Singapore has one of the most attractive corporate tax regimes in Asia, with low and transparent tax rates and an efficient tax filing/reporting system.
This article will provide you with a brief overview of corporate taxes in Singapore, as well as the procedures involved in paying your taxes, namely:
- Who Must Pay Corporate Taxes in Singapore?
- By When Do I Need to File Corporate Tax?
- How Much Corporate Tax Do I Need to Pay?
- How Do I File and Pay Corporate Tax in Singapore?
- Penalties for Inaccurate Tax Filings
- Penalties for Late or Non-Payment of Corporate Tax
Who Must Pay Corporate Taxes in Singapore?
Regardless of tax-residency status, all companies are required to pay corporate tax under the Income Tax Act on any chargeable income derived from Singapore or foreign income remitted into Singapore.
However, Singapore tax-resident companies enjoy several benefits over non-tax resident companies.
When is a company considered a Singapore tax-resident?
A company will be considered tax-resident in Singapore if its control and management had been exercised in Singapore for the preceding Year of Assessment (YA).
The YA is a 12-month period in which the company’s income will be assessed. For example, for YA 2018, the 12-month period would generally be from 1 April 2016 to 31 March 2017.
In determining where the company’s control and management is exercised, it is more dependent on the location where its strategic decisions are made (this will generally be the location of the company’s board meetings), rather than the company’s place of incorporation.
What are the benefits a Singapore tax-resident company enjoys?
The benefits enjoyed by tax-resident companies include:
- A Singapore tax-resident company can avoid double taxation of certain incomes in countries which Singapore has signed Avoidance of Double Taxation Agreements (DTAs) with. This means that the company is eligible for tax exemption or reduction on any income which has already been taxed in the foreign country. Similarly, if the income has already been taxed in Singapore, the company may claim tax exemption or reduction in the foreign country.
- A Singapore tax-resident company may be eligible for tax-exemptions on foreign dividends, foreign branch profits and service incomes from foreign countries provided that such incomes have already been subject to corporate tax in the foreign country. To qualify for such exemptions, the foreign country in question must have a corporate tax of at least 15% and the Inland Revenue Authority of Singapore (IRAS) considers the exemption to be beneficial to the company.
- For the first 3 YAs, a Singapore tax-resident company may qualify for tax exemption under the Start-Up Tax Exemption Scheme. This scheme allows newly-incorporated companies to enjoy 100% tax exemption on its first S$100,000 of chargeable income and a further 50% tax exemption on the next S$200,000 of chargeable income. (With effect from YA 2020, this will be reduced to 75% tax exemption on the first S$100,000 of chargeable income and 50% tax exemption on the next S$100,000 of chargeable income.)
In addition to corporate taxes, all companies are also required to pay withholding tax (tax which must be paid on payments to foreign companies) when they make payments in respect of certain categories of services to non-resident companies.
Read more about the payments which are liable for withholding tax in our other article.
By When Do I Need to File Corporate Tax?
From YA 2020, all companies in Singapore are required to e-File their corporate tax documents by 30 November. Physical filing is not accepted.
Late filing of corporate tax is an offence.The company’s officers (e.g. their directors) may be prosecuted in court.
In court, the company’s officers and the company may be fined up to $10,000 and $1,000 respectively. The company may be allowed to settle its fine through paying a composition amount of between $200 and $1,000.
In any case, the company will still have to file its outstanding corporate tax documents.
How Much Corporate Tax Do I Need to Pay?
What is the corporate tax rate in Singapore?
Singapore corporate tax is levied at a flat rate of 17% on chargeable income.
A company can calculate its chargeable income by taking its taxable revenues (any ongoing or recurring source of income derived from Singapore or remitted into Singapore) and subtracting deductible expenses.
Deductible expenses refer generally to any expenses “wholly and exclusively incurred … in the production of income”. This means that the company must be able to show why the expenditure was necessary to earn the income.
A non-exhaustive list of deductible expenses may be found on IRAS’ website.
