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A General Overview of Singapore’s Tax System Audit / Tax / Advisory Smart decisions. Lasting value.
A General Overview of Singapore’s Tax System
Contents
3 Corporate Income Tax
6 Personal Income Tax
7 Withholding Tax
8 Transfer Pricing
8 Goods and Services Tax
9 Tax Incentives
10 Avoidance of Double Taxation Agreements
11 Others
The information presented in this article was first published
in the Asia-Pacific Journal of Taxation, Vol.22 No.2 - 2018
(Authors: Sivakumar Saravan & Liew Kin Meng of Crowe Singapore)
and updated on 5 March 2019.
2
Crowe Singapore
Introduction
Singapore’s global economic standing, 1. remitted to, transmitted, or
stable political landscape, strong legal brought into Singapore;
system, business-friendly policies,
2. applied in or towards satisfaction of any
skilled labour force, and support for
debt incurred in respect of a trade or
innovation, among other factors, have
business carried on in Singapore; or
placed the island nation among the
most successful countries in the world 3. applied to purchase any
in attracting foreign investment. movable property which is
brought into Singapore.
As a global financial hub, Singapore has
a robust financial infrastructure to support However, foreign dividends, overseas
companies in their growth and regional branch profits, and foreign-sourced
expansion. With its excellent connectivity service income received by a
providing easy access to emerging resident company are not taxable if
markets, Singapore has positioned itself the following conditions are met:
as a launchpad for doing business in
Asia. It also has a vibrant entrepreneurial 1. The highest corporate tax rate
ecosystem whereby start-ups are nurtured (headline tax rate) of the foreign
through pro-innovation government country from which income is
policies, easy access to angel funding, received is at least 15 per cent in
and a strong technical infrastructure. the year the income is received.
While there are many factors that 2. The foreign income had been
drive investment decisions, a country’s subjected to tax in the foreign country
tax system does play a key role in from which it was received.
influencing such decisions. This can Income tax is levied only on “income”,
be seen from the fact that regulations which means gains of a capital nature are
relating to paying taxes is one of the not taxable in Singapore. However, capital
indicators for ranking countries in the gains that are derived from activities of a
World Bank’s Doing Business report. trade or business carried on in Singapore
This article provides a broad overview of may be deemed to be in the nature of
the Singapore tax system for companies income and hence subject to income tax.
looking to invest in Singapore.iF
There is certainty for non-taxation of gains
Corporate Income Tax on disposal of ordinary shares in investee
companies if prior to the disposal, the
Scope of Taxation investee company was held continuously
Under Singapore’s territorial basis for at least 24 months with at least 20
of taxation, a company’s income per cent ordinary shareholdings. This
accruing in or derived from Singapore tax certainty is applicable for disposal
or received in Singapore from outside of ordinary shares up to 31 May 2022.
Singapore is taxable. This applies to both
resident and non-resident companies
unless certain exceptions apply.
www.crowe.sg 3A General Overview of Singapore’s Tax System
Tax Residency The corporate tax rate for both
resident and non-resident
Residents and non-residents are subject
companies is 17 per cent.
to tax at the same corporate tax rate.
However, a tax resident enjoys several Under the partial tax exemption
tax benefits that are not afforded to scheme, 75 per cent of a company’s first
non-resident businesses. For example, SGD10,000 of chargeable income and
the tax exemption on certain foreign- 50 per cent of the next SGD290,000 of
sourced income and the tax exemption chargeable income shall be exempted
scheme for new start-up companies are from tax. There are no qualifying
only available to resident companies. conditions for this exemption scheme.
A resident company can also make
With effect from YA 2020, the partial
use of the benefits afforded under
tax exemption will be revised such that
Singapore’s wide tax treaty network,
75 per cent of the first SGD10,000 of
such as enjoying a lower withholding
chargeable income and 50 per cent of
tax rate on certain foreign income
the next SGD190,000 of chargeable
derived from a jurisdiction with which
income shall be exempted from tax.
Singapore has concluded a tax treaty.
