Corporate tax

Since January 1, 2003, Singapore has had a one-tier corporate income tax system. The tax paid by the company on its taxable income is a final tax, and all dividends paid by the company to its shareholders are exempt from further taxation.

At the moment, the general income tax rate for both local and foreign companies in Singapore is 17%.

It is important to understand that the total income tax rate in Singapore, is not the effective and real corporate tax rate. The effective corporate tax rate in Singapore is in most cases lower than the total tax rate because of the tax incentives and exemptions applied.

Although the general corporate tax rate in Singapore is 17%, there are various programs to help legally reduce taxation.

These tax credit programs fall into 3 categories:

• benefits for all Singaporean companies,
  benefits for companies under three years old,
• industry benefits, in particular banking, financial services, wealth management, tourism, insurance, shipping and shipping companies, and many others.
  

Singapore has a partial tax exemption program applicable to all companies registered in Singapore.

From the reporting year 2020 onwards:

Tax exemption on the first SGD 200,000 of taxable income:

Taxable income:
First $10,000
% Tax Exempt:
75%
Amount exempt from tax:
$7,500

Taxable income:
Subsequent $190,000
% Tax Exempt:
50%
Amount exempt from tax:
$95,000

Taxable income:
Total $200,000
% Tax Exempt:
-
Amount exempt from tax:
$102,500

Which means that 75% of the first $10,000 of taxable income will be fully exempt. Of the next $190,000 of taxable income, 50% will be exempt. So the total amount exempted will be $102,500. And for annual income in excess of S$200,000 (taxable income), the standard corporate tax rate of 17% will apply.

The government pays special attention to support start-ups and companies under 3 years old. There is a partial tax exemption program for Singapore companies under three years old:

Beginning in the 2020 reporting year and beyond:

Tax exemption on the first $200,000 of SGD taxable income if any of the first three reporting years falls in 2020 or thereafter:

Taxable income:
First $100,000.
% Tax Exempt:
75%
Amount exempt from tax:
$75,000

Taxable income:
Subsequent $100,000
% Tax Exempt:
50%
Amount exempt from tax:
$50,000

Taxable income:
Total amount of $200,000
% Tax Exempt:
-
Amount exempt from tax:
$125,000

Which means that 75% of the first $100,000 of taxable income will be fully exempt. Of the next $100,000 of taxable income, 50% will be exempt. So the total exempt amount would be $125,000. And for annual income in excess of S$200,000 (taxable income), the standard corporate tax rate of 17% will apply.

The conditions for obtaining tax benefits:

• The company must be incorporated in Singapore;
• The company is a tax resident of Singapore;
• The company has no more than 20 shareholders, one of whom is an individual and owns at least 10% of the Company's shares.

To qualify for tax benefits for start-ups, the company must be less than three years old

Exclusions: Companies whose main business activity is investment holding activities; and Companies that develop real estate for sale or investment cannot qualify for tax credits.

In addition to tax benefits in Singapore, there are also discounts on corporate income tax. The rate of this discount varies from year to year. For fiscal year 2020, it is 25% of the tax payable, but no more than SGD 15,000.

Currently, the deadline for filing tax returns for Singapore companies is December 15 (for electronic filing). But starting from the 2021 reporting year, the deadline will be November 30.

Depending on the size of the company and its turnover, the Company must file a full set of required reporting documents, including Form C or C-S, audited or unaudited accounts, as well as a tax calculation.

The tax period, i.e. the period of time at the end of which the tax base is determined and the amount of tax is calculated, in Singapore is calculated on the basis of the previous year. This means that the tax period for any reporting year always refers to the financial year preceding the reporting year.

For example, in 2021, you will be filing a tax return for your company's fiscal year that ended between January 1, 2020 and December 31, 2020.

The tax is levied on income earned in the previous fiscal year. For example, a tax return for assessment year (YA) 2021 would declare income earned during fiscal year 2020. This tax return must be filed by November 30, 2021.

There are two scenarios for registering a company with the GST:

• Mandatory registration - when your taxable turnover exceeds S$1 million in the last calendar year or your estimated turnover in the next 12 months exceeds S$1 million.
• Voluntary registration - you choose to register your company for GST voluntarily, even if your taxable turnover is less than S$1 million.

The place of incorporation of a company does not necessarily indicate the tax residence of the company. A company is considered to be tax resident in Singapore if its business is controlled and managed in Singapore. Control and management refers to decision-making on strategic issues, such as determining the company's development strategy.

As a rule, the place of the general meeting of the Board of Directors of the company, is one of the key factors determining where the control and management of the company is carried out.

If the company has an executive director or top managers who play an important role in decision making in Singapore, this is also one of the key factors in determining where control and governance is exercised.

Singapore has tax treaties with more than 80 countries and the list continues to grow. The treaties reflect Singapore's ongoing efforts to help businesses eliminate double taxation and to promote and facilitate international trade and investment opportunities.

Moreover, since 2009, Singapore has granted unilateral tax incentives to Singapore companies. Under this policy, all Singaporean companies with income earned in countries that do not have a double tax treaty with Singapore will be allowed a tax deduction on their foreign income from those countries.

This is a very frequently asked question. Issues of international taxation is a complex topic, because it involves the tax laws of several countries. It is important to consider the tax laws of Singapore, the tax laws of the country where the main business transactions/bank account is opened, as well as the terms of the double taxation treaty between these countries (if such a treaty has been signed).

It will only be possible to answer this question accurately if all the details are understood, in particular, in which countries the company's accounts will be opened, where business transactions will be carried out, from which country to which and for what the money will be transferred and other nuances.

If you plan to grow your business and strengthen your presence in Singapore, we strongly recommend that you pay your taxes in Singapore for the following reasons:

1. Low tax rates compared to other jurisdictions
2. Compliance with the law

3. good business reputation of the company in Singapore, which will be very useful in the following cases:

• Obtaining work visas
• Opening of bank accounts in Singapore
• Taking loans and credits from Singaporean financial institutions
• Obtaining government grants
• Due diligence by potential Singaporean partners

4. If you decide to sell the company/attract investors you will need to provide all of the company records, including taxes paid. The absence of some documents may adversely affect the decision to buy/invest.

Please be aware that the Singapore Revenue Authority may decide to audit your company. In the event that the audit reveals facts that may be considered by IRAS as tax evasion, the company and its directors face the following consequences:

• Under Singapore's tax law, any person who willfully evades/assists in tax evasion is guilty of an offence. Offenders found guilty face a fine of up to four times the amount of tax underpaid, a fine of not more than SGD 50,000 and/or imprisonment of not more than seven years.
• If there is fraud, the statutory limitation period under section 74(1) of the Income Tax Act and section 45(5) of the VAT Act does not apply. A tax audit can be conducted at any time after the statutory statute of limitations has expired:
• Standard statute of limitations for income tax frau

6 years, for fiscal year 2007 and earlier; or
4 years, for fiscal year 2008 et seq.