Claiming and carrying forward of capital allowances
A company may claim capital allowances (tax relief on any physical or tangible capital assets acquired by the company) in the form of further tax deductions to cover the cost of writing off any machinery or plant acquired for the purposes of its business.
The amount of capital allowances claimable annually may be calculated as the cost price of the asset divided by the number of years taken to completely write it off.
As a general rule, computers, prescribed automation equipment and assets costing up to S$5,000 can be written off in 1 year, while all other assets eligible for capital allowances can be written off over the course of 3 years.
Any unutilised capital allowances can be carried forward indefinitely to subsequent YAs provided that there is no substantial changes in the company’s shareholdings or principal business activities.
Carrying forward of net losses
Finally, where a company makes net losses in any YA, it may carry these losses forward to subsequent YAs to be deducted against future incomes provided that it satisfies the Shareholding Test, i.e. there is no substantial change in the company’s shareholdings between the last day of the year in which the losses were incurred, and the first day of the YA in which the losses are to be deducted.
This allows for a temporarily loss-making company to reduce future taxes payable.
How Do I File and Pay Corporate Tax in Singapore?
1. File the Estimated Chargeable Income (ECI) form (unless exempted)
In Singapore, the process of paying corporate taxes generally begins by filing an Estimated Chargeable Income (ECI) form providing an estimate of the company’s chargeable income with IRAS within 3 months of their financial year end.
All companies are required to file an ECI unless it has an annual revenue of not more than S$5 million and there is no estimated chargeable income for that YA, in which case it would be exempt from filing an ECI.
From YA 2020, companies required to file their ECI must do so via e-Filing. You may e-File your ECI form through the one-stop myTax Portal maintained by IRAS.
2. File the annual Income Tax Return
The company must then file its annual Income Tax Return with IRAS via the same myTax Portal.
The Income Tax Return is a report of the company’s actual income, thus differing from the ECI which is an estimate of the company’s income.
The annual Income Tax Return must be filed by all companies, even those which are making losses, applying to be struck off or under liquidation.
Companies must generally file their Income Tax Return using Form C, which requires the submission of financial statements, tax computation and supporting schedules.
However, a company may qualify to submit the simplified Form C-S instead if it meets the following conditions:
- The company is incorporated in Singapore.
- The company has an annual revenue of S$5 million or lower.
- The company’s income is taxed at the standard corporate tax rate of 17% (in other words, the company must not have income taxed at reduced tax rates, such as in certain promoted industries).
- The company is not claiming any special schemes such as investment allowances or foreign tax credits.
Alternatively, a company that has an annual revenue of S$200,000 or lower may submit a further-simplified Form C-S (Lite) from YA2020 onwards.
A dormant company (one which does not carry on business and has no income at all for that financial year) is also allowed to submit a simplified Form C-S/C for Dormant Company instead of the full Income Tax Return.
3. Receive IRAS’ Notice of Assessment (NOA)
After filing the necessary forms, IRAS will review the forms and will then issue a Notice of Assessment (NOA) to the company by 31 May of the following year.
This NOA is meant to provide a detailed statement of the company’s tax liabilities as well as provide an opportunity for the company to object to IRAS’ tax assessment if it wishes to do so.
4. Pay the assessed corporate tax
Where there are no issues raised in the NOA, the company must proceed to pay the assessed corporate tax within 30 days from the date of the NOA.
This may be done through a variety of methods including interbank GIRO, internet banking, cheque or telegraphic transfer.
Penalties for Inaccurate Tax Filings
Where the Income Tax Returns have been inaccurately filed without any intention to evade taxes, IRAS could impose:
- Financial penalties of up to 200% of the tax undercharged;
- Fines of up to S$5,000; and/or
- Imprisonment of up to 3 years.
Read about the common tax-filing mistakes to avoid to ensure that corporate taxes are filed accurately.