Qualifying new start-up companies,
A company is regarded as a resident if
except for investment holding companies
its management and control is exercised
and property developers, can enjoy
in Singapore. Generally, a company
the start-up tax exemption (SUTE)
may be considered as exercising its
scheme which provides for a full tax
powers of management and control in
exemption on the first SGD100,000
Singapore if its board of directors meets
of chargeable income and a tax
in Singapore to make strategic decisions.
exemption on 50 per cent of the next
Tax Year SGD200,000 of chargeable income for
the first three years of assessment.
The year of assessment (YA) is the
year in which income tax is calculated With effect from YA 2020, the SUTE
and charged. The basis period is the scheme will also be revised such that
period of income relevant to the YA. 75 per cent of the first SGD100,000 of
chargeable income and 50 per cent of
Singapore has a preceding-year basis
the next SGD100,000 of chargeable
of taxation, which means that the
income shall be exempted from tax.
basis period for any YA is the calendar
year preceding that YA. For example, To qualify for SUTE, the company
in YA 2019, the income that is being must meet the following conditions:
assessed for tax will be the income
1. It is incorporated in Singapore.
earned during the basis period from 1
January 2018 to 31 December 2018. 2. It is a tax resident in
Singapore for that YA.
Companies are allowed to adopt a
different financial year other than a 3. It has no more than 20 shareholders
calendar year. For example, for a company throughout the basis period for that
with a June financial year-end, the income YA, where all of the shareholders
assessable to tax in YA 2019 will be the are individuals or at least one
income earned during the basis period shareholder is an individual holding
from 1 July 2017 to 30 June 2018. at least 10 per cent of the issued
ordinary shares of the company.
4Crowe Singapore
For YAs 2018 and 2019, companies Tax Losses
are given a tax rebate computed at
Any capital allowances, tax losses,
40 per cent and 20 per cent of the
or donations that cannot be fully
corporate income tax payable, capped at
offset by the taxable profits of a YA
SGD15,000 and SGD10,000 respectively.
may be carried forward to be set off
The tax rebate is granted to all companies
against future taxable profits.
regardless of their tax residency status.
There is no expiry to the carry forward
Determining Taxable Income
of unabsorbed capital allowances
Tax Deductions and tax losses as long as the ultimate
shareholders remain substantially the
Tax deductions are allowed for revenue
same as at certain specified dates. For
expenditure wholly incurred in the
the carry forward of unutilised capital
production of income unless such
allowances, there is an additional
expenditure is specifically disallowed
requirement that the taxpayer carries
under the Income Tax Act. Depreciation
on the same business for which
and private car expenses are examples
the capital allowances arose.
of disallowed expenses. In some cases,
such as an investment holding company, For the carry forward of unabsorbed
the amount of revenue expenses donations, the same ultimate
that can be deducted is capped. shareholders requirement applies but
unabsorbed donations not utilised
Expenditures that are capital in nature
within five years will be forfeited.
do not qualify for tax deduction.
However, capital allowances (i.e. tax Unabsorbed capital allowances and
depreciation) can be claimed on certain tax losses of up to SGD100,000 can
types of capital expenditure, such also be carried back to the preceding
as expenses incurred on acquiring YA to offset the assessable income of
qualifying plant and machinery for the that YA. The substantial shareholding
purposes of a trade or business. requirement and the additional same
business requirement for capital
Similarly, subject to meeting certain
allowances also apply to carry back.
conditions, writing down allowances
over a period of 5 years, 10 years, or Group Consolidation
15 years can be claimed on qualifying
Under the group relief system, the current
capital expenditure incurred in acquiring
year unabsorbed capital allowances, tax
intellectual property rights (IPRs) up to the
losses, or donations of one company may
last day of the basis period for YA 2025.
be used by another company in the same
Enhanced deductions are available group. A group refers to a Singapore
for certain types of expenditure so as incorporated parent and all its Singapore
to incentivise companies to undertake incorporated subsidiaries which are
certain activities that are considered as directly or indirectly held through another
beneficial to the Singapore economy. Singapore subsidiary with at least 75 per
For example, companies may claim cent shareholdings. A formal application,
double deductions on eligible expenses at the point of submitting the tax returns,
incurred on certain internationalisation is required to be made by the transferor
activities, such as overseas business and claimant companies for group relief.
