FAQ ON TAX
Basis period and Year of
Assessment
A company is taxed on the income earned in the preceding financial year. This means that income earned in the financial year 2019 will be taxed in 2020.
To assess the amount of tax, IRAS looks at the income, expenses, etc. during the financial year.
This financial year is known as the "basis period".
The basis period is generally a 12-month period preceding the YA.
Examples based on different Financial Year Ends
|
Financial
Year End |
Basis Period |
YA |
|
31 Mar of each year |
1 Apr 2018 to 31 Mar 2019 |
2020 |
|
30 Jun of each year |
1
Jul 2018 to 30 Jun 2019 |
2020 |
|
31 Dec of each year |
1 Jan 2019 to 31 Dec 2019 |
2020 |
The same rule applies to new
companies.
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
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.
A. A company will be considered tax-resident in Singapore if its control and management had been exercised in Singapore for the preceding YA.
The YA is a 12-month period in which the company’s income will be assessed. For example, for YA 2020, the 12-month period would generally be from 1 January 2019 to 31 December 2019.
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.
With effect from YA 2010, a company is taxed at a flat rate of 17% on its chargeable income regardless of whether it is a local or foreign company. However, with the various level of tax exemption provided by the Singapore government, the effective tax rate for companies can be significantly lower.
A
partial tax exemption and a three-year start-up tax exemption for qualifying
start-up companies are available.
(i) Partial Tax Exemption for all companies
All companies including companies limited by guarantee can enjoy the following tax exemption:
YA 2020 onwards
·
75% exemption on the first $10,000 of normal
chargeable income; and
· A further 50% exemption on the next $190,000 of normal chargeable income.
YA 2010 to 2019
·
75% tax exemption on the first $10,000 of normal
chargeable income; and
· A further 50% exemption on the next $290,000 of normal chargeable income.
(ii)
Tax exemption for New Start-Up Companies – for the first three consecutive YAs where the YA falls in):
YA 2020 onwards
·
75% exemption on the first $100,000 of normal
chargeable income; and
· A further 50% exemption on the next $100,000 of normal chargeable income.
YA 2010 to 2019
·
Full exemption on the first $100,000 of normal
chargeable income; and
· A further 50% exemption on the next $200,000 of normal chargeable income.
The start-up exemption is not available to property development and investment holding companies.
For further details on the tax exemption schemes and qualifying conditions, please refer to the following links:
All other companies
For new start-ups
Singapore adopts a one-tier corporate tax system, under which all dividends paid by Singapore-resident companies are tax-exempt in the shareholder’s hands. There is no withholding tax on dividend, if it is remitted to non-resident.
You will be treated as a tax resident for a particular
Year of Assessment (YA) if you are a:
- Singapore Citizen or Singapore Permanent
Resident (SPR) who resides in Singapore except for temporary
absences; or
- Foreigner who has stayed / worked in Singapore (excludes director of a company) for 183 days or more in the year preceding the YA.
Otherwise, you will be treated as a non-resident of Singapore for
tax purposes.
Singapore's personal income tax rates for resident taxpayers are progressive. This means higher income earners pay a proportionately higher tax, with the current highest personal income tax rate at 22%. From YA 2017 onwards, tax rate is:
|
Chargeable
Income |
Income Tax Rate (%) |
|
First $20,000 |
0 |
|
First $30,000 |
- |
|
First $40,000 |
- |
|
First $80,000 |
- |
|
First $120,000 |
- |
|
First $160,000 |
- |
|
First $200,000 |
- |
|
First $240,000 |
- |
|
First $280,000 |
- |
|
First $320,000 |
- |
Taxes on Employment Income
The employment
income of non-residents is taxed at the flat rate of 15% or the progressive
resident tax rates, whichever is the higher tax amount.
Taxes on Director fee, Consultation fee and all Other Income
From YA 2017, the
tax rates for non-resident individuals (except certain reduced final
withholding tax rates) has been raised from 20% to 22%. This is to maintain
parity between the tax rates of non-resident individuals and the top marginal
tax rate of resident individuals.