Corporate Taxation

Corporate Taxation in Singapore

Corporate income tax is a tax imposed on a company’s profits. As a business owner in Singapore, you are required to pay this tax to the Inland Revenue Authority of Singapore (IRAS).

Singapore’s corporate tax system operates on a single-tier structure, meaning tax is only levied once at the company level, regardless of whether the income is distributed to shareholders. This system offers several advantages, including:

  • No double taxation for shareholders.
  • The tax paid by the company is considered the final tax.
  • Dividends paid to shareholders are exempt from further taxation.

Territorial-Based Taxation

Singapore follows a territorial tax system, where taxes are based on where profits are earned, not where the company is based. Profits made outside Singapore are not subject to taxation. The taxable income includes:

  • Profits from business activities.
  • Income from rental properties.
  • Royalties and other property-related premiums.

Corporate Tax Benefits

Singapore’s corporate tax rate is 17%. However, the country offers several tax breaks and incentives that can lower your effective tax rate, with personal income tax ranging from 0% to 22%. Key benefits include:

  • Low, transparent tax rates.
  • Support for startups, such as tax exemptions during the first three years of incorporation.
  • No taxes on dividends, inheritance, or capital gains under the single-tier system.
  • Incentives for research, development, and production-based technologies.
  • Exemptions on foreign-sourced income and dividends.

Tax Exemptions and Incentives

Singapore offers a variety of tax incentives for resident companies, including:

Startup Tax Exemptions

Your company may qualify for tax exemptions during the first three years if it meets the following conditions:

  • It is incorporated and tax-resident in Singapore.
  • It has no more than 20 shareholders, with at least one holding 10% of issued shares.

Partial Tax Exemption Scheme (PTE)

Under this scheme, 75% of the first $10,000 of your income is exempt, and 50% of the next $190,000 is also exempt.

Foreign-Sourced Income Tax Exemptions

Foreign-sourced service income, dividends, and branch profits are exempt if:

  • The tax exemption benefits Singapore.
  • The foreign income is taxed in its country of origin.
  • The foreign jurisdiction’s tax rate is at least 15%.

Development and Expansion Incentive (DEI)

If your business aims to upgrade or expand globally, you may qualify for DEI by:

  • Contributing to Singapore’s economy through business expenditures.
  • Creating skilled jobs that benefit Singaporeans.
  • Developing new capabilities and expertise.

Productivity and Innovation Credit (PIC) Scheme

Your company may receive a 400% tax deduction or allowance on qualifying expenditures in areas such as:

  • Licensing of intellectual property.
  • Workforce training.
  • Research and development activities.
  • Patent, trademark, and design registration.
  • Approved projects by the DesignSingapore Council.

Investment Allowance

Investment allowances are available for qualified projects for 5-8 years. You may receive a tax credit of up to 100% on capital expenditures.

Tax Return Filing

To file your corporate tax returns, you must submit an Estimated Chargeable Income (ECI) and either Form C or Form C-S. Form C requires tax computations, financial statements, and supporting documents, while Form C-S is a simplified version.

With its low tax rates and extensive incentives, Singapore is a prime location for emerging businesses. If you’re unsure about corporate tax exemptions or schemes, contact Global Business 360 for expert guidance tailored to your business needs.

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