development trips and missions, overseas
investment study trips and missions, and
participating in overseas trade fairs.
www.crowe.sg 5A General Overview of Singapore’s Tax System
Tax Administration Non-residents who are employed in
Singapore for 60 days or less in a
Estimated Chargeable Income
calendar year are exempted from tax
A company has to submit an estimate on the employment income derived
of its chargeable income known from that short-term employment. This
as Estimated Chargeable Income tax exemption is not applicable to a
(ECI) within three months after a company director, public entertainer,
company’s financial year end. or an independent professional
exercising a profession in Singapore.
For companies with a financial year ending
in or after July 2017, the filing of ECI is Residency
waived for that and subsequent YAs if both
An individual is treated as a tax resident
conditions below are satisfied for any YA:
if he or she resides in Singapore,
1. Annual revenue is not more than or is physically present or exercises
SGD 5 million for the financial year. an employment in Singapore for at
least 183 days in a calendar year.
2. ECI is NIL for the YA.
Under an administration concession,
Tax Return Filing individuals who have worked or stayed
The income tax return, Form C, must in Singapore for at least 183 days
be filed by 30 November of the YA. For continuously over two calendar years
small companies with an annual turnover can be treated as tax residents in
not exceeding SGD5 million, a simplified both years. This concession does not
income tax return, Form C-S, can be apply to directors, public entertainers,
filed, subject to meeting other conditions. or independent professionals.
If the forms are e-filed, the deadline will Tax Rates
be extended to 15 December of the YA.
A tax resident’s income is subject to
Tax Payment progressive tax rates, ranging from 0
Companies are given up to a month from to 22 per cent, depending on the level
the date of the Notice of Assessment of chargeable income of the individual.
(NOA) to pay the tax liability. If a company The highest individual tax rate of 22
wishes to object to the NOA, it has 2 per cent will be imposed on chargeable
months from the date of the NOA to do so. income in excess of SGD320,000.
Personal Income Tax Non-residents are subject to tax on their
employment income at a flat rate of 15
Scope of Taxation per cent or the resident rate, whichever is
higher. Other non-employment income,
Individuals are taxed on income accrued such as director’s fee, derived by
in or derived from Singapore. Income non-residents is taxed at 22 per cent.
sourced outside Singapore is not taxable,
even if such income is received into Only a tax resident is entitled to claim
Singapore (except received through a personal reliefs (such as spouse relief,
Singapore partnership). This applies to child relief, etc.) against his or her income.
both tax residents and non-residents.
For YA 2019, a personal income
tax rebate of 50% of tax payable,
capped at SGD200 will be granted
to all tax resident individuals.
6Crowe Singapore
Not Ordinarily Resident (NOR) Scheme
A foreigner who is deputed to Singapore liability is subject to a minimum floor
with regional responsibilities and travels effective tax rate of 10 per cent. provided
overseas regularly to discharge his or her the employer does not claim a tax
regional duties can seek to benefit from deduction for the corresponding amount.
the Not Ordinarily Resident (NOR) scheme
Secondly, any contributions made
that confers certain tax concessions.
by the employer to the individual’s
However, the NOR Scheme will non-mandatory overseas pension
lapse after YA 2020 and the last fund or social security scheme can be
NOR status will be granted for YA tax exempted up to a certain amount.
2020 and expire in YA 2024. Each of these concessions has its own
conditions that need to be fulfilled.