Penalties for Late or Non-Payment of Corporate Tax
Failure to pay the assessed corporate tax on time may result in a 5% penalty, with subsequent penalties of 1% imposed for each month the tax remains unpaid (up to a total of 12% penalty, which does not include the initial 5% penalty).
IRAS may also take further enforcement or legal actions to recover the unpaid tax.
Penalties for tax evasion
Tax evasion is where a company/individual deliberately provides IRAS with false or incomplete information in order to reduce their tax liability or obtain inappropriate tax credits and refund.
Singapore treats tax evasion as a serious criminal offence and IRAS has a sophisticated programme to investigate suspected tax evasion cases.
This may include surprise visits to, or searches of, company premises and residences to uncover accounting records and other relevant documents as well as obtaining or verifying information from third-parties such as banks and financial institutions.
IRAS will usually arrange for meetings with the company in question to discuss any findings uncovered during investigations.
It may then impose penalties depending on the individual circumstances, taking into account the company’s cooperativeness during investigations and whether there was any intention to evade taxes.
An investigation may range between 15 – 24 months.
In cases where the income tax returns have been falsely declared with the intention to evade taxes, IRAS could impose:
- Financial penalties of up to 400% of the tax undercharged;
- Fines of up to S$50,000; and/or
- Imprisonment of up to 5 years for the relevant person.
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In light of the severity of the above penalties, it is highly recommended to enlist the help of a qualified tax advisor and to ensure that tax filings and payments are performed in an accurate and timely manner. Check out our competitive rates for tax and other corporate services here.
FAQs
What is the corporate tax exemption rate in Singapore? ›
The standard corporate tax rate in Singapore is 17%. A partial tax exemption is eligible for first SGD 300,000 of chargeable income. Under this condition, 75% of the first SGD 10,000 of chargeable income is tax exempt and 50% of the next SGD 290,000 of chargeable income is tax exempt.
How do I pay business taxes in Singapore? ›- File the Estimated Chargeable Income (ECI) form (unless exempted) ...
- File the annual Income Tax Return. ...
- Receive IRAS' Notice of Assessment (NOA) ...
- Pay the assessed corporate tax.
FAQs on Corporate Tax Exemptions in Singapore
Partial tax exemption is given to all companies in Singapore on chargeable income of up to $300,000 as follows: 75% tax exemption on your first $10,000 of chargeable income and a further 50% exemption on the next $290,000 of your chargeable income.
Start-up Tax Exemption Scheme
Income derived by companies in Singapore is taxed at a flat rate of 17%. The start-up tax exemption scheme provides newly incorporated companies some exemption on their taxable profits in their first three years of operation.
Royalties, interest, rental of movable property, technical assistance, and management fees can be exempt from WHT in certain situations or subject to a reduction in tax rates, usually under fiscal incentives or DTAs.
What is full tax exemption? ›What Is a Tax Exemption? A tax exemption excludes certain income, revenue, or even taxpayers from tax altogether. For example, nonprofits that fulfill certain requirements are granted tax-exempt status by the IRS, preventing them from having to pay income tax.
How do foreigners pay tax in Singapore? ›- File income tax by using the IRAS' MyTax online portal or via paper tax return filing. ...
- Check filing status to make sure the tax return was processed and approved. ...
- Payment of taxes.
Tax residents do not need to pay tax if your annual income is less than S$20,000. However, you may still need to file a tax return if you have been informed by Singapore tax authority to submit your tax return. Note that additional earned income relief is also given to further reduce the tax payable depending on age.
How do foreigners pay income tax in Singapore? ›Non-resident individuals are not entitled to any personal reliefs and deductions, and are subject to tax at a flat rate of 22% (24% from year of assessment 2024). As a concession, employment income of non-residents is taxed at the higher of a flat rate of 15% or the graduated resident rates with personal reliefs.
Why is Singapore corporate tax so low? ›Singapore has over 80 tax treaties with other countries to avoid double-taxation of income. Singapore uses a single-tier tax system. Companies only pay taxes on profits. Post-tax profit distribution (i.e. dividends) to shareholders is tax-free.
