A Guide to Taxation in Singapore

Posted by Written by Ayman Falak Medina Reading Time: 5 minutes

Singapore adopts a territorial basis of taxation and so businesses are taxed only on Singapore-sourced income. Foreign-sourced income, such as branch profits, dividends, and service income, are taxed when remitted or deemed remitted into Singapore but will be exempted provided that the income has been taxed in the source country with a rate of at least 15 percent. There is also no capital gains tax in Singapore.

Corporate income tax

Singapore imposes a CIT at a flat rate of 17 percent, which is the lowest among ASEAN member states. The country practices a single-tier corporate tax system, which means businesses pay CIT only on chargeable income (profits), and all dividends are exempt from further taxation.

The low CIT rate has attracted a dynamic investment community into Singapore, comprising more than 7,000 multinational firms, with more than half operating their Asia-Pacific business from the country.

Foreign investors should seek the help of registered local tax advisors to better understand how they can stay compliant with the relevant regulations.

Who is obligated to pay?

Businesses that have their income derived from Singapore or income remitted to the country are obligated to pay corporate taxes at a rate of 17 percent on their chargeable income regardless of whether it is a local or foreign company.

The place of incorporation tax residency of a company is determined by where the business is managed and controlled. The location of the company’s Board of Directors meetings, where strategic decisions are made, is a key factor in determining where the control and management are exercised. If the company’s board of directors or other key management personnel that control the business are based outside of Singapore, then the company will be considered a non-tax resident.

Additionally, this is also the case if the company holds its board meetings outside the country, despite having the day-to-day operations conducted in Singapore.

Taxable incomes include:

  • Profits from trade or business (the single-tier system means Singapore-based companies will only pay taxes on profits and not on revenue);
  • Royalties and premiums;
  • Rental property income; and
  • Income from investments such as interests.

Tax residency

The tax liability of companies and individuals in Singapore is dependent on their tax residency status.

Resident vs. non-resident companies 

In Singapore, a company is either a resident or a non-resident. The Inland Revenue Authority of Singapore (IRAS) determines residency by where the company is controlled and managed, or in other words, where it makes decisions on strategic matters. This means that a company’s residency is not necessarily the location of where it is incorporated. 

For example, a company might be incorporated in Singapore, but be considered a non-resident if decisions are de facto made in another jurisdiction, such as Hong Kong or London. One factor in determining residency – but not necessarily the only one – is where the company holds its Board of Directors meeting. 

Resident vs. non-resident individuals 

Singapore citizens and Singapore permanent residents are both considered tax residents. Foreigners are considered tax residents if they:

  • Have stayed or worked in Singapore for (a) more than 183 days in a calendar year in the previous Year of Assessment (YA), or (b) continuously for three consecutive years; or
  • Have worked in Singapore for a continuous period spanning two calendar years with a total duration of stay exceeding 183 days, including physical presence in Singapore before and after the start of work.

The IRAS classifies non-resident individuals into three different categories: foreign professionals, public entertainers, and board directors. Residency for all three categories depends on whether they spend less than 183 days in a calendar year in Singapore, but they have different obligations for tax purposes. 

A professional is a non-resident if they are in Singapore for less than 183 days in a calendar year. Examples of foreign professionals include foreign experts or consultants invited to Singapore to share knowledge or expertise with an organization, an academic attending a seminar or workshop, or an individual operating via a foreign company. 

Foreign public entertainers who visit Singapore to perform, such as musicians, dancers, actors, and athletes, who spend less than 183 days in the country. They are classified as public entertainers regardless of whether they are working as individuals or as employees. The IRAS does not include individuals who assist public entertainers with their performances in this category, such as audio crewmembers, choreographers, coaches, and personal trainers. 

Finally, board directors, or company directors, are non-residents if they spend less than 183 in a calendar year in Singapore. A board director may also hold another role within a company, such as a chief executive officer or managing director, but they are only considered a board director for income derived in that role. 

Benefits of being a tax resident

Qualifying as a tax resident will mean the company is eligible for the multitude of tax incentives the country offers that can lower the total effective CIT tax rate.

These incentives include being eligible for new startups to receive a tax exemption of 75 percent on the first S$100,00 (US$73,300) of chargeable income and a further 50 percent exemption on the next S$100,00 (US$73,300) of chargeable income (available for the first three years of operations). All other companies will receive a tax exemption of 75 percent on the first S$10,000 (US$7,334) and a further 50 percent on the next S$190,000 (US$139,000) of chargeable income.

Tax residents can enjoy the benefits from the country’s more than 90 double tax avoidance (DTA) agreements, enabling businesses to eliminate instances of double taxation between treaty signatories.

Moreover, tax residents have the advantage of gaining access to the wider Asian markets through the country’s comprehensive free trade agreements (FTA).

Individual income tax

The tax liability of foreigners in Singapore is dependent on their tax residency status.

Chargeable income

Income tax rate (%)

First S$20,000 (US$14,888)

0

Next S$10,000 (US$7,411)

2

First S$30,000 (US$22,233)

Next S$10,000 (US$7,411)

3.5

First S$40,000 (US$29,641)

Next S$40,000 (US$29,641)

7

First S$80,000 (US$59,282)

Next S$40,000 (US$29,641)

11.5

First S$120,000   (US$88,923)

Next S$40,000 (US$29,641)

15

First S$160,000 (US$118,554)

Next S$40,000 (US$29,641)

18

First S$200,000 (US$148,183)

Next S$40,000 (US$29,641)

19

First S$240,000 (US$177,820)

Next S$40,000 (US$29,641)

19.5

First S$280,000 (US$207,457)

Next S$40,000 (US$29,641)

20

First S$320,000 (US$237,107)

Excess S$320,000 (US$237,107)

22.5

Non-tax residents are taxed at a flat rate of 15 percent.

Goods and services tax

The goods and services tax (GST), also known as value-added tax (VAT), is a consumption tax imposed on goods and services in Singapore regardless of whether they are acquired from domestic or overseas suppliers.

As GST is a self-assessed tax, Singapore-based businesses are required to assess their need to register for GST. As of January 1, 2023, the GST rate was increased from seven percent to eight percent.

The GST that is charged to customers is known as the ‘output tax’, and the GST that is incurred on business purchases and expenses, which includes the import of goods, is known as the ‘input tax’. The difference between the output and input tax is the net GST payable to the government.

Withholding tax

The withholding tax only applies to non-resident companies or individuals who have sourced income from Singapore.  The types of income subject to withholding tax are:

Capital gains tax

There is no capital gains tax in Singapore. Generally, the gains derived from the sale of a property/investment in Singapore are not subjected to tax as it is a capital gain. However, the gains may be taxable if one is in the business of trading shares. 


About Us

ASEAN Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia and maintains offices throughout ASEAN, including in Singapore, Hanoi, Ho Chi Minh City, and Da Nang in Vietnam, Munich, and Essen in Germany, Boston, and Salt Lake City in the United States, Milan, Conegliano, and Udine in Italy, in addition to Jakarta, and Batam in Indonesia. We also have partner firms in Malaysia, Bangladesh, the Philippines, and Thailand as well as our practices in China and India. Please contact us at asia@dezshira.com or visit our website at www.dezshira.com.