Corporate tax in Singapore
Among other benefits, one of the key reasons that investors are drawn to setting up their operations here is due to Singapore’s attractive tax regime – low corporate and personal tax rates, generous tax relief measures, absence of capital gains tax, one-tier tax system, and extensive double tax treaties with many countries.
Tax residency
To be a tax resident in Singapore, the company’s control and management has to be exercised in Singapore where the primary business decisions and policies are made during board meetings.
Corporate tax rate
Corporate tax rate is capped at 17% based on the company’s chargeable income.
Corporate taxation framework in Singapore
Singapore follows a territorial basis for corporate taxation where tax is imposed on income accrued in or derived in, as well as foreign-sourced income remitted in Singapore.
Dividends
Under Singapore’s one-tier corporate tax system, shareholders will not be taxed on dividends paid by a Singapore resident company.
Carrying forward of unutilised losses and allowances
Unutilised losses and allowances can be carried forward to subsequent years to offset against the income of those years until all trade losses are fully utilised.
Group relief
Group relief allows companies to deduct unutilised capital allowances/trade losses/donations of one company from the assessable income of another company in the same group. To qualify for group relief the companies must fulfil the following criteria:
- The transferor and claimant must be incorporated in Singapore
- They must belong to the same group
- They must have the same financial year end
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 you frequently buy and sell property/investment.
Find out more about GST in Singapore here.
Exemptions/Tax incentives
Start-up tax exemptions
To support entrepreneurship, the tax exemption scheme was introduced by IRAS in 2005. Start-up companies are eligible for the start-up tax exemption during the first 3 years of Year of Assessment (YA) after incorporation.
To qualify for these exemptions:
- the company must be a tax resident of Singapore
- the company must not have more than 20 individual shareholders or at least 1 shareholder is holding at least 10% of the issued shares
- the company must not be a property or investment holding company
From Year of Assessment 2010 to Year of Assessment 2019 (Maximum exemption for each Year of Assessment is $200,000)
CHARGEABLE INCOME | % EXEMPTED FROM TAX | AMOUNT EXEMPTED |
First $100,000 | 100% | $100,000 |
Next $200,000 | 50% | $100,000 |
In or after Year of Assessment 2020 (Maximum exemption for each Year of Assessment is $125,000)
CHARGEABLE INCOME | % EXEMPTED FROM TAX | AMOUNT EXEMPTED |
First $100,000 | 75% | $75,000 |
Next $100,000 | 50% | $50,000 |
Partial tax exemptions
Partial tax exemption are available for companies who do not qualify for startup exemptions or for companies who are beyond the first 3 years of their incorporation.
From Year of Assessment 2010 to Year of Assessment 2019 (Maximum exemption for each Year of Assessment is $152,500)
CHARGEABLE INCOME | % EXEMPTED FROM TAX | AMOUNT EXEMPTED |
First $10,000 | 75% | $7,500 |
Next $290,000 | 50% | $145,000 |
In or after Year of Assessment 2020 (Maximum exemption for each Year of Assessment is $102,500)
CHARGEABLE INCOME | % EXEMPTED FROM TAX | AMOUNT EXEMPTED |
First $10,000 | 75% | $7,500 |
Next $190,000 | 50% | $95,000 |
Corporate income tax (CIT) rebate
To further support the companies, government grants relief on corporate tax payable.
Year of Assessment | CIT REBATE* | CAPPED AT |
2019 | 20% | $10,000 |
2018 | 40% | $15,000 |
* This rebate does not apply to non-resident company that is subjected to withholding tax.
Regional (RHQ) and International Headquarters (IHQ) award
Companies who meet the requirements to set up a RHQ or IHQ in Singapore would be able to apply for these awards. These awards provide companies concessionary tax rates from 5% to 15% on the incremental income and other tax incentives.
Pioneer Certificate incentive (PC)
For companies who intend to make notable investments and advancement to the economy. Those who qualify for this incentive would be granted a reduced tax rate to 5%.
Development and Expansion Incentive (DEI)
This incentive encourages companies to grow and expand their businesses in Singapore. Companies who qualify for DEI would be eligible for a concessionary tax rate or a corporate tax exemption up to 5 years.
Avoidance of double taxation agreements
For cross border business, if you have paid taxes in a foreign country, the same income will not be taxed again in Singapore. To avoid double taxation, Singapore enters into extensive DTA with many countries to relieve double taxation of income (to see IRAS’ current list of countries that have a DTA with Singapore, click here).
Withholding tax
Certain payments may be subjected to withholding tax, such as payments made to non-resident companies, individuals for services rendered in Singapore, and income derived in Singapore. The company must withhold part of the payment and pay it to IRAS. Common types of payments subjected to withholding tax:
- interest, commission, fee in relation to any loan or indebtedness;
- royalty, rent or other payments for the use of or right to use any movable property;
- payments of management fees;
- payments for the use of or the right to use scientific, technical, industrial or commercial knowledge or information or for the rendering of assistance or service in connection with the application or use of such knowledge or information