There are two eligibility requirements
under the NOR scheme. Firstly, the Tax Administration
individual must be a tax resident in the YA
The due date for paper filing and e-filing
in which he or she is applying for the NOR
for personal income tax is 15 April
status. Secondly, he or she needs to be a
and 18 April of the YA, respectively.
non-resident for the past three YAs before
the YA in which he or she is applying Individuals are given up to a month from
for the NOR status. If granted, the NOR the date of the NOA to pay the tax liability.
status will be for five consecutive YAs. Individuals may also opt to pay their
income taxes via GIRO to enjoy interest-
There are two concessions under
free instalment(s) for up to 12 months. An
the NOR scheme. Firstly, the income
individual has up to 30 days from the date
attributable to periods that the individual
of the NOA to file an objection to the NOA.
is out of Singapore for business purposes
can be tax exempt, but the overall tax
Withholding Tax
Categories of Income or Payments WHT Rates (%)
Interest, commission, fee, or other payment in
15%
connection with any loan or indebtedness
Royalties or other lump sum payments for the
10%
use or the right to use movable properties
Royalties or other lump sum payments for the
10%
use or the right to use movable properties
Rent or other payments for the
15%
use of movable properties
Management fees, technical
17%
assistance and service fees
Director’s fee 22%
15% on gross income or
Payments to non-resident professionals
22% on net income
Singapore does not levy any WHT on dividends and remittance of branch profits.
www.crowe.sg 7A General Overview of Singapore’s Tax System
Transfer Pricing
Singapore adopts the internationally A supply of goods and services can
accepted arm’s length principle to either be a taxable supply or an exempt
guide transfer pricing (TP). The Inland supply. A person registered for GST
Revenue Authority of Singapore in Singapore is required to charge
(IRAS) expects taxpayers to be able GST on taxable supplies. A taxable
to support with documentation that supply can either be standard rated or
they have concluded all related party zero rated. The current GST rate for
transactions on an arm’s length basis. standard rated supplies is 7 per cent.
It is mandatory to prepare Exported goods and provision of
contemporaneous TP documentation international services are zero rated.
if certain conditions are met. From Certain specific transactions, such
YA 2018, certain details of related as the provision of most financial
party transactions must be reported services and the sale of residential
by completing a prescribed form if the properties, are exempted from GST.
value of the related party transactions
A GST registered person can claim
in the audited accounts for the relevant
the GST incurred on business
financial year exceeds SGD15 million.
purchases and expenses (known
Taxpayers must submit the form together
as input tax) if the conditions for
with their income tax return, Form C.
claiming input tax are satisfied.
Multinational enterprises whose
It is compulsory for a business to register
ultimate parent entity is a tax resident
for GST if at the end of every calendar
in Singapore are required to prepare
quarter the taxable turnover for the
and file country-by-country reports for
past 12 months exceeds SGD1 million.
financial years beginning on or after 1
Starting from the calendar year 2019,
January 2017 if the consolidated group
the taxable turnover threshold of SGD1
revenue in the preceding financial
million will be determined at the end of
year is at least SGD1,125 million.
each calendar year (i.e. 31 December)
Taxpayers may consider applying for rather than at each calendar quarter.
advance pricing agreements (APAs)
In addition, compulsory GST registration
to avoid TP disputes. There are three
is also required if there is certainty at any
types of APAs, namely, unilateral,
point of time that the taxable turnover
bilateral, and multilateral APAs. All
is expected to be above SGD1 million
taxpayers can apply for APAs, while
for the next 12 months. Taxpayers
only Singapore tax residents can apply
can also voluntarily register for GST
for bilateral and multilateral APAs.
subject to fulfilling certain conditions.
Goods and Under current GST rules, services from a
Services Tax (GST) supplier who originates from Singapore is
subject to GST, but for a supplier that is
Goods and Services Tax, or GST, supplying similar services and originates
is levied on the import of goods and from outside Singapore, the services are
most supplies of goods and services not subject to GST. To level the playing
in Singapore. The Singapore Customs field, GST on imported services will be
collects GST at the point when goods implemented starting from the year 2020.
are imported into Singapore.
8Crowe Singapore
Tax Incentives
The tax incentives are legislated, and
Singapore uses tax incentives to promote
the approving authority is usually vested
quality investment in certain business
with statutory bodies such as Enterprise
activities that provide significant and
Singapore (ES), the Economic Development
meaningful contributions to the growth
Board (EDB), the Monetary Authority of
of Singapore’s economy, technological
Singapore (MAS), and the Maritime and
advancement, and innovation. It is a
Port Authority of Singapore (MPA).
requirement that incentive applicants must
carry out substantial business activities in Some key tax incentives are listed below:
Singapore besides meeting other conditions.
