Taxation in Singapore
Internationally recognized as an important finance, commerce, and trading hub of Asia, Singapore has used prudent fiscal policy to attract foreign talent and investment to its shores. Its attractive tax policy is an integral part of its long-term strategy to become the preferred destination for investment and talent from across the globe. Entrepreneurs and companies set up in Singapore enjoy several benefits that are usually not available in other countries. These include a single-tier taxation system; no tax on overseas income, no capital gains tax, no dividend income tax and no tax on assets acquired in inheritance or as gifts. Furthermore, the country has adopted an extremely streamlined and simplified tax filing procedures. With that, an extensive network of bilateral treaties on Avoidance of Double Taxation ensures that companies and individuals who receive income from abroad or have assets outside Singapore are not taxed by both countries.
How Does Taxation in Singapore Work?
As said earlier, Singapore uses the single-tier tax system with simplified tax codes to reduce the administrative costs for companies operating in Singapore. Both resident and non-resident companies are taxed on their income. Foreign-sourced income, such as dividends, branch profits, and service income may be exempt from tax if remitted by a resident company under certain conditions. There are various types of taxes in Singapore:
- Corporate Tax
- Goods and Service Tax
- Withholding Tax
- Personal Income Tax
- Customs and Excise Tax
1. Corporate Tax
The Corporate Tax in Singapore is rated at 17% since the year 2010. Singapore follows a territorial-based taxation system. This means that only the income which is sourced from or received in Singapore is taxed. A company is required to file for income tax return on the earnings derived from, accrued from, or received in Singapore. Singapore also provides many incentives under the Corporate Tax. Like, startups enjoy tax exemption for the first three years whereby they pay no tax on $100,000 of the chargeable income and only 50% of the tax on the next $200,000 chargeable income.
2. Goods and Service Tax (GST)
Commonly known as the Value Added Tax (VAT), GST is an indirect tax levied in Singapore on the goods and services purchased by the customers. The current rate of GST in Singapore is 7%. It is levied on only domestic consumption. The products and services sold to other countries are exempt from GST.
3. Withholding Tax
In accordance with the Inland Revenue Authority of Singapore (IRAS), there is a legal obligation to withhold a percentage of payments to non-residents under the Singapore Income Tax Act. Businesses with parent companies that manage operations from overseas are non-residents.
The types of payments subject to Withholding Tax in Singapore include:
- Commission fees to overseas agents
- Management/director’s fees to non-residents
- Professional fees to offshore accountants
4. Personal Income Tax
Personal Income Tax in Singapore is the most affordable one in the world. The amount of tax payable is dependent on your tax residency status in Singapore, with non-residents taxed at the flat rate of 15%, unless resident rates result in a higher tax amount. In most cases, all remunerations from your employees are fully taxable, including salaries, bonuses, housing, and stock options.
5. Customs and Excise Tax
Singapore is effectively a duty-free port. While no duties are imposed on exports from Singapore, an import duty is levied on a small number of items such as petroleum products, motor vehicles, tobacco products, and liquor.
Inland Revenue Authority of Singapore (IRAS)
On 1st September 1992, the IRAS in Singapore was established by the legislation as a statutory board under the Ministry of Finance. As the government’s revenue collection body, IRAS collects Income Tax, GST, Property tax, Estate Duty, Betting and Sweepstake Duties, Stamp and Casino Duties.
Our Tax Services in Singapore
We at Business Setup Worldwide offer the following services for taxation in Singapore:
- Identification and proposals of most appropriate measures and solutions to taxation issues
- Consultation for income taxes and GST
- Preparation of tax returns: income tax, GST, property tax, etc.
- Transfer pricing
- Consulting services concerning personal & corporate taxes, customs, stamp duty, and capital taxation
If you are looking for tax consulting services in Singapore, do contact us. Our business advisors in Singapore would be happy to help!