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Tax in Singapore

The Singapore tax system is one of the most important factors that make the nation become a well-known business attraction for many foreign investors. In addition to the appealing corporate tax rate, there are many more beneficial tax schemes and incentives.

1. Corporate income tax in Singapore

Singapore adopts a territorial basis of taxation. Specifically, a company established in the city-state is only taxed on the income which is:

  • a Singapore-based source of income (arise within the Singapore territory), or
  • a foreign-based source of income remitted to Singapore.

Regarding corporate tax rate, it stood at 26% in 1997. Then, the figure experienced a gradual fall throughout the following years, before reaching 17% in 2010. And the flat tax rate of 17% remains to the present. Compared to other countries, Singapore’s current tax rate is relatively low and it helps the city-state to maintain its standing as one of the most favorable tax systems in the world.

Furthermore, the Singapore tax system is single-tier. Particularly, business profits of a company are only taxed once and dividends paid by a resident company to the shareholders are not subject to any further tax. Singapore also eliminates the tax imposed on capital gains.

>> Read more: Everything You Need To Know About Corporate Tax in Singapore.

2. Personal income tax in Singapore

Any individual who earns income within Singapore is subject to personal tax in this nation. The personal tax may differ from person to person, depending on their residency status.

Personal income tax for Singapore tax residents

An individual is a tax resident in Singapore if he/she is:

  • A Singapore citizen, or
  • A permanent resident in Singapore, or
  • Any foreigner who is physically present in Singapore for no less than 183 days.

Singapore adopts a progressive approach to personal income tax rates for tax-residents, from 0% to 22%.

Personal income tax for Singapore non-tax residents

An individual is considered a non-tax resident if that person has a presence in Singapore for less than 183 days. The tax rates applied to non-tax residents are:

Days of presence Tax rate
No more than 60 days 0% except for:

  • Directors, non-residential professionals and public entertainers, and
  • The circumstance under which the absence from Singapore is a part of the job requirement in Singapore.
From 61 days to 182 days
  • 15%, or
  • The progressive tax rates (0% – 22%)

Whichever results in higher tax amount.

Regarding directors, non-residential professionals and non-residential public entertainers, the tax rates range from 15% to 22%. Individuals can also legally make use of tax deductions (reliefs, rebates, expenses and donations) to lower their payable taxes.

>> Read more: Guide to Personal Income Tax in Singapore for Foreigners.

3. Goods and Services Tax in Singapore

Goods and Services Tax (GST), also known as Value Added Tax (VAT), is the consumption tax imposed on the imported goods (collected by Singapore Customs), and levied on nearly all goods and services provided in Singapore. Currently, the rate of GST is flat at 7% but expected to rise to 9% in the coming years.

Notwithstanding, there are still goods and services that are non-GST taxable. The following table demonstrates what they are:

Target Non-GST taxable supplies
Zero-rated supplies Exempt supplies Out-of-scope supplies
Goods -Exported goods -Sale and rental of residential property

-Importation and local supply of investment precious metals

-Sale of goods from overseas to another overseas destination

-Private transactions

-Sale of goods within Free Trade Zone and Zero GST Warehouse

Services -International services (under Section 21(3) of the GST Act) -Financial Services in the fourth schedule of the GST Act

-Digital payment tokens

GST requirements

There are two circumstances:

  • A business must register for GST if its taxable turnover exceeds $1 million for the previous 12 months at the end of a calendar year, or at any time in the future when a company expects its revenue will be more than $1 million over the next 12 months.
  • A business can voluntarily register for GST if its taxable turnover is no more than $1 million.

>> Read more: Some Pointers on Goods and Services Tax in Singapore.

4. Property tax in Singapore

Property tax is a tax imposed on the ownership of property whether the property is rented out, owner-occupied or vacant. It is important to note that property tax is different from income tax imposed on earnings generated from property.

