to liable to pay income tax on their dividends.

* CORPORATE TAX RATES. The corporate tax rates in Singapore are as follows: a new Singapore company enjoys zero tax on its first S$100,000 annual profits for the first 3 years while resident companies enjoy a 9% corporate tax for profits up to S$300,000. A flat rate of 17% is charged as the overall company tax rate.

* CORPORATE TAX EXEMPTION. Full corporate tax exemption is granted to a company for its normal chargeable income of up to S$100,000 for each of its first three successive years. However, to qualify for this tax exemption, a Singapore company must comply with the following requirements: it must be incorporated in Singapore, must be a tax resident of Singapore must have not more than 20 shareholders, and 10% of its shareholders must be individuals. Non-compliance with these requirements will disqualify a company from tax exemption, but it may still be qualified to avail of partial tax exemption.

* PARTIAL TAX EXEMPTION. A partial tax exemption is granted to a Singapore corporation which cannot avail of the tax exemption as described in the previous paragraph. A Singapore company may be eligible for partial tax exemption on its chargeable income of up to S$300,000 with the following rates: 4.5% tax rate for the first S$10,000 chargeable income; 9% tax rate for the next S$290,000 chargeable income, and; 17% tax rate for chargeable income in excess of S$300,000.

These tax benefits make Singapore attractive to foreign investors so it does not come as a surprise that this country is fast becoming an important business hub not only in Asia but in the whole wide world.

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