Corporate Tax in Singapore (2017 Update)


September 6, 2017 Facebook Twitter LinkedIn Google+ Latest News,Moneylender


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Guide to Corporate Tax in Singapore 

  

Singapore is well known as being one of the best places to run a company in the modern world. And the advantages of incorporating a company here are very numerous. Some of the benefits include the availability and easy access to affordable funding. The ease of conducting business on a day to day bases, strong Intellectual Property protection schemes in place. And a strategic location among the world’s leading emergency markets further reinforce by trade agreements with them and many other major economies. 

  

tax

tax

 

But for a corporation, arguably the most attractive benefit is the city-state’s tax framework. 

  

Singapore’s companies are taxed on profits gained within Singapore. As well as those from abroad which are remitted back into Singapore. Since 2010, the corporate income tax rate has been fixed at 17%. This tax rate is calculated using the company’s chargeable income (taxable revenues). Minus allowable expenses and most of the other allowances. 

  

The corporate tax income is calculate base on the company’s taxable revenues minus allowances and allowable expenses. 

  

As for the rate, even though the marginal rate in Singapore is the third lowest in the wold. The payable effective tax can be reduce even further if you take advantage of all the government incentives, such as their subsidies and schemes. Like with the Productivity and Innovation Credit (PIC) Scheme, through which it’s possible for a firm not to have to pay any corporate tax in Singapore even if it earns up to $28,000,000 per year! 

  

So let’s take a more in depth look at some of the options available to you and how to access them below. 

  

Corporate Tax Rates for New Companies  

To qualify for the Start-up Tax Exemption (SUTE) scheme, a company must meet these conditions:

  – Must have 20 individual shareholders or less 

– For corporate shareholders, one person must hold a minimum of 10% of total shares issue

– No investment holding or property companies are eligible for this program.   

The SUTE was extend a few years ago to include companies by guarantee. But the tax exemption program is not available to companies that partake in property development or investment holding companies that were incorporate after 2013. So if you plan on opening one of these types of businesses. Finally then you probably would be better off taking a look at some the other types of tax exemptions.  

  

For example, any company that doesn’t qualify for the SUTE scheme is automatically eligible for partial tax exemption. 

Foreign Sourced Income of Companies                      

Thus, it’s quite common these days for companies which are Singaporean taxes residents. But conduct their business overseas to have their foreign income remit to Singapore. And foreign sourced income is taxes because Singapore uses a progressive tax framework based on territorial policy.   

In spite of this, The Foreign Source Income Exemption detailed in Sections 13(7A) to 13(11) of the Income Taxes Act of Singapore shows that even these companies can benefit from the FSIE, or Foreign Sourced Income Exemption Scheme. 

  

The FISE is applicable for: 

  

          Profits made by Foreign Branches: These profits are generate by business operations that are base in Singapore. But have divisions register as branches in foreign countries. And it does not include Non-trade or non-business revenue generate by the foreign branch 

  

          Income Sourced from abroad: This includes income generate by resident taxpaying company for services that were provide in a foreign country. So this may mean a foreign office, management location, or any space at the disposal of the resident taxpayer 

  

           Dividends Sourced from Foreign Countries–  They are dividends paid by a non-Singaporean taxes resident company which have been temporarily deposit. So, in a custodian account before being remit into Singapore. And, it is important that whatever money was placed into the custodian account be remit back. Therefore, into Singapore within one year of being place into the account. Thus, any interest earned on the deposits will not be include in the dividends, as that is where the FSIE is source from. 

  

But exemptions only apply when the headline corporate taxes rate in the foreign company is at least 15% and the income has already tax in that country. 

  

Lastly, to enjoy taxes exemptions on foreign source income. And the company must be able to assure that the exemption is beneficial to the resident taxpayers. 

  

  1. Double Taxation Relief

  

Sometimes companies operating in multiple countries can be tax twice. Therefore, once in the foreign country, and again when the income is remit back to the main country. The Inland Revenue Authority of Singapore (IRAS) has a foreign tax credit scheme which lets the company claim credit. So, for the tax paid overseas against the local tax that should be paid on the same income. 

  

There are two types of relief here that can be claim under this scheme 

  

The first is the Double Taxes Relief (DTR) – With over 20 Free trade Agreements, 74 comprehensive and 8 limited Avoidance of Double Tax agreements. Thus, conducting trans-border trade making it cheap for Singaporean firms to expand their operations internationally. Thus, a DTR is the credit relief under DTAs to counter double taxation 

  

The second is the Unilateral Tax Credit – A scheme for taxes paid to foreign countries with which the state has no DTA and is only allowed when income is generated by: 

          Dividends in income 

          Employment income 

          Branch profits 

–  Income from royalties which are not taken up by any resident of Singapore, or isn’t deductible from any income that is make in Singapore 

  

  1. CIT (Corporate Income Taxes) Rebate Scheme

  

The Government announce that for the assessment years. Thus, all companies would receive a 30% corporate taxes rebate that wouldn’t exceed $30,000 on the Corporate Income Tax (CIT) rebate scheme. 

  

Many different businesses are beneficiaries of the new scheme, including non-tax resident companies within the city-state, register business truest. And companies already getting income taxes at the concessionary tax rate.

  

But for the income of resident companies, who are subject to final withholding taxes, the CIT will not apply to them. 

  

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