[Property tax = Annual value (1) x Tax rate (2)]

  • Annual value (AV) of a building is the estimated gross annual rent of that property if it were to be rent out. AV is determined based on estimated market rentals of similar or comparable properties.
  • There are many tax rates based on the following categories:
Residential property Non-residential property (such as commercial and industrial buildings)
Owner occupier Non-owner occupier
Progressive tax rates from 0% to 16% Progressive tax rates from 10% to 20% 10%

>> Read more: Introduction to Property Tax in Singapore.

5. Withholding tax in Singapore

A withholding tax is the percentage that is withheld from a payment made by a Singapore source to a Singapore non-tax resident. The withheld amount then will be remitted to the government for tax purposes. For withholding tax in Singapore, non-residents comprise individuals and companies.

Non-resident individuals (who have presence less than 183 days in Singapore) are separated into 3 groups with different imposed tax rates:

Group Tax rate
Non-resident Directors 22% on remuneration
Non-resident Public entertainers 10% (or 15% from April 2022) on income
Non-resident Professionals 15% on gross income or 22% on net income

Non-resident companies (that are controlled and managed in Singapore) will be imposed different withholding tax rates according to different types of income:

Income (most common types) Tax rate
Interest, commission or other payment relating to loan and indebtedness 15%
Royalty or other payment for the use of movable properties 10%
Rent or other payments for the use of moveable properties 15%
Payment for the use of or the right to use scientific, technical, industrial or commercial knowledge or information 10%
Technical assistance and service fees 17%
Management fees 17%

>> Read more: Guide to Withholding Tax in Singapore.

6. Tax incentives in Singapore

In addition to the relatively low corporate tax rate of 17%, many government authorities have offered many tax incentives to companies operating in some specific sectors. Below are some of the most common examples:

Sector Scheme and incentive Target Main benefit
Manufacturing and services

 

Pioneer Certificate (PC) & Development and Expansion (DEI) Incentive Companies expanding its activities in Singapore Concessionary tax rate of 5% for PC or 10% for DEI
Finance and treasure activities Finance and Treasury Centre (FTC) incentive Treasury management company operating in Singapore Reduced tax rate of 8%
Insurance Business Development Scheme Licensed insurers providing quality services Concessionary rate of up to 10%
Research, development and innovation Intellectual Property Development Incentive (IDI) IP developers who have a good track record Reduced corporate tax rate of 5% or 10% on qualifying IP income
Trading Global Trader Programme Trading companies having substantial operations in Singapore Reduced corporate tax rate of 5% or 10%
Shipping and maritime MSI-AIS award International ship owners and operators Tax exemption on qualifying shipping income
MSI-SSS award Ancillary shipping service providers Concessionary tax rate of 10%
Tourism Double Tax Deduction Companies wanting to promote inbound tourism or expand their markets 200% tax deduction on qualifying expenditure

>> Read more: Tax Incentives for Specific Industries in Singapore.

7. Double Tax Agreements

Singapore holds the view that double taxation constitutes a great impediment to its own economic standing as well as world trade. This results in the fact that Singapore has signed Avoidance of Double Tax (DTA) agreements with more than 80 countries.

The main purpose is to prevent a source of income from being taxed twice when transferring from Singapore to another country and vice versa. Furthermore, these double tax treaties also offer reduced and favorable tax rates applied to some specific types of income for both of the signing countries.

As for the scope, a double tax agreement applies to the residents of both signing countries (called the Contracting States), in which there is Singapore. Below is a list of key income types that are covered by a typical DTA agreement:

  • Income from immovable property
  • Business profits
  • Shipping and air transport
  • Associated enterprises
  • Dividends
  • Interest
  • Royalties and fees for technical services
  • Capital gains
  • Independent personal services
  • Dependent personal services
  • Pension
  • Government service
  • Other income

Residents of both Contracting States are eligible for all the beneficial provisions regulated in a Double Tax Avoidance Agreement.

>> Read more: Introduction to Double Tax Treaty in Singapore.

Should you have any further questions regarding taxation in Singapore, contact us now! BBCIncorp is always willing to help!

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