What is the corporate tax rate in Singapore 2023? ›
The corporate tax rate is 17%. Companies may be exempt from tax on certain types of income. They may also be taxed at a concessionary rate on qualifying income under the various tax incentives.
What is 30% withholding tax Singapore? ›Singapore investors are subjected to a 30% U.S. dividend withholding tax on all dividends received from U.S. listed equities (i.e. stocks, ETFs, bonds, mutual funds, etc) because Singapore doesn't currently have a tax treaty with the U.S.
What is exempted company in Singapore? ›If the company has more than 20 shareholders but less than 50, it is called as a private company. If the number of the shareholders is 20 or less, with no corporation holding or any beneficial interest in the shares of the company, it is known as an Exempt Private Limited Company or EPC in Singapore.
What is Section 13X exemption Singapore? ›Enhanced-Tier Fund Tax Exemption Scheme (Section 13X of the Income Tax Act) – Applies to funds with a minimum size of S$50 million that are managed or advised by a Singapore fund manager, which can be an exempted SFO or a licensed multi-family office.
What is 13X exemption? ›13R – Onshore (Singapore Resident Company) Fund Tax Exemption Scheme: designed for funds that reside or are incorporated in Singapore and MAS approval is required for the exemption. 13X – Enhanced Tier Fund Tax Exemption Scheme: applies to both onshore and offshore funds and MAS approval is required for the exemption.
What are the two conditions for exemption from withholding? ›To be exempt from withholding, both of the following must be true: You owed no federal income tax in the prior tax year, and. You expect to owe no federal income tax in the current tax year.
How many exemptions for withholding? ›You can claim anywhere between 0 and 3 allowances on the W4 IRS form, depending on what you're eligible for. Generally, the more allowances you claim, the less tax will be withheld from each paycheck. The fewer allowances claimed, the larger withholding amount, which may result in a refund.
How do tax withholding exemptions work? ›Exemption From Withholding
If an employee qualifies, he or she can also use Form W-4 to tell you not to deduct any federal income tax from his or her wages. To qualify for this exempt status, the employee must have had no tax liability for the previous year and must expect to have no tax liability for the current year.
There are two types of exemptions-personal and dependency. Each exemption reduces the income subject to tax.
What are examples of tax exemptions? ›- Charitable Organizations.
- Churches and Religious Organizations.
- Private Foundations.
- Political Organizations.
- Other Nonprofits.
What is the maximum limit for tax exemption? ›
It allows a maximum deduction of Rs 1.5 lakh every year from the taxpayer's total income. The benefit of this deduction can be availed by Individuals and HUFs. Companies, partnership firms, and LLPs cannot avail the benefit of this deduction.
How are US citizens taxed in Singapore? ›Expats do not pay Singapore tax on income earned from outside Singapore. Income from employment for non-residents has tax imposed at a 15% flat rate, or at the tax rates for residents, whichever is greater.
Do I need to pay tax in Singapore if I work overseas? ›A non-resident individual is taxable on his income derived from Singapore only. A Singaporean who goes on his own or is sent by his employer to work overseas is treated as a tax resident during the period of his overseas employment because he intends to return to Singapore.
Can foreigners claim tax relief in Singapore? ›As a tourist in Singapore, if you make any purchase of more than S$100 (including GST) at participating shops, you may claim a refund on the 8% Goods and Services Tax (GST) paid. This is known as the Tourism Refund scheme.
What happens if I dont pay Singapore tax? ›Issue a Warrant of Arrest. Take legal actions if the taxpayer does not file a tax return for two years or more. Upon conviction in Court, the taxpayer will have to pay a penalty equal to double the amount of tax that the IRAS may assess for that year of assessment, and a fine not exceeding S$1,000.
Can we save tax in Singapore? ›The easiest and best known way to reduce your taxes is to top up CPF accounts—the Special Account (SA) if you're below 55, and the Retirement Account (RA) if you're 55 and above, your Medisave, and yourSupplementary Retirement Scheme (SRS) account.
