A company is taxed on the income earned in the preceding financial year. This means that income earned in the financial year 2019 will be taxed in 2020 (ie. YA 2020). Year of Assessment ("YA") is referred to the year in which the income is assessed to tax by IRAS.
For example, if the financial year (also known as "basis period") for a company is:
1 July 2018 to 30 June 2019 - its YA will be YA 2020 and tax return will need to be filed by 15 December 2020.
1 April 2019 to 31 March 2020 - its YA will be YA 2021 and tax return will need to be filed by 15 December 2021.
1 January 2020 to 31 December 2020 - its YA will be YA 2021 and tax return will need to be filed by 15 December 2021.
With effect from YA 2010, a company is taxed at a flat rate of 17% on its chargeable income regardless of whether it is a local or foreign company. However, the effective tax rate comes out to lower if one takes into consideration of all the government schemes, relief and rebates.
This guide is meant for a quick knowledge of Singapore income tax for Company so that at the end you can have a simple understanding of how the tax system works in Singapore and thereby have better decision making. We do not illustrate deeper concepts as this will normally be done and advised by Singapore accounting and tax service providers.
Singapore Corporate Tax System
Tax Schemes to Lower Tax Payable:
Effective Tax Rates Table
Corporate Tax Filing Obligations:
Resident and non-resident companies are taxed on
income accruing in or derived from Singapore, and
foreign income remitted (actual or deemed remittance) into Singapore. However, remittance of specific foreign income (dividends, branch profits, services income) may be tax exempt when remitted by a resident company under certain conditions.
For Singapore tax purposes, the tax residence of a company is practically determined by the location where the directors of the company hold their board meetings and exercise de facto control. Management and control, in the context of determining the resident status of a company, include the decision-making body’s power to raise finance and control the company’s bank accounts; approve accounts; appoint those who manage the company’s day-to-day operations; declare dividends; as well as decide on matters relating to mergers/ acquisitions/ joint ventures.
Taxation of Dividends
Singapore practices a single-tier corporate income tax system. Tax paid by a company on its income (profits) is the final tax and all dividends are exempt in the hands of shareholders from further taxation.
Capital Gain Tax
Singapore does not tax on capital gains.
Tax Exemption Scheme For New Start-Up Company ("NSCTE")
Under the scheme, qualifying new companies are given the following tax exemption for the first three consecutive YAs where the YA falls in YA 2020 onwards:
75% exemption on the first $100,000 of normal chargeable income; and
50% exemption on the next $100,000 of normal chargeable income.
To qualify for the scheme, the following conditions must be met:
The company must not have more than 20 individual shareholders
In the case of having corporate shareholders in the new company, at least one shareholder must be an individual holding at least 10% of the issued shares
Property (Real Estate) and investment holding companies are not eligible
Partial Tax Exemption For All Companies ("PTE")
All other companies that do not qualify for the NSCTE Scheme will be eligible for partial tax exemption. For YA 2020 onwards:
75% exemption on the first $10,000 of normal chargeable income; and
50% exemption on the next $190,000 of normal chargeable income.
Corporate Income Tax Rebate
Corporate income tax rebate is given to all companies to ease business costs and support restructuring by companies and is applicable for YA 2013 to YA 2020.
All companies will receive a corporate income tax rebate of the following:
25% corporate income tax rebate, capped at $15,000 for YA 2020;
20% corporate income tax rebate, capped at $10,000 for YA 2019;
40% corporate income tax rebate, capped at $15,000 for YA 2018;
50% corporate income tax rebate, capped at $25,000 for YA 2017;
50% corporate income tax rebate, capped at $20,000 for YA 2016; and
30% corporate income tax rebate, capped at $30,000 per YA for YA 2013 to YA 2015.
Corporate income tax rebate is computed on the tax payable after deducting tax set-offs (e.g. foreign tax credit).
Effective Corporate Tax Rates ("Qualifying New Company")
The following table illustrates the effective tax rate of the newly incorporated company qualifying for the NSCTE Scheme for each of its first 3 year of tax assessment.
Assuming the qualifying company is incorporated on 1 January 2019 and its first financial year end is 31 December 2019. The first 3 YA will be YA 2020, YA 2021, and YA 2022.
If the company is owned only by an individual, the table can also be referred to as his effective tax rate if the profits of the company are declared as dividends paid to him being the sole shareholder of the company.
Effective Corporate Tax Rates ("All Other Companies")
The following table illustrates the effective tax rate of a Singapore resident company granted partial tax exemption subsequent to its third year of tax assessment.
Assuming the qualifying company is incorporated on 1 January 2016 and its first financial year end is 31 December 2016. The first 3 YA will be YA 2017, YA 2018, and YA 2019. For the below illustration, it is assumed the YA assessed is YA 2020, ie. the 4th year after the company is incorporated.
Estimated Chargeable Income ("ECI")
ECI is an estimate of the company's taxable income (after deducting tax-allowable expenses) for a Year of Assessment (YA). All companies including new companies are required to file ECI within three months from the end of their financial year except for companies that qualify for the administrative concession and those that are specifically not required to file.
For example, if the financial year for a company is:
1 July 2018 to 30 June 2019 - the ECI Tax Return of YA 2020 will need to be filed by 30 September 2019.
1 April 2019 to 31 March 2020 - the ECI Tax Return of YA 2021 will need to be filed by 30 June 2020.
1 January 2020 to 31 December 2020 - the ECI Tax Return of YA 2021 will need to be filed by 31 March 2021.
A company is not required to file ECI for that particular YA if it does not have:
an annual revenue of more than $5 million for that financial year; and
ECI* is NIL for that YA.
*ECI should be the amount before deducting the exempt amount under the partial tax exemption scheme or the tax exemption scheme for new start-up companies.
Where the audited financial statements are not available, you can refer to the company's management accounts for the purpose of declaring the revenue amount. Should the revenue amount based on audited financial statements be different from that declared in the ECI Form, and there is no change in your ECI, you are not required to revise the revenue figure.
Corporate Income Tax Returns (Form C) (Form C-S)
Except for dormant company which IRAS has specifically waived the requirement to file. a Company is required to file its corporate tax return electronically (e-file online) with Corppass by 30 November each year.
The Form C-S/ C is a declaration form for companies to declare their actual income. Companies must ensure that the form is correctly completed and gives a full and true account of the company's income.
Companies are still required to file the Form C-S/ C even if they are making losses.
Companies shall prepare financial statements and tax computation and submit them to IRAS when requested.