At a glance: Taxes in Singapore

JULY 03, 2018 - 6:07 PM

Taxes in Singapore are relatively low, because competitiveness is a key consideration undergirding its tax policy. As the Inland Revenue Authority of Singapore (IRAS) puts it, keeping tax rates competitive for both corporations and individuals alike is a “fundamental tenet” of Singapore’s tax policy.

“Keeping our corporate rate competitive will help us to continue to attract a good share of foreign investment. Keeping our individual rates low will encourage our people to work hard. It will also make risk-taking worthwhile and encourage entrepreneurship,” states the IRAS website.

Singapore relies on both direct taxes (such as corporate and personal income taxes and property tax) and indirect taxes (such as customs and excise duties and the goods and services tax) to raise revenue for government expenditure. Singapore also uses tax as a policy lever to influence behaviour. For instance, allowing accelerated capital allowance for most assets used for business purposes, so as to encourage more adoption of technology and automation.

Here are some of the key taxes:

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Corporate Tax: 17% flat rate

Whether local or foreign, all companies in Singapore are taxed a flat rate of 17 per cent on its chargeable income. Singapore has been lowering its corporate tax rate over the years - it fell from 20 per cent to 18 per cent in 2008, and then to 17 per cent in 2010. And, with the various exemptions, rebates and other tax relief schemes, many companies in pro-business Singapore would find their effective corporate tax rate to be even lower.

Corporate income tax rebate: 40% of tax payable, capped at $15,000

Earlier this year, the Finance Minister raised the corporate income tax rebate for year of assessment 2018 to 40 per cent of corporate tax payable (capped at S$15,000), up from 20 per cent of tax payable, subject to a S$10,000 cap. He also extended the rebate to YA2019 at a rate of 20 per cent of corporate tax payable, capped at S$10,000.

Tax exemption for startups; partial tax exemption

New companies and startups may qualify for tax exemption in their first three years. All new companies except those whose principal activity is investment holding or property development (whether for sale or investment).  

 

    Up till YA 2019 (if any of the first three YAs falls in or before YA 2019)

    First S$100,000 of chargeable income: 100% exempted from tax (S$100,000)

    Next S$200,000 of chargeable income: 50% exempted from tax (S$100,000)

    Total exemption of S$200,000 on the first S$300,000 of chargeable income

 

    From YA 2020 (if any of the first three YAs falls in or after YA 2020)

    First $100,000 of chargeable income: 75% exempted from tax (S$75,000)

    Next S$100,000 of chargeable income: 50% exempted from tax (S$50,000)

    Total exemption of S$125,000 on the first S$200,000 of chargeable income

 

Other companies can still benefit from the partial tax exemption scheme:

      Up till YA 2019:

    First S$10,000 of chargeable income: 75% exempted from tax (S$7,500)

    Next S$290,000 of chargeable income: 50% exempted from tax (S$145,000)

    Total exemption of S$152,500 on the first S$300,000 of chargeable income

    

    From YA 2020:

    First S$10,000 of chargeable income: 75% exempted from tax (S$7,500)

    Next S$190,000 of chargeable income: 50% exempted from tax (S$95,000)

    Total exemption of S$102,000 on the first S$200,000 of chargeable income.

 

Indirect Tax - Goods and Services Tax (GST) of 7%

Singapore’s goods and services tax (GST) is a broad-based consumption tax of 7 per cent that is levied on nearly all goods and services in Singapore. Exports of goods and international services are zero-rated, while the sale and lease of residential properties and financial services are exempt from GST.

The government has said that the GST will be raised to 9 per cent some time between 2021 and 2025, depending on the state of Singapore’s economy, how much government expenditures grow, and how buoyant existing taxes are.

From Jan 1, 2020, a new GST will also be pegged to imported e-commerce services such as music and video streaming, apps, online subscriptions and services such as marketing and accounting.

Withholding Tax

A person who makes payments (such as royalty, interest, technical service fees) to a non-resident company or individual is required to withhold a percentage of that payment, and pay that withholding tax to IRAS.

Dividends: No withholding tax is levied on dividends paid by companies resident in Singapore

Interest: 15% withholding tax on interest paid to a non-resident (unless reduced under a tax treaty or exempted).

Royalties: 10% withholding tax on royalties paid to a non-resident (unless reduced under a tax treaty or exempted)

A full list of Singapore’s withholding tax rates, which vary according to the nature of income involved, can be found here.

Personal Income Tax - progressive system of taxes, highest rate of 22%

Singapore’s personal income tax rates for residents follow a progressive schedule: the higher the income earned, the higher the marginal income tax levied. The highest personal income tax rate at the moment is 22 per cent. Foreigners who stay or work in Singapore for 183 days or more in the year before the year of assessment are treated as residents for tax purposes.

 

Chargeable income bracket

Income tax rate (%)

Gross tax payable (S$)

First S$20,000

0

0

Next S$10,000

First S$30,000

2

-

200

200

Next S$10,000

First S$40,000

3.5

-

350

550

Next S$40,000

First S$80,000

7

-

2,800

3,350

Next S$40,000

First S$120,000

11.5

-

4,600

7,950

Next S$40,000

First S$160,000

15

-

6,000

13,950

Next S$40,000

First S$200,000

18

-

7,200

21,150

Next S$40,000

First S$240,000

19

-

7,600

28,750

Next S$40,000

First S$280,000

19.5

-

7,800

36,550

Next S$40,000

First S$320,000

20

-

8,000

44,550

In excess of S$320,000

22

 
 

For non-residents, employment income is taxed at a flat rate of 15 per cent, or the resident tax rate above, whichever yields a higher tax amount. Director’s fee, property rental income and other fees (except certain reduced final withholding tax rates) stand at 22 per cent.

Tax incentives

Singapore offers additional tax incentives to companies in specific industry sectors of importance to the Singapore economy. These include exemptions and concessionary rates for angel investors, fund management companies, businesses engaged in various shipping and maritime activities, and companies setting up global or regional headquarters in Singapore, or using Singapore as a base for strategic finance and treasury management activities.

Details are available on the IRAS, Enterprise Singapore and the Economic Development Board websites.

 

Need more information?

Official: The Inland Revenue Authority of Singapore’s website summarises the various types of taxes.

Deloitte: Singapore Tax Highlights 2018 and Taxation and Investment in Singapore 2017

EY: Singapore Tax Guide

KPMG: Singapore Tax Profile (Updated June 2015)

PwC: Singapore Tax Summary

 

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