Singapore Corporate Tax Exemptions
Singapore Corporate Tax Exemptions
A number of entrepreneurs and investors flock to Singapore due to its attractiveness as a major international commercial hub, which boasts of pro-business government policies, desirable economic environment and generous corporate tax benefits.
Lets take a closer look at why the Corporate Taxation scheme is appealing:
First, Singapore adopts a one-tier tax system. A one-tier tax system means that the income tax payable on the chargeable income of a specific company is considered the “final tax” and shareholders will no longer be taxed on their dividend income.
Second, there is no withholding tax on dividends. And third, there is no capital gains tax imposed on gains of a capital nature.
Singapore Corporate Tax Rates
Investors and entrepreneurs alike would be glad to note that:
Applicable to companies incorporated in the calendar year 2018 and before.
Zero tax applies to newly-incorporated companies on the first $100,000 net profits for its first 3 years of operation.
All newly incorporated companies(with some exceptions) enjoy approximately 9% corporate tax rate for profits of up to $300,000.
The overall company tax rate is a fixed 18%, which will be reduced to 17% starting from 2010.
Yes, you read it right. FULL tax exemption will be granted on the first $100,000 net profits of qualifying companies for each of its first three consecutive tax filing years.
‘So, what is a qualifying company?’ you might muse. A qualifying company:
Is a company incorporated in Singapore
Is a tax resident in Singapore for that calendar year
Has less than 20 shareholders; and
At least 10% of its shareholders are individuals.
However, a company that does not meet these qualifications would still be eligible for partial corporate tax exemption.
Companies are eligible for partial tax exemption on chargeable income of up to $300,000 as follows:
|Chargeable Income ($)||Effective Tax Rate (%)|
|More than $300,000||18.0|
Taxation for Non-Resident Companies
In Singapore Corporate Taxation context, a company is considered a “Resident Singapore Company” if its central operations and management is carried out in Singapore.
Non-resident companies are not at liberty to enjoy the benefits of double tax treaties. On the good side, non-resident companies are not liable to Singapore income tax on foreign source income if it is not received in Singapore. This makes non-resident Singapore companies the ideal channel for international trading.
Applicable to companies incorporated in the calendar year 2019 and after.
Newly incorporated companies from the calendar year 2019 will now enjoy the following tax exemptions:
On the First S$100,000 Chargeable Income an exemption of S$75,000
On the next S$100,000 Chargeable Income an exemption of S$50,000.
Whereas before calendar year 2019 all newly incorporated companies would qualify for the tax exemptions based on the criteria as stated above, new conditions have been added for companies incorporated in calendar year 2019 onwards. The following are excluded from enjoying the tax exemptions for new start ups.
Investment Holding Companies
"A company which undertakes property development for sale, for investment, or for both investment and sale" - https://www.iras.gov.sg/irashome/Businesses/Companies/Learning-the-basics-of-Corporate-Income-Tax/Common-Tax-Reliefs-That-Help-Reduce-The-Tax-Bills/
In additions to the qualifying conditions as stated prior to the calendar year 2019, at least 10% of the shareholding by an individual must be beneficially held directly. This means that if the shareholder is acting as a nominee and holding shares on behalf of someone else, the company does not qualify for the tax exemptions.
Partial tax exemptions have also been amended from the calendar year 2019 onwards.
On the first S$10,000 chargeable Income - 75% is exempted
On the next S$190,000 chargeable Income - 50% is exempted.
Prior to the calendar year 2019 the total partial exemption was for S$300,000 which has now been reduced to S$200,000.
Filing of Estimated Chargeable Income (ECI)
From the calendar year 2019 onwards it is now compulsory for all companies to file their ECI electronically via the Tax Portal in IRAS.
To encourage companies to file their ECI as soon as possible, IRAS allows by application to pay the corporate tax by instalments through a GIRO plan. If you file your ECI one month after your financial year end you will avail 10 instalments. 2 months after will get you 8 instalments and 3 months after will get you 6 instalments.
If you file your ECI after 3 months from your financial year end there will be no instalment plans available and the ECI must be paid in full to avoid penalties which can be as much as 5% of the tax outstanding.
IRAS has now commenced the provision of the Notice of Assessment electronically. There will be no hard copy mailed to your registered address.
Please get in touch with us via the contact page for more information as the above is but a brief summary of corporate tax for companies in Singapore.