Corporate Income Tax in Singapore
- Singapore’s corporate income tax rate of 17 percent is the lowest among ASEAN member states.
- The country practices a single-tier tax system meaning businesses are taxed only on their profits, and there are no taxes on dividends.
- Investors should seek the assistance of registered tax advisors to better understand how they can stay compliant with the relevant tax regulations.
Singapore is globally renowned for its competitive tax structure. The country imposes corporate income tax (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 of 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 are considered tax residents and have their income derived from Singapore or income remitted to the country are obligated to pay corporate taxes.The tax residency of a company is determined by where the business is managed and controlled. 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 this 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.
Becoming a tax resident
For foreign businesses looking to become a tax resident, they will need to apply for a Certificate of Residence (COR).
In applying for a COR, the company will need to be incorporated in Singapore; a cost-effective process that usually takes one business day. The COR is administered by the Inland Revenue Authority of Singapore, or IRAS, the main tax authority in the country.
Applicants will need to demonstrate to IRAS that strategic business decisions are made in the company’s Singapore office and not abroad. The company must also have at least one director who is either a Singaporean citizen, permanent resident, or EntrePass holder, in addition to a high-level management employee based in Singapore.
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 which can lower the total effective CIT tax rate.
These incentives include being eligible for a corporate income tax rebate of 20 percent and for new startups to receive a tax exemption of 75 percent on the first S$100 thousand (US$73 thousand) of chargeable income (available for the first three years of operations).
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).
The withholding tax only applies to non-resident companies or individuals who have sourced an income from Singapore. The types of income subjected 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 the business of trading shares.
The article was originally published on August 15, 2018, and was updated on November 28, 2019