What is the best way to pay income tax in Singapore? ›One of the easiest and most convenient ways to pay your income tax, all you'll need is to have your GIRO arrangement set up once, and payments in subsequent years can use this. Opting for GIRO allows you to pay through monthly interest-free instalments or a yearly one-time payment.
What is the 183 day rule in Singapore? ›Individuals who are physically present or who exercise an employment (other than as a board director of a company) in Singapore for 183 days or more during the calendar year preceding the year of assessment are treated as tax residents for that year of assessment.
What is the 183 day rule? ›Understanding the 183-Day Rule
Generally, this means that if you spent 183 days or more in the country during a given year, you are considered a tax resident for that year. Each nation subject to the 183-day rule has its own criteria for considering someone a tax resident.
You happen to be a Singapore Citizen (SC) or Singapore Permanent Resident (SPR) who only travels out of the country on a temporary basis. You happen to be a foreigner who has physically stayed and worked in Singapore for at least 183 days in the calendar year preceding the year in question.
Is Singapore a corporate tax haven? ›
Tax Haven Companies – Low-tax
Apart from jurisdictions that guarantee zero tax for foreign companies, there is another category of tax haven that are known as low tax havens. These include countries such as Barbados, Gibraltar, and Singapore.
British Virgin Islands and Cayman Islands are the world's most popular corporate tax havens in the world for 2021 according to Corporate Tax Haven Index (by Tax Justice Network) which publishes a ranking of jurisdictions most complicit in helping multinational corporations underpay corporate income tax.
Which is the cheapest corporate tax in world? ›- Republic of Cyprus. Latest & Lowest Corporate Tax Rate: 12.5% ...
- Republic of Ireland. ...
- Principality of Liechtenstein. ...
- Republic of Moldova. ...
- Democratic Republic of Timor-Leste. ...
- Principality of Andorra. ...
- Bosnia and Herzegovina. ...
- Republic of Bulgaria.
The Republic was among 130 jurisdictions to join a landmark agreement in October 2021. The deal provides a framework for the reform of international tax rules, and backs the global minimum effective corporate tax of 15 per cent from 2023.
What are the changes in corporate tax in 2023? ›15% corporate minimum tax
Under this change, a new minimum 15% tax would apply based on annual income posted in a corporation's financial statement, rather than the corporation's taxable income, effective on January 1, 2023.
What is an Existing 80/20 Company Under the Nonresident Alien Income Tax Rules? An exemption from the 30-percent flat tax, collected through withholding, is allowed for the active foreign business percentage of any dividend or interest paid by an existing 80/20 company.
What is Section 45 of the Singapore income tax Act? ›Who is Applicable to Pay a Withholding Tax? Based on section 45 of the Income Tax Law of Singapore, anyone in Singapore who make payments for certain services they got from a non-resident company or individual is legally required to pay withholding tax.
What is Section 45 withholding tax Singapore? ›The types of payments that are subject to Singapore Withholding Tax are any payments listed under Section 45 of the Singapore Income Tax Act, which includes: Payment of commission fees to overseas agents; Payment of director's fees to non-resident directors; and. Payment of professional fees to offshore accountants.
Can a foreigner own a company in Singapore? ›Just like a local Singaporean, a foreigner can register a company and own its 100% shareholding without facing any difficulties. In fact, anyone over the age of 18 years can start a company in Singapore.
What is one tier tax exempt Singapore? ›Single-Tier Income Tax System
Singapore practices a single-tier corporate income tax system. Tax paid by a company on its income is the final tax and all dividends are exempt in the hands of shareholders from further taxation. The one-tier corporate taxation system was introduced in Budget 2002.
Which companies are exempt from audit in Singapore? ›
Prior Criteria for Audit Exemption
An Exempt Private Company is a company that has less than 20 shareholders and no corporate shareholders. Pursuant to the 2014 Amendment, the criteria has changed. Now, any company defined as a “small company” will be eligible for audit exemption.
