Overview of Singapore corporate tax for newly incorporated companies
About Singapore – Singapore is a republic with a parliamentary system of government. Its tax system is well regulated and is lower than in other developed countries. It uses the territorial base of taxation where taxes are imposed on derived income. The source of income is mainly determined by the place where the services are provided. IRAS (Inland Revenue Authority of Singapore) administers, assesses and collects taxes.
corporate tax – A Company is taxed on its profits in the country or when it receives income from another country. Singapore is one such country that follows a single tier tax system, meaning profits made by the company are only taxed once. In other words, the dividends received by the shareholder of the company are completely tax free.
For a newly incorporated company – Full tax breaks are granted such as 0% tax on the first $100,000 for the first 3 years for a new company that is incorporated in Singapore, is a Singapore tax resident and has less than 20 shareholders owning a minimum of 10 % of actions. Singapore resident companies are eligible for a partial tax of up to 9% on $300,000 per year. Any income above this will be charged a general tax which is now 18%.
Tax Exemptions for Holding Companies and Non-Resident Companies – Exemptions are granted on foreign source earnings and dividends that are remitted to Singapore if the general tax of the country of origin of the income is at least 15% and the income was already subject to tax. Foreign source income withheld outside of Singapore is not taxable. There is no capital gains tax in Singapore and it also does not impose withholding tax on dividends. A company is called a resident company if its head office is in Singapore and non-resident if it is elsewhere. A resident company is entitled to the benefits conferred under the Double Taxation Avoidance Agreements (DTAs) that Singapore has concluded with the treaty countries. A non-resident company is not eligible for double tax treaties. Income is not subject to Singapore income tax on foreign source income if it is not received in Singapore. Therefore, non-resident companies are attractive options as international holding companies.
Goods and Services Tax (GST) – A company must register for GST if at any time at the end of a quarter its taxable supplies exceed S$1 million for a quarter and the three immediately preceding quarters, or if its taxable supplies are expected to exceed S$1 million for the next 12 months. Dutiable supplies include goods and services supplied in Singapore, goods exported from Singapore, and international services. A business is supposed to register for GST within 30 days of liability.
the tax return – For a newly incorporated company, IRAS sends Form C in the 2nd year for evaluation. The business period of a company is the accounting period and the following year would be the evaluation period. For example, if the accounting period is April 1, 2007 to March 31, 2008, then the assessment year would be 2009. For subsequent years, reporting would be in the months of March/April.