5 Tips on Filing Corporate Tax in Singapore

Starting your business in Singapore is a dream for business pioneers and entrepreneurs who are actively seeking innovative environment to kick-start their operations. Similarly, the country offers extensive opportunities for SME's and corporates who are looking for a secure location with low corporate taxes to expand its services. The city-state has been the focal point for companies and businesses due to the pro-business climate, stable political leadership, business-friendly laws and robust legal system.

Overview of the Corporate Tax in Singapore

Singapore has the lowest corporate tax rates in Asia with transparent tax regulations and efficient tax filing systems making it attractive for companies and businesses to set up their operations in the country. The government is focused on making Singapore a nerve centre for business, finance, and trade in the Asia Pacific region.

In the schemes to accelerate the economy and attract investments from all over the world the state felt that an effective, transparent, corporate tax regime with low tax rates was necessary to encourage trade, commerce and business activity in the country. Hence the corporate income tax system was designed to be effective at contributing to the economic growth and enhancing the business environment in Singapore.

Corporate Tax Regime in Singapore

Singapore’s corporate income tax regulations are actively monitored and revised from time to time in by the Inland Revenue Authority of Singapore (IRAS) to stay appealing for companies, businesses. These amendments are made according to Singapore's business ecosystem and economy to allow competitive tax rates to be implemented depending on the situation; however, there is a base value for the corporate tax, and it also differs based upon the profits, type of business and type of company structure.

Since 2003, Singapore has embraced a single-tier integrated corporate tax system, where the company pays the tax on its final chargeable income after the company pays all the dividends to its shareholders. The corporate tax system is maintained territorially at a flat-rate all over Singapore building a conducive business environment that is transparent, effective and accelerates growth.

Tips on Filing the Corporate Taxes in Singapore

  • Check if your company is eligible for tax incentives
  • Apply to be a tax resident in Singapore. It eases the income taxes over time
  • Prepare records for all the costs incurred during your business operation
  • Add the cost of depreciation of your Company's assets (i.e., the value of the machines operating in a company depreciates over a while, small manufacturing companies can take advantage of this thereby reducing their total taxable income)
  • Deduct the taxes at source (i.e., transfer your taxes pay to the government to the buyer or client or user of your goods and services)
  • Claim indexation on the Company’s assets
  • Invest your Company's profit in tax levied bonds, funds and securities; then your business will have to pay fewer taxes as there is no capital gains tax in Singapore

Tax Exemptions from Corporate Taxes in Singapore

The dividends which are acquired by a company’s shareholders are exempt from any taxation as there is no capital gains tax in Singapore. Similarly, the wealth gained from the sale of fixed assets, shares, gains from foreign currency on transactions is exempt from taxation.

Furthermore, there are tax incentives for specific businesses in Singapore. These tax incentives are offered based on various parameters that encompass the size of the business, type of company structure, amount of total capital invested, year of operation, number of shareholders and the amount of profitable income generated by the company in Singapore.

Tax Residence for Singapore Companies

For a business, to qualify for the tax incentive, the company must be a registered tax resident of Singapore for a period of more than 1 year or must be registered in Singapore operating for more than twelve months. Eventually, when the companies apply for these tax exemptions the effective corporate income tax rates are significantly reduced from the taxable income of the company. The start-ups, small and medium-sized businesses can take advantage of this exemption from the government.

Criteria for Tax Exemption

  • The company must be a tax resident of Singapore
  • The business must be registered in Singapore as a Company
  • Should not have more than twenty shareholders of which at least one is an individual shareholder holding at least ten per cent of shares

Singapore Double Taxation Treaties

As a Singapore tax resident company, the business can leverage the extensive double-taxation treaties made by the Singapore government with twenty plus countries all around the world. The double-tax avoidance system makes sure that a company does not pay dual in Singapore or as well as in another country.

The Double-Tax Avoidance agreements (DTA) permits a company to claim tax exemption or reduction in Singapore for the taxes paid by the company in another country. Likewise, a Singapore tax resident company or a company registered in Singapore can claim tax exemptions in other countries if the business has paid its corporate taxes in Singapore.

According to the Singapore Double taxation treaties, the Singapore tax resident companies are eligible for tax exemptions on foreign dividends, foreign branch profits and service income from foreign countries on the basis that the company has already paid the corporate taxes in Singapore. However, in order for a company to qualify for the exemption in Singapore, the company must have paid taxes in a foreign country which has a corporate tax rate of at least 15p percentage.

Why Choose Singapore for your Company?

With a highly-developed free-market economy, the state of Singapore is the most pro-business country with low taxes rates, strategic location, world-class infrastructure, and attractive investment environment. The country is benefitted from the Foreign Direct Investments (FDI) as the government has designed favourable, secure and fast growing environment supporting investors, business leaders and corporates from around the world to start their operations and leverage the competitive edge offered by the country.

Contact us for starting a business in Singapore by registering your company following the Singapore regulations. Our experienced team of professionals from Singapore will be happy to guide and assist you in incorporating your company in Singapore.

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