Singapore is famous for its food, being a garden city, and its attractive low corporate tax rates as well. Low crime rates, the avid culture, and cleanliness attract many expats. Singapore polices are pro-business which means that there’s little bureaucracy, and its easy to get a Company set up with little restrictions on hiring.
Tax is one of the main concerns for entrepreneurs and foreigners who are looking to start their business in Singapore and in this article, we will give a brief introduction to Singapore tax. We will be covering the
- Do all Singapore companies need to pay?
- What’s the rate of Singapore Corporate tax rate
- When do company need to file their tax return
- Are there any income exempted from corporate tax
- What is GST
- Do my company need to pay GST
- When do the company need to file GST returns
This article will give you an understanding of different aspects of the country’s taxation system, so read on to get an overview of Singapore corporate tax.
Do All Companies Need To Pay Corporate Tax?
The answer is not surprising, according to the Income Tax Act, all businesses are required to pay corporate tax on any chargeable income.
However, there are benefits for Singapore tax resident companies over non-tax resident ones.
What Is The Rate Of The Singapore Tax Rate?
For Singapore tax resident companies, the corporate tax rate is 17% however, there’s numerous schemes that reduce the effective tax rates to as low as 4% such as the tax exemption scheme for new start-up companies. You may be wondering how about companies that are no longer start-ups, for those companies, the partial tax exemption scheme still applies which reduce the effective tax rates to as low as 8%.
There’s sales tax in Singapore which is called Goods and Services Tax (GST) which is at 7%. It was introduced to increase the resilience of taxes. However, not all companies are required to charge GST.
When Do Companies Need To File Their Tax Return?
The general timeline for filing the corporate tax returns is independent from the company’s own financial year. The deadline for filing tax in hard copy form is 30th November. But, for e-filing, the due date is 15th December. The corporate income taxes are paid and assessed on the preceding year basis which means that in current year, the Company is filing taxes for their financial period that ends in the prior year.
While filing the tax return, a company has to provide a complete set of return documents, including Form C, audited/unaudited accounts, and tax computation records. Most companies may qualify to file a simplified tax return called Form CS as well.
Is There Any Income Exempted From Corporate Tax?
As mentioned earlier, Singapore resident companies enjoy fair benefits and tax exemptions are one of them. The exemptions are broadly available except for companies that have only corporate shareholders or more than 20 shareholders.
Start-Up Tax Exemption (SUTE) – for a newly incorporated company:
This exemption provides tax relief to new companies. For the initial 3 years of operation, the tax rates which will be effective are as follows:
• Rate for first S$100,000- 4.25% of normal chargeable income
• Rate for subsequent S$100,000- 8.5%
Partial Tax Exemptions (PTE) – for three years old and above company
A business that is more than three years old qualifies for tax relief rate. It is applicable only after the first three years of operation. The effective tax rates are as follows:
• The rate for first S$10,000 – 4.25% of normal chargeable income
• Rate for subsequent S$190,000- 8.5%
What Is GST?
GST stands for Goods and Services Tax. This broad-based consumption tax was introduced on 1st April, 1994, at a rate of 3%. Currently, the rate is at 7%. It is applicable in Singapore and is levied on the import of goods and also on supplies of goods and services within Singapore.
There are certain types of revenue that are exempted from charging GST, for example, leasing of residential properties or services provided to overseas customers are exempted from GST.
Do My Company Need To Charge and Pay GST?
Companies that have annual turnover more than $1 million is required to be GST-registered and collect GST. Companies that are GST registered are able to claim back GST incurred on the production of related GST supplies.
When Does The Company Need To File GST Returns?
After your company has become liable to collect and pay GST as per the previously mentioned protocol, you will then be required to file GST return every quarter. This applies to all companies and cannot be customized.
Therefore, the due date for GST returns is one month after each quarter ends.
Are there tax on dividends to shareholders by Singapore Resident Companies?
No, Singapore operates on a single tier tax system. As the profits of the Company has been taxed once at the Company’s level, when dividends are declared to shareholders. The dividends are not subjected to additional tax to avoid taxing the same source of income twice.
You might be wondering if a foreigner might be subjected to withholding tax on dividends from a Singapore company. The answer is that there’s no withholding tax imposed on dividends as well. Although some double tax agreements between Singapore and other countries have allowance for Singapore to impose withholding tax, the tax authority does not impose any.
We have provided a brief overview of the Singapore tax system and please feel free to contact us if you have any questions that we can assist you with.