FAQ ON CORPORATE TAX MATTERS

Singapore tax system is on a territorial basis. A company, regardless of whether it is a local or a foreign company, will be taxed on its:

  • income accruing in or derived from Singapore; or
  • income received in Singapore from outside Singapore


    • Income is assessed on a preceding year basis. This means that the basis period for any Year of Assessment (YA) generally refers to the financial year ending in the year preceding the YA. Example, your company's basis period for YA 2013 is from 1 Jan 2012 to 31 Dec 2012.

    For taxation purposes, a "Company" includes:

    A business entity incorporated or registered under the Companies Act or any law in force in Singapore. It usually has the words "Pte Ltd" or "Ltd" as part of its name; or - A foreign company registered in Singapore such as a branch of a foreign company; or - A foreign company incorporated or registered outside Singapore
    A company does not include sole-proprietorship and partnership businesses registered in or outside Singapore

    Capital gain is not taxable. Examples of receipts that are capital in nature are: Gains on sale of fixed assets , Gains on foreign exchange on capital transactions.
    Income may be exempted from tax under the provisions of the Singapore Income Tax Act. Some examples are: Exempt shipping income derived by a shipping company, Foreign-sourced dividends, branch profits & service income received by a resident company that satisfies the qualifying conditions.

    In Singapore, the tax residence status of a company depends on where the control and management of its business is exercised. A company is tax resident in Singapore if the control and management of its business is exercised in Singapore. Generally, a Singapore branch of a foreign company is not treated as a Singapore tax resident since the control and management is vested with an overseas parent company. The basis of taxation for a resident company and non-resident company is generally the same. However, there are some benefits that a resident company can enjoy that a non-resident would not. These include:

  • It is entitled to benefits conferred under the Avoidance of Double Taxation Agreements (DTA) that Singapore has concluded with treaty countries.

  • It can enjoy tax exemption on foreign-sourced dividends, foreign branch profits, and foreign-sourced service income under section 13(8) of the Income Tax Act.

  • It can enjoy the tax exemption scheme for new start-up companies.

    • Corporate Tax Rates

    Income Tax Rate
    Tax rate on corporate profits for up to 300,000 SGD 8.5%
    Tax rate on corporate profits above 300,000 SGD 17%
    Tax rate on capital gains accrued by the company 0%
    Tax rate on dividend distribution to shareholders 0%
    Tax rate on foreign-sourced income not brought into Singapore 0%
    Tax rate on foreign-sourced income brought into Singapore 0 – 17% (subject to certain conditions)

    Personal Tax Rates (From YA 2012 onwards)

    Income Tax Rate%
    Tax rate on first 20,000
    Tax rate on next 10,000     		0
    2
    First $30,000
    Next $10,000     		-
    3.50
    First $40,000
    Next $40,000     		-
    7
    First $80,000
    Next $40,000     		-
    11.5
    First $120,000
    Next $ 40,000     		-
    15
    First $160,000
    Next $ 40,000     		-
    17
    First $200,000
    Next $120,000     		-
    18
    First $320,000
    Above $320,000     		-
    20
    Tax rate on income earned overseas
    		 0
    (subject to certain conditions) 20
    Tax rate on dividends received from Singapore company 0

    Singapore’s 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. As in many jurisdictions, income tax rate in Singapore 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.

    General Tax Exemptions Below are general tax exemptions currently available to Singapore resident companies. With these tax exemptions, the effective income tax rate for Singapore companies is reduced significantly. About the Tax Exemption Scheme for New Start-up Companies

    With effect from Year of Assessment (YA) 2010 If your company is not excluded from the Tax Exemption scheme, it can enjoy the tax exemption if it meets the following qualifying conditions:

    • incorporated in Singapore (including a company limited by guarantee**);
    • a tax resident* in Singapore for that YA; and
    • has no more than 20 shareholders throughout the basis period for that YA where:
    • all of the shareholders are individuals beneficially and directly holding the shares in their own names; or at least one shareholder is an individual beneficially and directly holding at least 10% of the issued ordinary shares of the company.
    The exempt amount for each YA is as follows:
    Year of Assessment Exempt amount for new start-up companies
    2008 onwards First $100,000 @ 100% = $100,000
    Next $200,000 @ 50% = $100,000
    Total $300,000 $200,000 – exempted
    Thus charge income is (300k – 200K) 100k @ 17%= $17,000 tax
    Tax saving is (200k @ 17%) $34,000.

    Companies not eligible for the Tax Exemption scheme New!
    As announced in Budget 2013, the Tax Exemption scheme does not apply to the following companies incorporated after 25 Feb 2013: A company whose principal activity is that of investment holding; and A company whose principal activity is that of developing properties for sale, for investment, or for both investment and sale.
    Investment holding companies derive only passive incomes such as dividend and interest income, while the real estate industry typically incorporates a new company for each new property development. The start-up tax exemption for encouraging entrepreneurship is not intended for such companies. These companies will be given partial tax exemption.

    Abuse of the Tax Exemption scheme
    IRAS has observed some companies set up not for entrepreneurship and genuine commercial reasons but rather to take advantage of the tax exemption scheme. IRAS will take actions against such abuses. Normal companies and newly incorporated companies after the third YA are eligible for partial tax exemption.

    Effective from YA 2008, a partial tax exemption is given to companies on normal chargeable income* (excluding Singapore franked dividends) of up to $300,000 as follows:

    Exempt amount Taxable amount
    First $ 10,000 @ 75% = $ 7,500 2,500
    Next $290,000 @ 50% = $145,000 145,000
    Total $300,000
    Tax payable (147,500 @17%)
    Tax saving of (152,500 @ 17%)
    @17%    		 $152,500

    $25,925    		 147,500
    $25,075

    Effective Corporate Tax Rate The above general tax incentives mean very attractive tax rates. See illustration below for tax rate for various annual taxable income:
    First Three Years of Income Tax Filings for Newly Incorporated Companies

    Taxable Income (S$) Tax Rate
    0 – 100,000 0%
    100,001 – 300,000 8.5%
    300,001 – 2,000,000 17%

    Singapore adopts a one-tier corporate tax system with effect from 1 Jan 2003. Under the one-tier corporate tax system, tax paid by a company on its chargeable income is a final tax. All dividends paid by a company are exempt from tax in the hands of the shareholders. There is no withholding tax on dividend, if it is remitted to non-resident.

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