Incentive Benefits
Pioneer Certificate Corporate tax exemption or a concessionary tax
(PC) and Development rate of 5% or 10% on income derived from qualifying
Expansion Incentives (DEI) activities, including pioneering or expanded activities
in Singapore. The award of PC or DEI may also be
accompanied with the International Headquarter Award
status for companies to anchor their global or regional
headquarters activities of managing, coordinating,
and controlling business activities in Singapore.
Finance & Treasury Centre Concessionary tax rate of 8% on income derived from
(FTC) Incentive qualifying FTC services. Withholding tax exemption
on interest payments is granted if the funds are used
for approved qualifying activities or services.
Financial Sector Concessionary tax rates of between 5% to 13.5%
Incentive (FSI) on income from qualifying financial activities
such as banking, insurance, fund management,
financial, and investment advisory services.
Global Trader Concessionary tax rate of 5% or 10% on qualifying
Programme (GTP) income from physical trading, brokering of physical
trades, and derivative trading income.
Intellectual Property Reduced tax rate on intellectual property related income
Development (IDI) arising from research and development activities.
www.crowe.sg 9A General Overview of Singapore’s Tax System
Avoidance of Double
Taxation Agreements
Singapore has comprehensive avoidance of double taxation
agreements (DTAs) with over 80 foreign jurisdictions:
Regions Countries
Australia, Bangladesh, Brunei, Cambodia,
China, Ethiopia, F
iji, India, Indonesia, Japan,
Kazakhstan, Republic of Korea, Laos, Malaysia,
Asia Pacific
Mongolia, Myanmar, New Zealand, Pakistan,
Papua New Guinea, Philippines, Sri Lanka,
Taiwan, Thailand, Uzbekistan, Vietnam
Egypt, Ethiopia, Libya, Mauritius, Morocco,
Africa Nigeria, Rwanda, Seychelles, South Africa
Signed but not ratified: Gabon, Ghana, Kenya, Tunisia
Bahrain, Israel, Kuwait, Oman, Qatar, Saudi
Middle-East
Arabia, United Arab Emirates
Barbados, Canada, Mexico,
Americas Ecuador, Panama, Uruguay
Signed but not ratified: Brazil
Albania, Austria, Belarus, Belgium, Bulgaria,
Cyprus, Czech Republic, Denmark, Estonia,
Finland, France, Georgia, Germany, Guernsey,
Hungary, Ireland, Isle of Man, Italy, Jersey,
Europe Latvia, Liechtenstein, Lithuania, Luxembourg,
Malta, Netherlands, Norway, Poland, Portugal,
Romania, Russian Federation, San Marino,
Slovak Republic, Slovenia, Spain, Sweden,
Switzerland, Turkey, Ukraine, United Kingdom
Source: Inland Revenue Authority of Singapore, 2019
10Crowe Singapore
Others
Stamp Duty
Stamp duty is a tax on dutiable documents signing the document if it is signed
relating to any immovable property in in Singapore or within 30 days after
Singapore and any stock or shares. receiving the document in Singapore if
Some common dutiable documents that the document was signed overseas.
are chargeable with stamp duty are
Estate/Inheritance Tax
1. transfer documents for the purchase or
Estate duty is not applicable to deaths on
acquisition of immovable properties;
and beyond 15 February 2008. Singapore
2. contracts or agreements (e.g. sale also does not have inheritance tax.
and purchase agreements) and
Excise and Import Duties
transfer instruments for the purchase
or acquisition of shares; and Singapore is essentially a free port. Excise
and import duties are levied only on four
3. agreements for the lease of immovable
categories of goods: intoxicating liquors,
properties (including any furniture,
tobacco products, motor vehicles, and
chattels, fittings, or equipment).
petroleum products & biodiesel blends.
Stamping of a dutiable document
must be done within 14 days after
www.crowe.sg 11 11Crowe Singapore
Contact Information
Sivakumar Saravan, Senior Partner
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kinmeng.liew@crowe.sg
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The information presented in this document is as at 1 March 2019.
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