Asia Corporate Advisory

Singapore corporate tax

What to know

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1. Singapore tax system

Singapore practices a single-tier corporate income tax system. Tax paid by a company on its income is the final tax and all dividends are exempt in the hands of shareholders from further taxation. 

The corporate income tax rate since 2010 has been fixed at 17%. It is calculated on the basis of the company’s chargeable income i.e. taxable revenues less allowable expenses and other allowances. But the effective tax payable comes out to even lower if one takes advantage of all the government incentives, subsidies and schemes.

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. 

Resident and non-resident companies are taxed on income accruing in or derived from Singapore as well as on foreign income remitted (actual or deemed) into Singapore. Remittance of specific foreign income (dividends, branch profits, services income) may be tax exempt when remitted by a resident company under certain conditions.

 

2. General tax incentives (Tax exemption scheme)

Since YA 2005, Singapore has been providing the following general tax exemptions and/or incentives to all Singapore tax resident companies. With these tax exemptions in place and applied against the taxable income, the effective income tax rate for Singapore companies is reduced significantly. In 2018 budget, it was announced that the tax exemption under the scheme will be revised. The changes will take effect from YA 2020 for all qualifying newly incorporated companies that claim the tax exemption under the scheme.

From YA2020 onwards:

  • 75% exemption on the first $100,000 of normal chargeable income, and

  • A further 50% exemption on the next $100,000 of normal chargeable income

YA 2019 and before:

  • Full exemption on the first $100,000 of normal chargeable income; and

  • A further 50% exemption on the next $200,000 of normal chargeable income

For newly incorporated companies

Newly incorporated companies are eligible for the New Start-up Company Tax Exemption (NSCTE) scheme for their first 3 years of tax assessment. To qualify for the scheme, the following conditions must be met:

  • company must be incorporated in Singapore

  • a tax resident in Singapore (Please see below the tax residency of company)

  • has no more than 20 shareholders of which at least one is an individual shareholder holding at least 10% of shares.

  • the company principal activity is NOT that of investment holding or undertakes property development for sale, for investment, or for both investment and sale.

A qualified start-up company would enjoy the following tax exemption: 

  • For YA 2019 and before:

    • First S$100,000 chargeable income of the Company is exempted from tax,

    • a further 50% of the next S$200,000 chargeable income of the Company is exempted from tax.

  • From YA 2020 onwards:

    • 75% exemption on the first $100,000 of normal chargeable income, and

    • A further 50% exemption on the next $100,000 of normal chargeable income

For example, If the company is incorporated on 1 Jan 2017 and have its financial year end on 31 Dec 2017, the first 3 YA will be YA 2018, YA 2019, and YA 2020. Accordingly, its tax exemption scheme will be as follows:

tax rate.GIF

For existing companies

All other companies that do not qualify for the NSCTE Scheme will be eligible for partial tax exemption - companies in Singapore are given partial tax exemption on normal chargeable income of up to S$200,000 for YA 2020 onwards.

The qualifying companies not already enjoying the NSCTE Scheme will enjoy:

  • For YA 2019 and before:

    • 75% of first S$10,000 chargeable income of the Company is exempted from tax,

    • a further 50% of the next S$290,000 chargeable income of the Company is exempted from tax.

  • From YA 2020 onwards:

    • 75% of first S$10,000 chargeable income of the Company is exempted from tax,

    • a further 50% of the next S$190,000 chargeable income of the Company is exempted from tax.

For example, If the company is incorporated on 1 Jan 2016 and have its financial year end on 31 Dec 2015, the first 3 YA will be YA 2016, YA 2017, and YA 2018. Accordingly, its tax exemption scheme for the 5 years will be as follows:

tax rate 2.GIF
 

3. Tax rebates

Further to the tax exemption schemes that are provided to all Singapore resident companies, the Singapore government has granted all companies a 20% Corporate Income Tax Rebate capped at S$10,000 for YA 2019 (40% rebate, capped at $20,000 for YA 2018). For example, a company having a chargeable income of S$10,000 after tax exemption and is subject to 17% tax rate, the corporate tax payable before tax rebate will be S$1,700 (17% x S$10,000). The 20% rebate granted to the company will be S$340, and the net tax payable by the company will be S$1,360.

 

4. Effective tax rates (YA 2019)

tax rate table new coy.GIF

Newly incorporated company (tax table for YA 2019 only)

The table on the left 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 (up to YA 2019). 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 as the sole shareholder of the company.

*the estimated tax payable is only for guidance purpose. Effective tax rate includes the 20% tax rebate that is granted by the Singapore government for YA 2019, capped at a limit of S$10,000 only

 

Existing company ((tax table for YA 2019 only)

The table on the right illustrates the effective tax rate of a Singapore resident company granted partial tax exemption subsequent to its third year of tax assessment (for YA 2019 only). 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 as the sole shareholder of the company.

*the estimated tax payable is only for guidance purpose. Effective tax rate includes the 20% tax rebate that is granted by the Singapore government for YA 2019, capped at a limit of S$10,000 only

tax rate table old coy ya2019.GIF