Section 13(6) of the Singapore Income Tax Act provides for tax exemption on income derived from employment exercised in Singapore for not more than 60 days in a year by non-resident individuals (not applicable to company directors and public entertainers).
What is 60 days exemption in Singapore? ›Short-term visiting employees are not subject to tax on income from an employment exercised in Singapore if the employment does not exceed 60 days in a calendar year. This exemption, however, does not apply to a public entertainer or to a company director.
What is small offer exemption Singapore? ›Allowing offers under the small offers exemption to be made to persons who have previously indicated their interest in investing in such securities would also facilitate the establishment of an efficient private equity market.
What is 13O and 13U tax exemption? ›Section 13U (formerly Section 13X) of the Act
The Enhanced-Tier Fund Tax Exemption Scheme, or Section 13U of the Act, exempts from tax the income arising from funds managed by a Singapore-based fund manager/family office.
13R. Enhanced fund tax exemption policy 13X. Tax exemption. Exemption of specific income from specified investments. The legal form of the fund.
What is exemption rule? ›To exempt a person or thing from a particular rule, duty, or obligation means to state officially that they are not bound or affected by it. [...]
What is Singapore concession tax rate? ›International traders are taxed at concessionary rates of 5% or 10% on qualifying income from physical trading, brokering of physical trades, and derivative trading income.
Is Singapore tax free for companies? ›Singapore levies taxes on profits and not on revenue. Profits of your Singapore company will be taxed at 17% (with an effective tax rate often lower due to various tax incentives and tax exemptions available to Singapore-resident companies).
Is the corporate tax rate 21%? ›In December 2017, Congress passed Public Law 115-97—commonly known as the Tax Cuts and Jobs Act (TCJA). Among many changes, TCJA lowered the top statutory corporate tax rate from 35 percent to 21 percent.
How is Singapore corporate tax calculated? ›
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Corporate - Taxes on corporate income.
| Chargeable income (SGD) | Exempt from tax | Exempt income (SGD) |
|---|---|---|
| First 100,000 | 75% | 75,000 |
| Next 100,000 | 50% | 50,000 |
| Total | 125,000 |
Non-resident individuals are not entitled to any personal reliefs and deductions, and are subject to tax at a flat rate of 22% (24% from year of assessment 2024).
What is the corporate tax hike for 2023? ›US President Joe Biden included a hike to the US corporate income tax rate to 28 percent, among numerous other measures, in his 2023 Budget, released March 9, 2023.
Is Singapore still a tax haven? ›Apart from jurisdictions that guarantee zero tax for foreign companies, there is another category of tax haven that are known as low tax havens. These include countries such as Barbados, Gibraltar, and Singapore. In a country like Barbados, an foreign company is charged on the total annual profits.
What is the exemption amount for 2023? ›The annual exclusion amount for 2023 is $17,000 ($34,000 per married couple). That means you could give up to $17,000 (or a married couple could give a total of $34,000) in annual exclusion gifts to any child, grandchild or other person.
Is Singapore a tax haven country? ›Is Singapore a tax-free country? No, Singapore is not a tax-free nation. It follows a progressive taxation policy that ranges from 0% to 22% (for income above S$320,000). But, there is no taxation on inheritance or capital gain.
What country has highest corporate tax rate? ›- The highest corporate tax rate in the world belongs to the United Arab Emirates (UAE), with a 2021 tax rate of up to 55%. ...
- The global average corporate tax rate is 23.64%.
How do profitable corporations get away with paying no U.S. income tax? Their most lucrative (and perfectly legal) tax avoidance strategies include accelerated depreciation, the offshoring of profits, generous deductions for appreciated employee stock options, and tax credits.
Who will pay 15 minimum corporate tax? ›Companies are subject to the tax if they have a three-year average of at least $1 billion in financial-statement net income. The tax takes effect for 2023, so initially the average will be based on the results of 2020, 2021, and 2022.