- 1 Singapore
- 1.1 Corporate Taxation
- 1.2 Singapore Taxation Territorial Scope
- 1.3 Single-tier income tax system
- 1.4 Corporate income tax rates and general tax exemptions
- 1.5 General Tax Incentives
- 1.6 0% tax on S$100K taxable income
- 1.7 Be incorporated in Singapore Be tax resident in Singapore
- 1.8 8.5% tax on taxable income of up to S$300K
- 1.9 Effective Corporate Tax Rate
- 1.10 First Three Years of Income Tax Filings
- 1.11 After First Three Years of Income Tax Filings
- 1.12 One-off Corporate Income Tax (CIT) Rebate for YA 2016 & YA 2017
- 1.13 Withholding tax
- 1.14 Tax residence of company
- 1.15 Net income vs taxable income
Singapore is often cited as the leading example of countries that continues to reduce corporate income tax rates and introduce various tax incentives to attract and keep global investments.
Singapore has a single-tier territorial based flat-rate corporate income tax system.
Effective tax rates as one of the lowest in the world and the general “business friendliness” of Singapore are the two important factors contributing to the economic growth and foreign investment into the city-state.
Single-tier income tax system
Since January 1, 2003, Singapore has adopted a single-tier corporate income tax system, which means there is no double-taxation for stakeholders. Tax paid by a company on its chargeable income is the final tax and all dividends paid by a company to its shareholders are exempt from further taxation.
There is no tax on capital gains in Singapore. Examples of capitals gains include gains on sale of fixed assets, gains on foreign exchange on capital transactions, etc.
Corporate income tax rates and general tax exemptions
Singapore’s headline corporate tax rate is a flat 17%. In order to make Singapore as an attractive investment destination, income tax rates in Singapore have been going down consistently since 1997/2000 (26%) to 2010, since when its corporate tax rate has been of 17% only.
Headline income tax rate in Singapore as in many other jurisdictions does not necessarily provide an accurate indication of effective corporate tax rate. The effective rate is normally lower than the headline tax rate due to applicable tax exemptions and tax incentives, depreciation rules, etc.
General Tax Incentives
Listed below are general tax exemptions/incentives currently available to Singapore resident companies. Once these tax exemptions are applied to the taxable income, the effective income tax rate for small-to-midsize Singapore companies is reduced significantly.
0% tax on S$100K taxable income
The corporate income tax rate is 0% on the first S$100,000 taxable income for each of the first three tax filing years for a newly incorporated company that meets the following conditions:
Be incorporated in Singapore
Be tax resident in Singapore
Has no more than 20 shareholders of which at least one is an individual shareholder holding at least 10% of shares.
8.5% tax on taxable income of up to S$300K
All Singapore resident companies are eligible for partial tax exemption which effectively translates to about 8.5% tax rate on taxable income of up to S$300,000 per annum. The taxable income above S$300,000 will be charged at the normal headline corporate tax rate of 17%.
Effective Corporate Tax Rate
The above general tax incentives mean very attractive tax rates for small-to-midsize companies. For example, a typical Singapore resident company with S$2,000,000 annual taxable income will be taxed as below:
First Three Years of Income Tax Filings
TAXABLE INCOME (S$)
|0 – 100,000||0%|
|100,001 – 300,000||8.5%|
|300,001 – 2,000,000||17%|
After First Three Years of Income Tax Filings
TAXABLE INCOME (S$)
|0 – 300,000||8.5%|
|300,001 – 2,000,000||17%|
One-off Corporate Income Tax (CIT)
Rebate for YA 2016 & YA 2017
According to the Singapore Budget 2015, every Singapore company will be eligible for a corporate income tax rebate. Singapore companies can claim a one-time 30% corporate income tax rebate on corporate income tax payable for YA 2016 & YA 2017, subject to a cap of S$20,000.
Singapore has implemented a withholding tax law (on certain types of income) to ensure the collection of tax payable to non-residents on income generated in Singapore. The tax withholding does not apply to Singapore resident companies or individuals. Under the law, when a payment of a specified nature is made to a non-resident company or individual, a percentage of the payment has to be withheld and paid to Income Tax Authorities. The amount withheld is called the withholding tax.
Tax residence of company
A company is considered as resident in Singapore if the control and management of the business is exercised in Singapore. Although the term “control and management” is not defined explicitly by authorities, a generally accepted consensus is that it refers to the policy level decision making at the level of Board of Directors and not the day-to-day decision making and operations.
In general, a company is considered non-resident in Singapore if the directors manage and control the business and hold board meetings from outside Singapore. This is true even if, for example, the lower level operations are taking place in Singapore.
A company’s residence may change from one year of assessment to the next depending on the circumstances. A Singapore branch of a foreign company is generally not treated as a Singapore tax resident since the control and management is vested with an overseas parent company.
Net income vs taxable income
A company’s income means gains or profits from any trade or business income from investment such as dividends, interest and rental royalties, premiums and any other profits from property other gains of an income nature.
As per Income Tax Act of Singapore, corporate tax is imposed on the income that is
- A) Accruing in or derived from Singapore;
- B) Received in Singapore from outside Singapore.
Part A is the income that has a source in Singapore.
Part B is the income with a source outside Singapore and received in Singapore.
For Part B however, there are certain qualified exemptions commonly known as Exemptions On Foreign Sourced Income.
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